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U.S. Securities and Exchange Commission

U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 16161 / MAY 26, 1999

Securities and Exchange Commission v. Lorraine K. Cassano, et al., Civil Action No. 99-CV -3822 (S.D.N.Y.)

SEC CHARGES TWENTY-FIVE INDIVIDUALS WITH ILLEGAL PROFITS OF OVER $1.3 MILLION FROM INSIDER TRADING IN ADVANCE OF IBM’S TAKEOVER OF LOTUS DEVELOPMENT CORPORATION

The Securities and Exchange Commission today charged a former IBM secretary, Lorraine K. Cassano, and twenty-four other individuals with insider trading in the securities of Lotus Development Corporation in advance of IBM’s takeover of Lotus. The Commission alleged that in the course of her employment Lorraine Cassano learned of a secret IBM plan to take over Lotus, and tipped her husband, Robert M. Cassano. The Commission further alleged that Robert Cassano then tipped two friends with whom he entered into secret profit sharing arrangements. According to the Commission’s complaint, after purchasing Lotus stock and options, those two friends tipped others as the information then rapidly spread through a network of relatives, friends, co-workers and business associates within a six hour period on Friday, June 2, 1995. The Complaint alleges that after IBM’s public announcement on June 5, 1995, the defendants’ trading generated illegal trading profits of more than $1.3 million. The case was filed in the United States District Court for the Southern District of New York.

The illicit information obtained by L. Cassano ultimately was passed down to six tiers of traders. Many of the defendants were infrequent or even first time securities purchasers who purchased primarily call options, thus allowing them to make large profits on relatively small investments. In addition, the illicit trading cut across all walks of life as the defendants include a banker, an attorney, a doctor, stock brokers, an engineer, a financial analyst, salesmen, small businessmen such as delicatessen and pizzeria owners, printer repairmen, and a school teacher.

Four of the defendants, L. Cassano and R. Cassano, Michael P. Green, and Dr. Gary Spierer, have settled the charges against them by agreeing to permanent injunctions from violating the antifraud provisions of the federal securities laws and to pay the following monetary relief:

• L. Cassano and R. Cassano will jointly pay $7,500 in disgorgement plus prejudgment interest and each will pay a penalty of $7,500 while an additional $315,000 in disgorgement for tipping others will be waived based upon their demonstrated financial inability to pay more.

• Green will pay $17,935 in disgorgement plus prejudgment interest (representing his own trading profits and those of his tippee) and a penalty of $17,935.

• Spierer will pay $110,354 in disgorgement plus prejudgment interest (representing his own trading profits and those of his tippee, Alvin Ira Davis) and a penalty of $82,579.

The Commission’s case remains pending against the remaining twenty-one defendants.

The Commission is seeking permanent injunctions for violations of Sections 10(b) and/or 14(e) of the Securities Exchange Act of 1934 and Rules 10b-5 and/or 14(e)-3 thereunder, disgorgement of their illegal trading profits plus prejudgment interest and a civil monetary penalty of up to three times their illegal trading profits. The Commission will also seek to hold defendants liable for the profits of their tippees.

The Complaint also alleges that several of the defendants engaged in concerted efforts to impede the underlying investigation by lying to the Commission staff in testimony under oath and/or in investigative interviews. In related criminal cases brought by the U.S. Attorney for the Southern District of New York, seven defendants earlier pleaded guilty to criminal charges arising from this action. R. Cassano was charged with insider trading. P. Gerard Mazzone, and Peter Mazzone were charged with insider trading and perjury. Green, Joesph Petrosino, Carmine DeSantis and Spierer were charged with perjury and/or obstructive conduct in the Commission’s investigation.

The Complaint named the following persons as defendants:

Domenico Alba, was at the time a co-owner and operator of a pizzeria. Alba is a resident of Staten Island, New York. He is alleged to have made approximately $49,000 in illegal trading profits, and is charged with tipping two other individuals.

Lorraine K. Cassano, was at the time a secretary in the Volumes and Revenue Department of the Software Group at IBM in Somers, New York. She is a resident of North Salem, New York. She is alleged to have made, with her husband, approximately $7,500 in illegal trading profits, and is charged with tipping her husband.

Robert M. Cassano, the husband of L. Cassano, was a salesman for a paging communications company at the time of the illegal trading. He resides in North Salem, New York. He is alleged to have made, with his wife, $7,500 in illegal trading profits and is charged with tipping two others.

Richard Cofrancesco, is employed as a service technician for a manufacturer of laser computer printing equipment. Cofrancesco resides in Staten Island, New York. He is alleged to have made approximately $25,000 in illegal trading profits and is charged with tipping four others.

Alvin Ira Davis, was at the time employed as a bank vice president and financial analyst. Davis resides in Staten Island, New York. Davis is alleged to have made approximately $57,000 in illegal trading profits.

Josephine DeCicco, was at the time a private school teacher. She resides in Staten Island, New York. She is alleged to have made approximately $48,000 in illegal trading profits.

Lawrence DeMonte, is an executive of a family-owned grocery store in Staten Island, New York. DeMonte resides in Staten Island. He is alleged to have made approximately $48,000 in illegal trading profits.

