Two Defendants Sentenced to Prison in Insider Trading Scheme | WPN World People News

The two primary traders in an extensive insider trading network were sentenced to prison for repeatedly using information divulged by insiders at pharmaceutical/medical technology firms operating in New Jersey, U.S. Attorney Paul J. Fishman announced.

Lawrence Grum, 50, of Livingston, New Jersey, was sentenced to one year and one day in prison, and Michael Castelli, 50, of Morris Plains, New Jersey, was sentenced to nine months in prison. Grum previously pleaded guilty before U.S. District Judge Katharine S. Hayden to an information charging him with two counts of conspiracy to commit securities fraud and four counts of securities fraud. Castelli previously pleaded guilty before Judge Hayden to an information charging him with two counts of conspiracy to commit securities fraud and five counts of securities fraud. Judge Hayden imposed both sentences in Newark federal court.

From 2007 to 2012, Grum and Castelli executed numerous, profitable trades based on inside information fed to them by their friend, Mark Cupo, 53, of Morris Plains, who was an executive at Sanofi-Aventis, a global pharmaceutical company with United States operations based in New Jersey. Cupo, in turn, obtained much of the inside information from his friend and former employee, John Lazorchak, 43, of Long Valley, New Jersey, who was director of financial reporting at Celgene Corp., another global pharmaceutical company based in New Jersey. Lazorchak also obtained certain inside information from Mark Foldy, 44, of Morris Plains, a friend and former high school classmate of Lazorchak who was a marketing executive at Stryker Corp., a leading medical technology business with a major division located in New Jersey.

During the course of the multi-year insider trading operation, Grum and Castelli regularly received from Lazorchak, via Cupo, material, non-public information about Celgene’s anticipated corporate acquisitions, numerous quarterly earnings results, and regulatory news, with the understanding that Grum and Castelli would trade based on the inside information and share their profits with Lazorchak and Cupo. Grum and Castelli also received inside information directly from Cupo regarding a corporate acquisition planned by Cupo’s employer, Sanofi, as well as inside information Cupo had obtained from Lazorchak regarding a Stryker acquisition. Lazorchak, in turn, had obtained the Stryker inside information from his friend, Foldy.

Grum and Castelli made efforts to conceal their involvement in insider trading by, for example, compiling binders of market research to try to provide an independent basis for their knowledge of confidential, material non-public information.

The material, non-public information available to Grum and Castelli enabled them to reap substantial profits by engaging in lucrative securities trading ahead of the public announcement of several corporate acquisitions, numerous quarterly earnings results, and regulatory news. In addition, they shared a portion of their profits with Lazorchak and Cupo for their respective roles in providing Grum and Castelli inside information.

In addition to the prison terms, Judge Hayden sentenced Grum and Castelli to two years each of supervised release.

Grum and Castelli are the last of the six defendants charged with participating in this insider trading network to plead guilty. The other four defendants—Lazorchak, Cupo, Foldy, and Michael Pendolino, 44, of Nashua, New Hampshire—entered their guilty pleas before Judge Hayden on October 7, 2013, and are awaiting sentencing.

Source: U.S. Attorney’s Office