The Securities and Exchange Commission (SEC) filed two complaints on Sept. 30 in the U.S. District Court for the western district of Pennsylvania against a total of 16 individuals for insider trading in advance of Dick’s Sporting Goods Inc.’s June 21, 2004, announcement that it intended to acquire Galyan’s Trading Company, Inc. via a tender offer. The complaints allege:
Joseph J. Queri, Jr., Dicks Sr. VP of real estate, tipped his close friend, Gary Gosson, and his father, Joseph Queri, Sr., about the acquisition.
Gosson, located in Syracuse, NY, tipped his friends defendants Gary L. Camp, Michael A. Santaro, Joseph A. Federico, Philip J. Simao, Mark J. Costello, and Alan J. Johnston, who all bought shares of Galyan’s stock. Johnston, in turn, tipped family members and friends, who also bought shares. Gosson gave Camp money to buy shares of Galyan’s stock through Camp’s brokerage account. Santaro and Federico shared profits with Gosson.
Queri Sr., located in Las Vegas, NV, tipped his friends James L. Jerome, Kyle D. Kaczowski, Gino M. Ferraro, Felix A. Crisafulli, and Thomas M. Heller, who all bought shares of Galyan’s stock. Jerome, in turn, tipped defendant Brandt A. England, who also bought shares. Kaczowski tipped two friends who traded. Ferraro tipped his son-in-law, defendant Franko J. Marretti III, who traded and tipped a business colleague.
The day after the public announcement, Galyan’s stock closed at $16.68, a 50.3% increase from the previous day’s closing price of $11.10. The traders collectively profited over $620,000 after selling their Galyan’s stock.
Five of the defendants have agreed to settle with the SEC. Without admitting or denying the allegations in the complaint, Queri Sr., Santaro, Ferraro, Crisafulli and Heller consented to the entry of a final judgment, subject to the court’s approval, in which they are permanently enjoined from future violations of Sections 10(b) and 14(e) of the Securities Exchange Act of 1934 and Rules 10b-5 and 14e-3 thereunder.
In addition to permanent injunctive relief, Queri Sr. agreed to pay disgorgement of $2,600.00, plus prejudgment interest of $728.59, jointly and severally with Ferraro, and a civil penalty, for tipping, in the amount of $105,647. Ferraro agreed to pay disgorgement of $13,092.00, plus prejudgment interest of $3,668.66, of which $3,328.59 is to be paid jointly and severally with Queri Sr., and a civil penalty, for trading and tipping, in the amount of $22,644.00. Crisafulli agreed to pay disgorgement of $13,327.00, plus prejudgment interest of $3,734.52, and a one-time civil penalty, for trading, in the amount of $13,327.00. Heller agreed to pay disgorgement of $7,639.00, plus prejudgment interest of $2,140.61, and a one-time civil penalty, for trading, in the amount of $7,639.00. Finally, Santaro agree to pay disgorgement of $18,782.00, plus prejudgment interest of $5,263.15, and a civil penalty, for trading, in the amount of $18,782.00.