Carmine DeSantis, is an attorney-at-law and a partner in a two-lawyer firm in Staten Island, New York. DeSantis is admitted to the bars of the states of New York and New Jersey and resides in Staten Island. He is alleged to have made approximately $16,000 in illegal trading profits.

Ronald DeTommaso, is a stock broker at Russo Securities, Inc., a Staten Island brokerage firm, and resides in Newark, New Jersey. He is alleged to have made approximately $5,900 in illegal trading profits.

Michael Paul Green, at all relevant times was a salesman for a paging communications company. Green resides in Edison, New Jersey. He is alleged to have made approximately $17,900 in illegal trading profits and is charged with causing one other person to trade.

Isaac Lederman, at all relevant times was the owner and operator of an egg, butter and dairy wholesaling business based in Bayonne, New Jersey. Lederman resides in Morganville, New Jersey. He is alleged to have made approximately $47,500 in illegal trading profits from trading in his brother’s brokerage account and is charged with tipping his brother and one other person.

Samuel Gary Lederman, is a stock broker and resides in Upper Saddle River, New Jersey. He is the brother of Isaac Lederman and is alleged to have made approximately $47,500 in illegal trading profits.

P. Gerard Mazzone (a.k.a. "Jerry Mazzone"), is employed as a service technician for a manufacturer of computer printing equipment. He resides in Staten Island, New York. He is alleged to have made approximately $28,000 in illegal trading profits and is charged with tipping four others.

Peter G. Mazzone, owns and operates a delicatessen in Staten Island, New York, where he also resides. He is the cousin of Jerry Mazzone, allegedly made approximately $84,000 in illegal profits and is charged with tipping four others.

John J. Melville, at all relevant times was a bank consultant and resided in Spotswood, New Jersey. He is alleged to have made approximately $116,000 in illegal trading profits.

Joseph Petrosino, is a service technician for a manufacturer of laser computer printing equipment. Petrosino resides in Brooklyn, New York. He is alleged to have made approximately $48,000 in illegal trading profits.

James Vincent Ribellino, Jr., is the president and part owner, along with two other defendants, of a business in Brooklyn, New York, that prepares, prints and mails direct mail marketing materials. Ribellino resides in Staten Island, New York. He is alleged to have traded and allowed two others to trade in his brokerage account for a total illegal profit of approximately $83,000.

Jonah Rosenblatt, was at the time a stock broker at Russo Securities. Rosenblatt resides in Lawrence, New York. The Complaint alleges that he caused six of his customers to trade, realizing approximately $468,000 in illegal trading profits.

Diane Russo Scipioni, is also a stock broker at Russo Securities. At the time of the illegal trading, Scipioni resided in Staten Island, New York. She is alleged to have made approximately $3,000 in illegal trading profits.

Ralph Serpe, operates and partially owns, along with Ribellino and one other defendant, a business in Brooklyn, New York, that prepares, prints and mails direct mail marketing materials. Serpe resides in East Northport, New York. He is alleged to have traded through Ribellino’s account along with one other person making a joint illegal profit of approximately $83,000.

Gary Spierer, is a medical doctor specializing in obstetrics and gynecology. Spierer practices and resides in Staten Island, New York. He is alleged to have made approximately $57,000 in illegal trading profits and is charged with tipping one other person.

Claudio Spinelli, is employed as an electrical engineer. C. Spinelli resides in Staten Island, New York. He is alleged to have made approximately $37,000 in illegal trading profits.

Domenico Spinelli, owns and operates with a pizzeria in Staten Island, New York, where he also resides. He is alleged to have made approximately $49,000 in illegal trading profits and is charged with tipping his brother, Claudio Spinelli.

Dorinda Marie Tribiano, is a stock broker at Russo Securities, where she serviced an account maintained by P. Mazzone. Tribiano resides in Staten Island, New York. She is alleged to have made approximately $3,000 in illegal profits and is charged with tipping three others.

Gerald Wells, operates and partially owns, along with Ribellino and Serpe, a business in Brooklyn, New York, that prepares, prints and mails direct mail marketing materials. Wells resides in Port Washington, New York. He is alleged to have traded through Ribellino’s account along with Serpe making a joint illegal profit of approximately $83,000.

The Commission coordinated its investigation with that of the Securities and Commodities Fraud Task Force in the Office of the United States Attorney for the Southern District of New York. The Commission also acknowledges the assistance provided by the American Stock Exchange, the New York Stock Exchange and NASDR, Inc.

This Complaint is the second arising out of the Lotus investigation. On April 16, 1998, the Commission charged Robert Scott, a former employee of Chase Manhattan Bank, with trading on inside information concerning IBM’s takeover of Lotus. Scott settled the case paying disgorgement of $12,267, plus prejudgment interest and a penalty of $12,267. SEC v. Robert G. Scott, Jr., C.A. No. 98-CV-2712 (Stanton) (S.D.N.Y.) [Litigation Release No. 15078]

http://www.sec.gov/litigation/litreleases/lr16161.htm


Modified:05/26/1999