UNITED STATES SECURITIES AND EXCHANGE COMMISSION Litigation Release No. 16047 / January 27, 1999 SECURITIES AND EXCHANGE COMMISSION v. LARRY F. SMATH, GREGORY R. SALVAGE, JOSEPH T. FALCONE, PETER L. COHEN, SETH J. GLASER and FRANK ZANGARA, CV-99-523 (E.D.N.Y.)(TCP) NEW YORK-- The Securities and Exchange Commission filed an action in federal court in Brooklyn, New York today alleging that five stockbrokers and a foreman at a magazine distribution facility engaged in an insider trading scheme involving nonpublic advance copies of the Inside Wall Street column of Business Week magazine. The source of the nonpublic Inside Wall Street columns was a foreman at Hudson News Company ("Hudson News"), a wholesale and retail distributor of newspapers and magazines, who provided the nonpublic Inside Wall Street columns to one of the brokers in exchange for cash payments. The insider trading scheme took place from June 1995 to January 1996. Named in the Commission’s Complaint were: Larry F. Smath, age 42, a resident of Levittown, New York. During the time of the illegal conduct, Smath was employed at Renaissance Financial Securities Corp. ("Renaissance"), a now defunct broker-dealer that was located in Mineola, New York. Gregory R. Salvage, age 43, a resident of Levittown, New York and a foreman at Hudson News in North Bergen, New Jersey. Joseph T. Falcone, age 39, a resident of Old Bethpage, New York. During the time of the illegal conduct, Falcone was employed by Prudential Securities, Inc., a registered broker-dealer located in Melville, New York. Falcone is currently employed by Times Securities Services, Inc., a registered broker-dealer located in Melville, New York. Peter L. Cohen, age 33, a resident of Plainview, New York. During the time of the illegal conduct, Cohen was employed by Renaissance. Cohen is currently employed by J.B. Sutton Group, LLC, a registered broker-dealer located in Great Neck, New York. Seth J. Glaser, age 29, a resident of Levittown, New York. At the time of the illegal conduct, Glaser was employed by Renaissance. Glaser is currently employed by Fleet Enterprises, Inc., a registered broker-dealer located in Jersey City, New Jersey. Frank Zangara, age 36, a resident of Hicksville, New York. At the time of the illegal conduct, Zangara was employed at Tasin & Co., Inc., a registered broker-dealer located in Hauppauge, New York. Zangara is currently employed at Tasin & Co., Inc. The Commission’s Complaint alleges that beginning in June 1995, Smath arranged for Salvage to fax at least eighteen Inside Wall Street columns to him before the columns were made public. In exchange for faxing the columns, Smath paid Salvage approximately $200 per column, for most columns, from June 1995 to January 1996. While in possession of the nonpublic Inside Wall Street columns, Smath traded at least 35 different securities in brokerage accounts in his name and/or the names of his relatives. Smath and his relatives made profits of approximately $94,000 from those trades. In addition, the Commission’s Complaint alleges that Cohen, Glaser, Falcone and Zangara paid Smath in cash for communicating the contents of the Inside Wall Street columns to them before the columns were made public. Falcone, Cohen, Glaser and Zangara each traded securities while in possession of the nonpublic information obtained from the Inside Wall Street columns. Cohen, Glaser, Falcone and Zangara also recommended securities mentioned in the Inside Wall Street columns to their customers, and also tipped at least one customer, while in possession of the nonpublic contents of the Inside Wall Street columns. The one customer who was tipped traded at least 33 different securities while in possession of the nonpublic contents of the Inside Wall Street columns and made approximately $78,000 from those illegal trades. In total, the defendants and their family members and customers purchased approximately $8 million of securities mentioned in Inside Wall Street columns. In its Complaint, the Commission alleges that the defendants violated the antifraud provisions of the federal securities laws -- Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The Commission is seeking permanent injunctions against future violations of the antifraud provisions, disgorgement of the defendants' ill-gotten gains plus prejudgment interest, and civil penalties. The Commission will continue its investigation to determine whether other individuals violated the federal securities laws in connection with this scheme. The Commission was assisted in its investigation by the United States Attorney’s Office for the Eastern District of New York, the United States Postal Inspection Service, the New York Stock Exchange, the National Association of Securities Dealers, and other securities industry self- regulatory organizations. In a related proceeding, the United States Attorney’s Office for the Eastern District of New York filed criminal charges against Cohen, Glaser and Falcone in federal court in Uniondale, New York.