U.S. SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE NO. 16599 / June 20, 2000
Securities and Exchange Commission v. Lorraine K. Cassano, Civil Action No. 99-CV-3822 (S.D.N.Y.)
THREE MORE TRADERS SETTLE LOTUS INSIDER TRADING CHARGES BY AGREEING TO PAY MORE THAN $330,000 IN DISGORGEMENT AND PENALTIES
Two Also Agree to Bars from the Securities Brokerage Industry
The Securities and Exchange Commission today announced that three more traders have agreed to settle Commission charges that they engaged in insider trading in advance of IBM's takeover of Lotus Development Corporation. Specifically, Isaac Lederman of Morganville, New Jersey, has agreed to pay (i) disgorgement of $143,286 (representing his trading profit of $47,463 and the trade profit of two individuals he tipped) plus $66,384 in prejudgment interest (minus the amounts of disgorgement and interest paid by his tippees) and (ii) a civil penalty of $143,286. Samuel G. Lederman of Upper Saddle River, New Jersey, one of I. Lederman's tippees, has agreed to disgorge his trading profit of $47,463 plus $22,760 in prejudgment interest and to pay a civil penalty of $47,463. Jonah Rosenblatt, of Far Rockaway, New York, has agreed to the entry of a final judgment holding him liable for disgorgement of $467,990 (representing the profits from trading he allegedly caused) plus prejudgment interest, but waiving payment of disgorgement and not imposing a civil monetary penalty based upon his demonstrated inability to pay. I. Lederman, S. Lederman and Rosenblatt have further consented to the entry of permanent injunctions prohibiting future violations of Section 14(e) of the Securities Exchange Act of 1934 and Rule 14e-3 thereunder. Finally, S. Lederman and Rosenblatt, both stockbrokers, have agreed to be barred from the securities brokerage industry. S. Lederman will be able to reapply after five years and Rosenblatt after three years. In consenting to the entry of the relief, the defendants neither admitted nor denied the Commission's substantive allegations against them.
On May 26, 1999, the Commission charged I. Lederman, S. Lederman, Rosenblatt and twenty-two others with insider trading in Lotus options and stock. Specifically, the Commission alleged that I. Lederman purchased short-term Lotus call options on June 2, 1995, based upon an illegal tip he had received from a friend and customer of his wholesale food business, Peter G. Mazzone. In addition, the Commission charged I. Lederman with tipping his brother, S. Lederman, and another of his customers, Lawrence DeMonte. Both S. Lederman and DeMonte also purchased short-term Lotus call options on June 2. When IBM announced a hostile tender offer for Lotus on June 5, 1995, I. Lederman and S. Lederman each made a profit of $47,463, and DeMonte made a profit of $48,360. According to the Commission's complaint, Rosenblatt was tipped directly or indirectly by Mazzone's stockbroker, who worked at the same brokerage firm as Rosenblatt. The Commission charged Rosenblatt with soliciting and otherwise directing the purchase of Lotus stock and options by six of his brokerage customers based upon that tip. After IBM's public announcement, Rosenblatt's customers made an aggregate profit of $467,990.
The Commission alleged that Mazzone had obtained the information indirectly from Lorraine Cassano, an IBM secretary who had misappropriated information about the then-secret takeover plan from IBM. According to the Commission's complaint, I. Lederman was a fourth tier tippee, S. Lederman was a fifth tier tippee, and Rosenblatt was at least a fifth tier tippee.
Eleven of the twenty-five defendants in this case have now reached settlements with the Commission. Cassano and DeMonte are among the defendants who previously settled the Commission's charges. The Commission is continuing to litigate against the other fourteen defendants. The final pre-trial conference in this case has been scheduled for June 26, 2000.
For further information, please see Litigation Release Nos. 16438 (February 16, 2000), 16278 (September 13, 1999), 16185 (June 10, 1999) and 16161 (May 26, 1999).