FINAL JUDGMENTS ENTERED IN INSIDER TRADING CASE INVOLVING MERGERS, DRUG APPROVAL, EARNINGS REPORTS

FROM:  US. SECURITIES AND EXCHANGE COMMISSION 

Court Enters Final Judgments by Consent Against Michael Pendolino, Lawrence D. Grum, and Michael L. Castelli

The Securities and Exchange Commission announced that on June 12, 2014, in SEC v. Lazorchak et al., Civ. Act. No. 12-07164 KSH-PS, the Honorable Katharine S. Hayden, United States District Court Judge for the District of New Jersey, entered final judgments by consent against Defendants Michael Pendolino (Pendolino), of Nashua, New Hampshire; Lawrence D. Grum (Grum), of Livingston, New Jersey; and Michael L. Castelli (Castelli), of Morris Plains, New Jersey. The judgments permanently enjoin Pendolino, Grum, and Castelli from future violations of antifraud provisions of the federal securities laws and order them to pay disgorgement and prejudgment interest.

The SEC's complaint, filed on November 19, 2012, alleged an insider-trading scheme spanning five years and involving illegal tipping by insiders at three public companies: Celgene Corp. (Celgene), Sanofi-Aventis Corporation (Sanofi); and (3) Stryker Corp. (Stryker), and at least eleven material events, including mergers, a drug approval application, and quarterly earnings information. The SEC further alleged that the insiders tipped material nonpublic information about each of these corporate events to Grum and Castelli who, in turn, traded on the basis of, and tipped that information to others. As alleged, the Celgene insider also tipped material nonpublic information about two of the events to his high school friend, Pendolino, who traded on the basis of, and tipped that information to others.

The judgments permanently enjoin Pendolino, Grum, and Foldy from violating Sections 10(b) and 14(e) of the Securities Exchange Act of 1934 and Rules 10b-5 and 14e-3 thereunder, and order them to pay combined disgorgement and prejudgment interest as follows: Pendolino, $68,862.12; Grum, $838,758.75; Castelli, $716,208.90.

Pendolino, Grum, and Castelli were criminally charged in a parallel criminal action in federal district court in the District of New Jersey. They have since pled guilty to charges of conspiracy to commit securities fraud and/or securities fraud and have been sentenced: Pendolino to probation of one year, and Grum and Castelli to prison terms of a year and a day, and nine months, respectively. United States v. Pendolino, 2:13-00657-KSH; United States v. Grum, 2:13-00737-KSH; United States v. Castelli, 2:13-00738-KSH.

The SEC acknowledges the assistance of the U.S. Attorney's Office for the District of New Jersey, the Federal Bureau of Investigation, the Financial Industry Regulatory Authority, and the Options Regulatory Surveillance Authority.