U.S. SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE NO. 18974 / November 17, 2004
Securities and Exchange Commission v. Russell T. Bradlee, Thomas F. Bradlee, Louis P. Stone, IV, and Angela DelVacchio, Civil Action No. 04CV02011(JGP) (D.D.C. filed November 17, 2004)
SEC CHARGES FORMER BANK EMPLOYEES AND THEIR RELATIVES WITH INSIDER TRADING
The U.S. Securities and Exchange Commission ("Commission") today filed a civil action in the U.S. District Court for the District of Columbia alleging that Russell T. Bradlee, Thomas F. Bradlee, Louis P. Stone, IV, and Angela DelVacchio violated the antifraud provisions of the federal securities laws by illegally buying, tipping, or recommending that others buy F&M Bancorp ("F&M") common stock ahead of a March 13, 2003, public announcement that Mercantile Bankshares Corporation ("Mercantile") and F&M had signed a definitive merger agreement pursuant to which Mercantile would acquire F&M.
The Commission's Complaint alleges that between February 19, 2003, and February 24, 2003, during their employment as analysts in the Affiliate Loan Review Department at Mercantile, Russell T. Bradlee and Louis P. Stone, IV learned material, nonpublic, and confidential information regarding the possible acquisition of F&M by Mercantile. The Complaint alleges that Russell Bradlee and Louis Stone misappropriated this information from their employer by using it to purchase common stock of F&M prior to the public announcement of the possible acquisition and by disclosing the information to others. Russell Bradlee tipped his father, Thomas F. Bradlee, about the possible acquisition, and his father then recommended F&M common stock to a friend. Thomas Bradlee bought common stock of F&M based on his son's tip, and his friend bought F&M common stock based on Thomas Bradlee's recommendation. Louis Stone tipped his sister, Angela DelVacchio, about the possible acquisition, and his sister recommended F&M common stock to her husband. Her husband then bought common stock of F&M based on the recommendation. Russell Bradlee, Thomas Bradlee, Thomas Bradlee's friend, Louis Stone, and Angela DelVacchio's husband all sold their F&M common stock after the public announcement of the possible acquisition.
Without admitting or denying the allegations in the Commission's Complaint, except for jurisdiction, each of the defendants has consented to entry of a proposed Final Judgment permanently enjoining him or her from further violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b 5 thereunder. Additionally, the proposed Final Judgment against Russell Bradlee orders him to disgorge his trading profits of $3,442, together with prejudgment interest thereon of $202, and to pay a civil penalty of $10,000. The proposed Final Judgment against Thomas Bradlee orders him to disgorge his trading profits and the trading profits of his friend, in the aggregate amount of $112,628, together with prejudgment interest thereon of $6,630, and to pay a civil penalty of $112,628. The proposed Final Judgment against Louis Stone finds him liable for disgorgement of his trading profits of $3,976, together with prejudgment interest thereon, but waives payment of those amounts, and does not order payment of a civil penalty, based on sworn representations in his Statement of Financial Condition submitted to the Commission. The proposed Final Judgment against Angela DelVacchio orders her to disgorge her husband's unlawful trading profits of $33,901, together with prejudgment interest thereon of $1,847, and to pay a civil penalty of $33,901.
The Commission acknowledges the assistance provided by the NASD. The Commission's investigation in this matter is continuing.