By Emily Flitter
NEW YORK, Nov 19 (Reuters) - New Jersey's U.S. prosecutor's
office is picking up more insider trading cases, edging into
territory that has historically been dominated by the federal
prosecutors in New York City.
The most recent case was unveiled on Monday when prosecutors
in Newark announced charges against six people - three of whom
were friends from high school - for their alleged roles in an
insider-trading ring. The six have been charged for passing tips
to each other about healthcare companies which generated $1.4
million in illegal profits.
New Jersey's growing clout in law enforcement could lead to
deeper involvement in bigger cases.
While they are loathe to admit it, U.S. prosecutors around
the country compete for cases and develop expertise in pursuing
certain types of criminal activity.
In addition to the reputations they have developed for
success in certain areas, there are several ways a U.S.
attorney's office can stake a claim to a case. Prosecutors have
a good chance of establishing jurisdiction over a case if the
alleged crime was committed in their territory or if one of the
alleged criminals is based there.
They can also be pulled in by the Federal Bureau of
Investigation if a specific FBI field office takes the lead on
an investigation.
"New Jersey is New York's next door neighbor, and many of
the U.S. attorneys working in the U.S. office in New Jersey have
experience working with New York law firms and with highly
sophisticated financial matters," said Alan Zegas, a criminal
defense lawyer in Chatham, New Jersey.
Zegas added that the head prosecutor for the district, Paul
Fishman, had spent more than 10 years leading the white collar
crime practice for the law firm Friedman Kaplan in New York.
"He has significant training. He's also very involved
generally with the Justice Department in Washington," Zegas
said.
Fishman left Friedman Kaplan to become U.S. Attorney for the
District of New Jersey in 2009.
Largely due to its role as an international marketplace, New
York is also a center for the prosecution of white collar crime,
and federal prosecutors there have close working relationships
with lawyers at the U.S. Securities and Exchange Commission,
which most often initiates insider trading investigations.
While much of the SEC's manpower is in New York, its
regional Philadelphia office also plays a major role in
ferreting out insider trading activity. Philadelphia's regional
director and market abuse unit chief, Daniel Hawke, has built a
sophisticated computer system to analyze stock trading patterns
for evidence of insider trading.
"The way we work up insider trading cases involves close
coordination with criminal authorities and we have been lucky
enough to develop a great relationship with the District of New
Jersey," said Colleen Lynch, assistant regional director in the
SEC's market abuse unit in Philadelphia.
HEALTHCARE DEALS
The SEC and the FBI have been engaged in a wide-ranging
investigation into insider trading in healthcare and technology
deals over the past five years.
The investigations have spurred multiple insider trading
charges both in New York and in other parts of the country. The
investigation is so large that one person familiar with it said
New Jersey's involvement doesn't mean cases are being taken away
from New York's Southern District; more insider trading cases
are being unearthed than any one prosecutor's office can handle,
the person said.
Thursday's case charged a ring of corporate executives and
business owners with passing tips on healthcare deals to each
other to reap more than $1.4 million in illegal profits.
Prosecutors charged John Lazorchak, Mark Cupo and Mark
Foldy, who held positions at Celgene Corp, Sanofi S.A., and
Stryker Corp, respectively, with running a network of inside
information about their companies. They passed allegedly tips to
two other men, Michael Castelli and Lawrence Grum, who traded on
them and made "hundreds of thousands of dollars in profits,"
according to a press release issued by the prosecutors.
The five people in the network are all New Jersey residents.
A sixth man, Michael Pendolino, who lives in Nashua, New
Hampshire, is also accused of trading on tips from Lazorchak.
A seventh man was named in the civil suit filed by the SEC
but not in the criminal suit.
The SEC filed its civil case in New Jersey in conjunction
with the criminal proceedings the U.S. attorneys brought there.
"By funneling their inside information to a network of
family and friends, the defendants and their associates reaped
$1.4 million in profits at the expense of ordinary investors,"
Fishman said in a press release announcing the charges.
Lawyers for the men charged did not immediately respond to
requests for comment.
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