U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 22061 / August 4, 2011
DEFENDANT IN NEWALLIANCE BANCSHARES IPO FRAUD SETTLES WITH SEC
Securities and Exchange Commission v. Gary Richetelli, Civil Action No. 3:09-CV-00361 (CFD) (D. Conn., filed March 5, 2009)
The Securities and Exchange Commission announced today that the federal court in Connecticut entered a final judgment by consent against defendant Gary Richetelli in an enforcement action relating to fraud in the initial public offering of NewAlliance Bancshares, Inc. On August 2, 2011, the U.S. District Court for the District of Connecticut entered judgment against Richetelli, 64, a resident of Milford, Connecticut ordering him to pay disgorgement of $854,945 plus prejudgment interest of $45,055 and a civil penalty of $100,000.
According to the Commission's complaint, filed March 5, 2009, the action arises out of the April 2004 conversion of New Haven Savings Bank ("NHSB") from a mutual form of organization to a stock form of organization. Because mutual banks are owned by their depositors, the depositors are given first priority in receiving the shares arising out of the conversion's initial public offering. The Commission's complaint alleges that Richetelli entered into illegal arrangements with six NHSB depositors (which were hidden from NHSB) pursuant to which he funded their purchase of shares of NewAlliance stock in exchange for 90% of the profits earned on the sales of such shares. The complaint further alleges that Richetelli also illegally funded the purchase of additional shares of the stock using his mother’s NHSB account, retaining 100% of the profits derived from the sales of those shares. The complaint further alleges that, through his scheme and at the expense of other NHSB bank depositors, Richetelli illegally obtained hundreds of thousands in proceeds from the sale of NewAlliance stock that had been purchased in the IPO.
Without admitting or denying the allegations in the Commission's complaint, Richetelli consented to the entry of the judgment enjoining him from violating Section 10(b) of the Securities Exchange Act of 1934 and ordering him to pay disgorgement of $854,945, representing ill-gotten gains he received as a result of the conduct alleged in the complaint, together with prejudgment interest thereon in the amount of $45,055, and a civil penalty of $100,000. The judgment was entered by the Honorable Christopher Droney of the United States District Court for the District of Connecticut.
[For further information, please see Litigation Release No. 19288 (June 28, 2005), Litigation Release No. 19444 (October 25, 2005), Litigation Release No. 19714 (June 1, 2006), Litigation Release No. 19797 (August 9, 2006), Litigation Release No. 20934 (March 6, 2009), and the Investor Alert the Commission issued on June 28, 2005. The Investor Alert is available at: www.sec.gov/investor/pubs/mutualconversion.htm.]