UNITED STATES SECURITIES AND EXCHANGE COMMISSION Litigation Release No. 15653 / February 25, 1998 SECURITIES AND EXCHANGE COMMISSION v. THE OAKFORD CORPORATION, EDWARD J. MUEGER, INC., R.M. CARUCCI CORP., TOUCHDOWN SECURITIES, INC., MFS SECURITIES CORP., OAKWOOD SECURITIES CORP., D ALESSIO SECURITIES, INC., WILLIAM S. KILLEEN, THOMAS W. BOCK, THOMAS J. CAVALLINO, EDWARD J. MUEGER, ROBERT J. CARUCCI, CHRISTINE A. BEYER, MICHAEL A. FRAYLER, MARK R. SAVARESE, JOHN J. SAVARESE and JOHN R. D ALESSIO, United States District Court for the Southern District of New York, 98 Civ. 1366 (JSR) (S.D.N.Y.) The Securities and Exchange Commission today filed a federal civil enforcement action alleging illegal profit sharing arrangements between a registered broker-dealer and eight brokers on the floor of the New York Stock Exchange. As a result of the unlawful arrangements, the defendants made over $11.1 million in illegal profits since the arrangements began in October 1993. Named as defendants in the Commission s Complaint filed in federal court in Manhattan are the following: The Oakford Corporation ( Oakford ), a broker-dealer registered with the Commission since 1991, and located in New York, New York; William S. Killeen ("Killeen"), age 37, of Colts Neck, New Jersey, Oakford s Chief Executive Officer; and Thomas W. Bock, age 45, of Garden City, New York, Oakford s Chief Financial Officer. The Complaint alleges that Killeen and Bock entered into unlawful profit sharing arrangements with the following defendants, all of whom are members of the NYSE (collectively the Floor Brokers ): . Thomas J. Cavallino, age 41, of Shrewsbury, New Jersey, an independent floor broker on the NYSE doing business as Oakwood Securities, Inc., since 1991; . Edward J. Mueger, age 63, of Port Washington, New York, an independent floor broker on the NYSE doing business as Edward J. Mueger, Inc. since 1974; ù Robert J. Carucci, age 36, of Staten Island, New York, an independent floor broker on the NYSE doing business as R.M. Carucci Corp. since 1986; ù Christine A. Beyer, age 32, of Stamford Connecticut, an independent floor broker on the NYSE since 1992; . Michael A. Frayler, age 49, of Colts Neck, New Jersey, an independent floor broker on the NYSE doing business as Touchdown Securities, Inc. since 1994; ù Mark R. Savarese, age 36, of Garden City, New York, a floor broker on the NYSE for MFS Securities Corp. since 1990; ù John J. Savarese, age 39, of Garden City, New York, a floor broker on the NYSE for MFS since 1989; and ù John R. D Alessio, age 43, of Fort Lee, New Jersey, an independent floor ======END OF PAGE 1====== broker on the NYSE doing business as D Alessio Securities, Inc. since 1983. Also named as defendants are the registered broker-dealers and NYSE member firms Edward J. Mueger, Inc., of Port Washington, New York, R.M. Carucci Corp., of Staten Island, New York, Touchdown Securities, Inc., of New York, New York, MFS Securities Corp., of New York, New York, Oakwood Securities Corp., of White Plains, New York, and D Alessio Securities, Inc., of New York, New York. The Commission s Complaint alleges as follows: Pursuant to the profit sharing arrangements, Bock and Killeen opened accounts at Oakford and falsely identified the accounts as Oakford proprietary trading accounts. These Oakford accounts were, in fact, controlled by the defendant Floor Brokers. During the day, as they learned of potentially advantageous trading opportunities from their unique positions on the floor of the NYSE, the defendant Floor Brokers initiated transactions in the Oakford accounts. The Floor Brokers and Bock and Killeen generally split the profits and losses in the Oakford accounts 70/30 - 70% to the Floor Brokers and 30% to Oakford. Between October 1993 and December 1996, this scheme netted illegal profits totaling at least $11.1 million, with the Floor Brokers receiving approximately $8.8 million and Oakford receiving approximately $2.3 million. In order to conceal their scheme, the defendants deliberately falsified various books and records, including order tickets, so as to conceal from regulators the true nature of these transactions. During the trading day Oakford time stamped numerous blank order tickets. After the Floor Brokers executed an order in their Oakford accounts, they communicated to Bock, Killeen or an Oakford clerk the details of the trade. At that time, Bock, Killeen or an Oakford clerk selected a previously time stamped Oakford order ticket which reflected a time prior to the time the Floor Broker had executed the order. Bock, Killeen, or an Oakford clerk then filled in the details of the trade on the Oakford order ticket. By creating false order tickets in this manner, the defendants made it appear that the Floor Brokers trades had resulted from orders that the Floor Brokers had received from Oakford. The federal securities laws and a variety of NYSE rules prohibit floor brokers from trading for their own account while they are on the floor of the exchange. From their unique position on the floor of the NYSE, floor brokers are immediately aware of changes in securities prices, large buy and sell orders for securities, and a host of other information not immediately ascertainable to other participants and investors in the markets. The proscriptions against trading by floor brokers are intended to prevent floor brokers from taking unfair advantage of their unique position. The Commission s Complaint charged the defendants with violating, or aiding and abetting violations of, Sections 11(a) and 17(a) of the Securities Exchange Act of 1934 and Rules 11a-1, 17a-3 and 17a-5 thereunder ======END OF PAGE 2====== and NYSE Rules 90(a), 95(a) and 111(a). The Complaint seeks permanent injunctive relief, disgorgement of all illegal profits from the defendants, prejudgment interest and civil money penalties. The Commission's action is a result of an investigation with the United States Attorney's Office for the Southern District of New York, the Internal Revenue Service Criminal Investigation Division, the Federal Bureau of Investigation and the NYSE. ======END OF PAGE 3======