Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

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Thursday, October 2, 2008

SEC Charges 16 Individuals in Insider Trading in advance of Dick's Sporting Goods Merger Announcement

The SEC filed two complaints in the U.S. District Court for the Western District of Pennsylvania against a total of sixteen 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 that Joseph J. Queri, Jr., Dicks' Senior Vice President of Real Estate, tipped his close friend, Gary Gosson, and his father, Joseph Queri, Sr., about the acquisition.  Gosson, in turn, 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 Galyans stock. Johnston, in turn, tipped family members and friends, who also bought shares. Gosson gave Camp money to buy shares of Galyans stock through Camp's brokerage account. Santaro and Federico shared profits with Gosson.

Queri Sr. tipped his friends James L. Jerome, Kyle D. Kaczowski, Gino M. Ferraro, Felix A. Crisafulli, and Thomas M. Heller, who all bought shares of Galyans 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 Galyans 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.

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