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U.S. Securities and Exchange Commission

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK


SECURITIES AND EXCHANGE COMMISSION,

Plaintiff,

v.

ANTHONY CHRYSIKOS and
MICHAEL MARTELLO,

Defendants,

MARIE MARTELLO,

Relief Defendant.


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Civil Action No.

02 Civ. _____________

COMPLAINT

Plaintiff Securities and Exchange Commission ("SEC" or the "Commission") alleges:

NATURE OF THE ACTION

1. This case involves tipping and insider trading in advance of the July 30, 2001, initial public announcement of a tender offer by General Electric Capital Corp ("GE Capital") for the outstanding common stock of Heller Financial, Inc. ("Heller Financial"). Anthony Chrysikos ("Chrysikos"), a Vice President of GE Capital, tipped Michael Martello, an American Kung-Fu instructor and Web page designer, who then purchased Heller Financial call options on the American Stock Exchange.

JURISDICTION AND VENUE

2. This Court has jurisdiction over this action pursuant to Sections 21(d), 21(e), 21A, and 27 of the Securities Exchange Act of 1934 ("Exchange Act") [15 U.S.C. §§ 78u(d), 78u(e), 78u-1 and 78aa].

3. Defendants Chrysikos and Michael Martello, directly or indirectly, have made use of the means or instrumentalities of interstate commerce, or of the mails, or the facilities of a national securities exchange in connection with the transactions, acts, practices and courses of business alleged herein.

4. Heller Financial call options were traded on the American Stock Exchange, located in this District, and the transactions at issue were executed in this District on that Exchange.

5. Defendants Chrysikos and Michael Martello will, unless restrained and enjoined, continue to engage in the acts, practices and courses of business alleged herein, or in transactions, acts, practices and courses of business of similar purport and object.

THE DEFENDANTS

6. Defendant Anthony Chrysikos ("Chrysikos") is a Vice President of Finance in the Aircraft Services Division of GE Capital. He currently resides in Edgewater, New Jersey.

7. Defendant Michael Martello is a Kung-Fu instructor and Web page designer. His last known address is in Whitestone, New York. He is currently living in Belgium.

THE RELIEF DEFENDANT

8. Relief Defendant Marie Martello is Michael Martello's mother. She currently resides in Whitestone, New York.

OTHER ENTITIES

9. Heller Financial, a commercial lender, was a Delaware corporation with its corporate headquarters in Chicago, Illinois. The common stock of Heller Financial was registered with the Commission pursuant to Section 12(b) of the Exchange Act and was traded on the New York Stock Exchange. Options of Heller Financial were traded on the American Stock Exchange. On July 30, 2001, GE Capital announced a $5.3 billion cash tender offer for the outstanding common stock of Heller Financial.

10. GE Capital, a financial services provider, is a Delaware corporation with its principal place of business in Stamford, Connecticut. GE Capital is a wholly owned subsidiary of General Electric Company ("General Electric"). The common stock of General Electric is registered with the Commission pursuant to Section 12(b) of the Exchange Act and is traded on the New York Stock Exchange.

RELEVANT FACTS

Chrysikos Acquires Material Nonpublic Information and Tips Michael Martello

11. In the course of his employment at GE Capital, Chrysikos acquired material nonpublic information regarding the contemplated business combination between GE Capital and Heller Financial. In fact, Chrysikos was a member of the GE Capital deal team for that transaction. Chrysikos learned about the prospective tender offer as early as May of 2001, and, in any event, was well aware of the pertinent transactional terms by July of 2001.

12. On July 26 and 27, 2001, Chrysikos conveyed material nonpublic information regarding the Heller Financial transaction to Michael Martello, by means of telephone conversations with his mother, Marie Martello.

13. On July 26, 2001, at 9:48 p.m. E.S.T., a phone call was placed from Chrysikos' home phone in New Jersey to Marie Martello in Whitestone, New York. Marie Martello lives alone at the Whitestone residence.

14. The next morning, at 8:25 a.m. E.S.T. and again at 9:55 a.m. E.S.T., calls were placed from Marie Martello to Michael Martello, who was in Taiwan at the time.

