U.S. SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE NO. 16848 / January 2, 2001
Securities and Exchange Commission v. Lorraine K. Cassano, Civil Action No. 99-CV-3822 (S.D.N.Y.)
SEC OBTAINS INJUNCTIONS AND OVER $580,000 IN DISGORGEMENT, INTEREST AND PENALTIES AGAINST INSIDER TRADERS IN LOTUS SECURITIES
The Securities and Exchange Commission today announced that the Hon. Louis Kaplan of the United States District Court for the Southern District of New York ordered six defendants to pay disgorgement, interest and penalties totaling $581,117 in an insider trading case arising out of IBM's 1995 takeover of Lotus Development Corp. Judge Kaplan also issued permanent injunctions against five of the six insider traders enjoining them from future violations of the SEC's insider trading laws. Each of the six defendants bought Lotus call options or Lotus stock based on material non-public information that IBM intended to take over Lotus. Four of the six defendants, James Ribellino of Marlboro, NJ, Gerard Wells of Port Washington, NY, Ralph Serpe of East Northport, NY, and Claudio Spinelli of Staten Island, NY were found liable for insider trading by a jury on December 7, 2000. The other two defendants, Jerry Mazzone of Staten Island, NY and Richard Cofrancesco of Staten Island, NY agreed to the entry of an order establishing their liability prior to the jury's verdict.
On December 20, 2000, Judge Kaplan ordered Jerry Mazzone to pay $45,112 in disgorgement, $25,655 in pre-judgment interest, and a civil penalty of $60,000. He ordered Richard Cofrancesco of Staten Island, NY to pay $24,119 in disgorgement, $13,717 in pre-judgment interest, and a civil penalty of $30,000. He ordered James Ribellino of Marlboro, NJ, to pay $54,500 in disgorgement, $31,625 in pre-judgment interest, and a civil penalty of $54,300. He ordered Ralph Serpe of East Northport, NY to pay $13,500 in disgorgement, $7,837 in pre-judgment interest, and a civil penalty of $54,300. He ordered Gerard Wells of Port Washington, NY to pay $13,500 in disgorgement, $7,837 in pre-judgment interest, and a civil penalty of $54,300. Finally, he ordered Claudio Spinelli of Staten Island, NY, a seventh-tier tippee, to pay $35,000 in disgorgement, $20,815 in pre-judgment interest, and a civil penalty of $35,000.
The Court issued permanent injunctions against Jerry Mazzone and Cofrancesco enjoining them from future violations of the antifraud provisions of the securities laws, that is, Section 10(b) of the Exchange Act of 1934 and Rule 10b-5 thereunder. The Court also issued permanent injunctions against Jerry Mazzone, Cofrancesco, Ribellino, Serpe, and Claudio Spinelli enjoining them from future violations of the tender offer insider trading provisions of the federal securities laws, that is, Section 14(e) of the Exchange Act and Rule 14e-3 thereunder. The Court did not issue an injunction against Wells.
The trial resulted from a complaint the Commission filed on May 26, 1999, charging a total of 25 defendants with insider trading in Lotus options and stock. Fifteen of the 25 defendants settled prior to trial, one defendant settled during the trial, and two defendants, Jerry Mazzone and Richard Cofrancesco, agreed to stipulate to liability during the trial. Of the remaining seven defendants, the jury found James Ribellino, Gerald Wells, Ralph Serpe and Claudio Spinelli liable for violations of Section 14(e) of the Exchange Act and Rule 14(e) thereunder. The jury also found Dorinda Tribiano, Diane Scipioni and Ronald DeTommaso not liable.
The Commission's complaint alleged that Lorraine Cassano, an IBM secretary, told her husband, Robert Cassano, about IBM's secret plan to acquire Lotus. Robert Cassano told his friend, Jerry Mazzone, who purchased Lotus stock and call options on June 2, 1995. Jerry Mazzone then tipped his cousin, Peter Mazzone, and three coworkers, one of whom was Richard Cofrancesco; all five purchased Lotus call options or Lotus stock on June 2. The complaint further alleged that Cofrancesco told his cousin, Domenico Alba, about the illegal tip and Domenico Alba told his friend, Josephine DeCicco and his business partner, Domenico Spinelli, who then told his brother, Claudio Spinelli. Cofrancesco also told three business acquaintances, James Ribellino, Gerard Wells and Ralph Serpe, about the IBM takeover plan and Ribellino, Wells and Serpe jointly purchased Lotus call options on June 2. When IBM announced its hostile tender offer for Lotus on June 5, 1995, Lorraine Cassano, Robert Cassano, Jerry Mazzone, Peter Mazzone, Cofrancesco, Alba, DeCicco, Domenico Spinelli, Claudio Spinelli, Ribellino, Wells, Serpe, and the thirteen other defendants made over $1 million in illegal profits.
For further information, please see Litigation Release Nos. 16825 (December 12, 2000), 16599 (June 20,2000) 16438 (February 16, 2000), 16278 (September 13, 1999), 16185 (June 10, 1999) and 16161 (May 26, 1999).