High school pals get prison in New Jersey insider trading case

April 9 Wed Apr 9, 2014 3:32pm EDT

April 9 (Reuters) - Two New Jersey men who were the main traders in an insider trading ring that focused on pharmaceutical and medical technology stocks and generated $1.48 million of illegal profit were sentenced to prison on Wednesday, U.S. Attorney Paul Fishman in New Jersey said.

Lawrence Grum, 50, was sentenced to one year and one day in prison, while his high school classmate Michael Castelli, also 50, received nine months.

Both were sentenced by U.S. District Judge Katharine Hayden in Newark, New Jersey.

Grum, of Livingston, New Jersey, had pleaded guilty to four counts of securities fraud and two counts of conspiracy. Castelli, of Morris Plains, New Jersey, had pleaded guilty to five counts of securities fraud and two counts of conspiracy.

All six people charged in the scheme have pleaded guilty.

Investigators said the scheme ran from 2007 to 2012 and involved trades ahead of quarterly earnings results, acquisitions and other news from companies including Celgene Corp, Sanofi SA and Stryker Corp.

According to prosecutors, Grum and Castelli made numerous profitable trades based on tips from insiders or middlemen, and tried to conceal their tracks by compiling binders of market research to suggest an independent basis for their trades.

The men were accused of trading on tips from Mark Cupo, then a Sanofi executive, who in turn obtained some tips from John Lazorchak, then Celgene's director of financial reporting.

Lazorchak, meanwhile, also got tips from Mark Foldy, then a Stryker executive, prosecutors said.

Scott Resnik, a partner at Katten Muchin Rosenman who represents Grum, did not immediately respond to requests for comment. Daniel Stein, a partner at Richards Kibbe & Orbe who represents Castelli, did not immediately respond to similar requests.

Cupo, 53, of Morris Plains; Foldy, 44, also of Morris Plains; Lazorchak, 43, of Long Valley, New Jersey; and Michael Pendolino, 44, a chiropractor from Nashua, New Hampshire, pleaded guilty to involvement in the scheme in October. They await sentencing.

The cases are in the U.S. District Court, District of New Jersey. They are U.S. v. Grum, No. 13-00737; and U.S. v. Castelli, No. 13-00738. (Reporting by Jonathan Stempel in New York; Editing by Jonathan Oatis)

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