SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 16352 / November 10, 1999
UNITED STATES V. JOSEPH FALCONE, U.S. District Court, E.D.N.Y., No. 99-CR-332 (TCP)
The Securities and Exchange Commission ("Commission") announced that on November 9, 1999, Joseph T. Falcone ("Falcone"), a resident of Old Bethpage, New York, and former registered representative of the Melville, New York branch of a registered broker-dealer. was found guilty of insider trading. In a trial prosecuted by the Office of the United States Attorney for the Eastern District of New York, a jury found Falcone guilty of 14 felony counts arising out of Falcone's recommendations to customers of securities mentioned in the "Inside Wall Street" column of Business Week magazine and his own purchases of such securities.
The Commission previously filed a civil complaint against Falcone, four other registered representatives, and a foreman at a magazine distribution facility, alleging that, from June 1995 to January 1996, the defendants engaged in an insider trading scheme involving nonpublic advance copies of the "Inside Wall Street" column. The Commission's Complaint alleges that defendant Larry F. Smath ("Smath"), a registered representative at Renaissance Financial Securities Corp. in Mineola, New York, obtained advance copies of "Inside Wall Street" columns from Gregory R. Salvage ("Salvage"), a foreman at Hudson News Company, before the columns were made public. In exchange for faxing the columns to him, Smath usually paid Salvage approximately $200 per column from June 1995 to January 1996. While in possession of the nonpublic "Inside Wall Street" columns, Smath traded securities in brokerage accounts in his name and/or the names of his relatives. In addition, the Commission's Complaint alleges that Falcone and other defendants paid Smath for communicating the contents of the "Inside Wall Street" columns to them before the columns were made public. While in possession of the nonpublic information obtained from the columns, Falcone and other defendants traded securities mentioned in the columns and recommended those securities to their customers. In total, the defendants and their family members and customers purchased approximately $8 million of securities mentioned in "Inside Wall Street" columns.
Smath and two of the other defendants in the Commission's action, Peter L. Cohen and Seth J. Glaser, were also charged by the U.S. Attorney's Office. Each previously pleaded guilty to a felony charge. The Commission's action, which alleges that the defendants violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, is pending in the United States District Court, Eastern District of New York.
For further information about the Commission's action, see Litigation Release No. 16047.http://www.sec.gov/litigation/litreleases/lr16352.htm