U.S. Securities & Exchange Commission
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U.S. Securities and Exchange Commission

Washington, D.C.

LITIGATION RELEASE NO. 16596 \ June 19, 2000

SECURITIES AND EXCHANGE COMMISSION v. MARK J. ARONDS AND MICHAEL J. GARZONI, U.S. District Court for the Eastern District of Michigan, Civil Action No. 96-74813

SEC Settles Insider Trading Action with Former Kmart Employee And Texas Real Estate Broker

The Securities and Exchange Commission today announced the settlement of an insider trading case against former Kmart employee Michael J. Garzoni and Texas real estate broker Mark J. Aronds involving trading in the securities of Intelligent Electronics, Inc. prior to the sale of its subsidiary to a subsidiary of Kmart.

On June 16, 2000, final judgment was entered in U.S. District Court for the Eastern District of Michigan imposing permanent injunctions and other relief against Aronds and Garzoni relating to Aronds' purchases of Intelligent Electronics securities prior to the public announcement on December 4, 1992 that BizMart, a subsidiary of Intelligent Electronics, had been sold to OfficeMax, then a subsidiary of Kmart.

In its October 18, 1996 civil complaint, the Commission alleged that Garzoni, a real estate representative in Kmart Corporation's Troy, Michigan headquarters, tipped Aronds, a Texas real estate broker, prior to the public announcement of Intelligent Electronics' sale of its BizMart subsidiary to OfficeMax, then a subsidiary of Kmart. After being tipped by Garzoni, Aronds purchased Intelligent Electronics call options and stock in advance of the public announcement and realized profits of $115,759.65. Aronds and Garzoni shared the proceeds of Aronds' trading.

On December 21, 1996, the SEC civil suit was stayed due to pending criminal proceedings against Aronds and Garzoni involving Kmart real estate transactions and securities fraud based on the same insider trading. Garzoni pled guilty to all charges and was sentenced to 30 months in federal prison on June 2, 1998. Garzoni is now on supervised release. At his criminal jury trial, Aronds was convicted of money laundering, interstate transportation of property taken by fraud and criminal forfeiture, and was acquitted on the securities fraud charge. On September 1, 1998, Aronds was sentenced to 87 months in jail, which he is presently serving.

Without admitting or denying the allegations of the Commission's Complaint, the defendants consented to a permanent injunction enjoining them from future violations of Section 10(b) of the Securities and Exchange Act of 1934 ("Exchange Act"), and Rule 10b-5 thereunder. In addition, the Commission waived disgorgement of $115,759.65, and did not seek money penalties, based on the defendants' inability to pay.

For additional information about this matter, see Litigation Release No. 15128 (October 21, 1996).