15. At 11:14 a.m. E.S.T., a phone call was placed from the Whitestone residence to Chrysikos' direct dial number at GE Capital in Stamford, Connecticut.

16. Three minutes later, at 11:17 a.m. E.S.T., another phone call was placed from the Whitestone residence to Taiwan.

17. Approximately twenty minutes later, at 11:38 a.m. E.S.T., a call was placed to the Whitestone residence from GE Capital in Stamford, Connecticut.

Michael Martello Trades on the Basis of Material Nonpublic Information

18. At 12:16 p.m. E.S.T., a little more than a half-hour after the last call from GE Capital, Marie Martello, after obtaining cash from various sources, went to a Queens branch bank of Citibank and deposited $9,200 in cash into a Citibank Insured Money Market Account (the "Insured Money Market Account") that is in Michael Martello's name.

19. In addition to the Insured Money Market Account, Michael Martello also maintains a brokerage account in his name at Citicorp Investment Services (the "Brokerage Account"). The Insured Money Market Account is linked to the Brokerage Account such that funds from the Brokerage Account are swept into the Insured Money Market Account.

20. Marie Martello maintains two accounts with Citibank: a checking account (the "Checking Account") and a Preferred Money Market Account (the "Preferred Money Market Account"). Michael Martello holds a power of attorney over the Checking Account and Preferred Money Market Account.

21. After Marie Martello made the $9,200 cash deposit, the aggregate funds available in the Insured Money Market Account and the Brokerage Account were a little more than $11,000.

22. At 12:37 p.m. E.S.T., just twenty-one minutes after Marie Martello made the cash deposit, Michael Martello began a dialogue by phone from Taiwan with a registered representative at Citicorp Investment Services.

23. During the call, Michael Martello stated that he wanted to buy the maximum number of call options that he could with the funds available in his Citibank accounts. When the representative informed Michael Martello that the representative could not simply tell him the maximum number that may be purchased with his available funds, Michael Martello engages in a back-and-forth, first trying a number that leaves money in his account, then trying a number that is too great given his balance, and finally arriving at an order to purchase 130 Heller Financial call options, because that order left approximately $50 remaining in his account. (The call options had an expiration date in October 2001 and a strike price of $40.)

The Information Becomes Public and Michael Martello Cashes Out

24. On July 30, 2001, the next trading day, GE Capital announced that it had entered into a definitive agreement to acquire Heller Financial for a cash tender offer of $5.3 billion, or $53.75 per share.

25. On July 31, 2001, Michael Martello sold all 130 call options for $168,274.87, yielding a total realized profit of $157,259.09 on his investment of $11,015. The proceeds from that transaction were swept out of the Brokerage Account and into the Insured Money Market Account.

26. That same day, Michael Martello transferred the $168,274.87 from the Insured Money Market Account to the Preferred Money Market Account.

27. Between August 27, 2001, and October 22, 2001, Marie Martello made four separate cash withdrawals, aggregating $32,000, from the Preferred Money Market Account and transferred another $2,000 from that account to the Checking Account.

28. On November 14, 2001, an additional $4,100 was sent overseas by wire transfer to Belgium from the Preferred Money Market Account. Michael Martello is currently living in Belgium.

29. In addition, the trading proceeds have been dissipated by means of ATM withdrawals initiated from overseas, first in Taiwan, and more recently in Belgium.

FIRST CLAIM FOR RELIEF
Violations of Exchange Act Section 10(b) and
Rule 10b-5 Promulgated Thereunder
[15 U.S.C. § 78j(b) and 17 C.F.R. § 240.10b-5]
Against Defendants Chrysikos and Michael Martello

30. Paragraphs 1 through 29 are realleged and incorporated herein by reference.

31. Chrysikos knew or recklessly disregarded the fact that he possessed material nonpublic information concerning GE Capital's contemplated business combination with Heller Financial, as described above. Chrysikos knew or recklessly disregarded the fact that he owed a fiduciary duty to General Electric and to its shareholders to maintain such information in confidence until it was publicly disseminated.

