United States Securities and Exchange Commission
Litigation Release No. 16370 / November 24, 1999
U.S. v. James L. D'Angelo and John C. Larrabee. Cr. No. 98-10208-MLW
Former Law Firm Employee and Stockbroker Convicted of Insider Trading
The U.S. Attorney's Office for the District of Massachusetts announced on November 23, 1999 that following separate trials in the United States District Court for the District of Massachusetts, James L. D'Angelo of Wolfeboro, New Hampshire, and John C. Larrabee of Boxford, Massachusetts, were each convicted of nine counts of securities fraud for insider trading in the stock of BayBanks, Inc.
The indictment alleged that Larrabee was the Director of Fiduciary Services for the Boston law firm of Bingham, Dana & Gould, and that D'Angelo was a stockbroker at PaineWebber, Inc. in Andover, Massachusetts. Larrabee, who was not a lawyer, was in charge of Bingham, Dana's department that administered trusts of the firm's clients. In that role, he chose the stockbrokers who would execute the securities trades in those trust accounts. For a number of years, Larrabee had been referring the majority of that business to D'Angelo, for whom those accounts were an important source of business. From at least 1991 through 1995, D'Angelo had secretly given money to and made payments on behalf of Larrabee, including college tuition payments for Larrabee's children. Those payments violated the conflict-of-interest policies of both Bingham, Dana and PaineWebber.
In early December 1995, Bank of Boston retained Bingham, Dana to represent it in connection with its confidential proposed merger with BayBanks. The indictment alleged that Larrabee learned of the pending deal, and on the afternoon of December 12, 1995, tipped D'Angelo. D'Angelo promptly purchased $870,048 worth of Baybanks stock in eight accounts that he and his family controlled and a ninth account in the name of his girlfriend. Bank of Boston and BayBanks publicly announced the merger that evening. The next morning, D'Angelo sold all of the stock for an $86,750 profit.
On March 25, 1997, the Securities and Exchange Commission filed an insider trading complaint against D'Angelo and Larrabee in the United States District Court for the District of Massachusetts. Simultaneously with the filing of the complaint, and without admitting or denying the Commission's allegations, D'Angelo consented to a permanent injunction against future violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and paid disgorgement of $86,750, plus prejudgment interest in the amount of $8,552 and a civil penalty of $86,750, for a total of $182,052. In addition, the Commission barred D'Angelo, with his consent, from association with any broker, dealer, municipal securities dealer, investment adviser or investment company (See Exchange Act Release 38524, April 18, 1997). The Commission's civil action against Larrabee is still pending.
For further information, see Litigation Release No. 15306 (March 25, 1997).http://www.sec.gov/litigation/litreleases/lr16370.htm