Insider Trading Case Exposes Main Street America's Temptation

A massive insider trading case was sparked when an IBM secretary, Lorraine Cassano, shared confidential information with her husband, who then shared it with friends, acquaintances, and colleagues. Within hours, more than two dozen individuals had bought stock, expecting a massive profit from IBM's acquisition of Lotus Development Corp. The group gained $1.3 million, but the Cassanos only made $7,500.

Key Takeaways:

• The insider trading case began with an IBM secretary, Lorraine Cassano, sharing confidential information with her husband.
• The information was then shared with friends, acquaintances, and colleagues, leading to a group of over 25 individuals buying stock in expectation of a profit.
• The group ultimately gained $1.3 million, with the Cassanos making only $7,500.
• The case highlights a trend of non-Wall Street individuals attempting to profit from inside information.
• The individuals involved in the case include a pizzeria owner, a bank vice president, a private school teacher, and several stockbrokers.
• Thirteen individuals charged in the case reside in Staten Island, NY, while six reside in New Jersey.
• Lorraine Cassano was suspended and fired from IBM after the investigation began.
• Robert Cassano pleaded guilty to insider trading on January 15, 1998.

Statistics:

• 25 individuals were charged in the insider trading case.
• The group gained $1.3 million from their investments.
• The Cassanos made only $7,500 from their investments.
• IBM acquired Lotus Development Corp. in a deal worth a significant amount.
• The value of Lotus common stock increased by nearly 90% after the acquisition announcement.
• 13 individuals charged in the case live in Staten Island, NY.
• 6 individuals charged in the case live in New Jersey.

Sources:

• "SEC Takes Aim at Insider Trading Across Main Street" New York Times, June 2, 1995
• "SEC Cites IBM Employee for Insider Trading" New York Times, January 15, 1998