U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 19698 / May 15, 2006

Securities and Exchange Commission v. Robert J. Downs, Jr. and Stephen J. Messina, C.A. No. 06-2031 (Eastern District of Pennsylvania)

SEC Sues Philadelphia Lawyer And Friend For Insider Trading

Lawyer Communicated Material Nonpublic Information to Friend Concerning Impending Electronics Boutique Holdings Corp. Merger

Friend Charged in Related Criminal Action with Making False Statement to SEC Investigators

Defendants Agree to Settlements Including Injunctions, Civil Penalties, and, as to One Defendant, Disgorgement of Illegal Profits Plus Interest, Paying in Total over $785,000

The Securities and Exchange Commission today filed an insider trading Complaint in the United States District Court for the Eastern District of Pennsylvania against Robert J. Downs, Jr., 43, a former partner in a Philadelphia law firm, and his friend, Stephen J. Messina, 51, an operations employee at a suburban Philadelphia computer supply company. The Complaint alleges that Downs misappropriated material nonpublic information from his law firm and one of its corporate clients and then communicated that information to his friend, Messina, who traded options while in possession of and based on the material nonpublic information. According to the Complaint, Messina made over $308,000 in illegal profits.

Among other things, the Complaint alleges:

• In April of 2005, Downs was a partner in a Philadelphia law firm that was representing Electronics Boutique Holdings Corp. ("Electronics Boutique") in connection with the video game retailer's planned merger with GameStop Corp. ("GameStop").
   
• On April 11, 2005, one week before the public announcement of the intended merger between Electronics Boutique and GameStop, Downs communicated material nonpublic information to Messina concerning the merger.
   
• While in possession of and based on the material nonpublic information that he received from Downs, Messina bought bullish options on the securities of Electronics Boutique. After Electronics Boutique and GameStop announced their agreement and plan of merger on April 18, 2005, Messina closed his option positions and realized a profit in excess of $308,000.

Downs and Messina have each consented, without admitting or denying the allegations in the Complaint, to final judgments permanently enjoining them from violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. In addition, Messina agreed to pay over $481,000 to settle the charges against him - disgorgement of $308,335, prejudgment interest in the amount of $18,914, and a civil penalty of $154,167. To settle the charges against him, Downs agreed to pay a civil penalty in the amount of $308,335.

In a related action, the United States Attorney for the Eastern District of Pennsylvania announced today the filing of an information charging Messina with a felony count of making a false statement to SEC attorneys in violation of 18 U.S.C. § 1001.

The Commission thanks the U.S. Attorney's Office for the Eastern District of Pennsylvania, the Philadelphia Division of the Federal Bureau of Investigation, and the Chicago Board Options Exchange for their cooperation in this matter.

The Commission's investigation in this matter is continuing.

SEC Complaint in this matter

http://www.sec.gov/litigation/litreleases/2006/lr19698.htm