32. Chrysikos, in violation of his fiduciary duty to General Electric and to its shareholders, misappropriated such material nonpublic information by communicating such information, directly or indirectly, to Michael Martello while knowing, reasonably expecting, or recklessly disregarding the likelihood that Michael Martello would trade in the securities of Heller Financial.

33. Michael Martello, on the basis of such information, and knowing, having reason to know, or recklessly disregarding the fact that such information had been communicated to him in breach of Chrysikos' fiduciary duty to General Electric and to its shareholders, purchased securities of Heller Financial.

34. By reason of the foregoing, Defendants Chrysikos and Michael Martello directly or indirectly violated Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rule 10b-5 [17 C.F.R. § 240.10b-5] thereunder.

SECOND CLAIM FOR RELIEF
Violations of Exchange Act Section 14(e) and
Rule 14e-3 Promulgated Thereunder
[15 U.S.C. § 78n(e) and 17 C.F.R. § 240.14e-3]
against Defendants Chrysikos and Michael Martello

35. Paragraphs 1 through 29 are realleged and incorporated herein by reference.

36. Chrysikos knew or had reason to know that the information he possessed concerning GE Capital's contemplated business combination with Heller Financial, as described above, constituted material nonpublic information relating to a tender offer that had been acquired from the offering entity, GE Capital.

37. Chrysikos communicated such information, directly or indirectly, to Michael Martello while knowing, reasonably expecting, or recklessly disregarding the likelihood that Michael Martello would trade in the securities of Heller Financial.

38. Michael Martello, while in possession of such information, and knowing or having reason to know the that such information had been acquired, directly or indirectly, from GE Capital, purchased securities of Heller Financial, as set forth above.

39. By the date on which Michael Martello purchased the securities of Heller Financial, GE Capital had taken substantial steps to commence its tender offer for the outstanding common stock of Heller Financial.

40. By reason of the foregoing, Defendants Chrysikos and Michael Martello directly or indirectly violated Section 14(e) of the Exchange Act [15 U.S.C. § 78n(e)] and Rule 14e-3 [17 C.F.R. § 240.14e-3] thereunder.

PRAYER FOR RELIEF

WHEREFORE, Plaintiff SEC respectfully requests that this Court enter a judgment:

(i) permanently enjoining Defendants Chrysikos and Michael Martello from violating Sections 10(b) and 14(e) of the Exchange Act [15 U.S.C. §§ 78j(b) and 78n(e)], and Rules 10b-5 and 14e-3 thereunder [17 C.F.R. §§ 240.10b-5 and 240.14e-3];

(ii) ordering Defendants Chrysikos and Michael Martello to disgorge all profits realized from the unlawful trading alleged herein, with prejudgment interest thereon;

(iii) ordering Defendant Michael Martello and Relief Defendant Marie Martello to provide a complete accounting of all profits realized from the unlawful trading alleged herein;

(iv) ordering Relief Defendant Marie Martello to disgorge all money, property, or other assets derived, directly or indirectly, from the illegal activity alleged herein;

(v) ordering Defendants Chrysikos and Michael Martello to pay civil money penalties under Section 21A of the Exchange Act [15 U.S.C. § 78u-1]; and

(vi) granting such other relief as this Court may deem just and appropriate.

Dated: Washington, D.C.
March 6, 2002

Respectfully submitted,

_________________________
Thomas C. Newkirk (TN7271)
Larry P. Ellsworth
James T. Coffman
David Frohlich
Jessica M. Weiner

Counsel for Plaintiff
Securities and Exchange Commission
Mail Stop 9-11
450 Fifth Street, N.W.
Washington, D.C. 20549
(202) 942-4596 (Ellsworth)
(202) 942-9581 (fax)

Local Counsel:
Robert B. Blackburn (RB1545)
Securities and Exchange Commission
The Woolworth Building
233 Broadway
New York, NY 10279
(646) 428-1610
(646) 428-1971 (fax)


http://www.sec.gov/litigation/complaints/complr17404.htm

Modified: 03/07/2002