A pair of brokers pleaded guilty to federal insider trading charges yesterday, admitting that they used tips from a former Stryker (NYSE:SYK) marketing executive to make illicit trades ahead of the medical device company’s 2011 acquisition of Orthovita.
Lawrence Grum and Michael Castelli each admitted to 2 counts of conspiracy to commit securities fraud, federal prosecutors said. Grum also copped to 4 counts of securities fraud and Castelli admitted to 5 counts of securities fraud, according to the office of new Jersey district attorney Paul Fishman.
Grum and Castelli allegedly acted on tips from former Stryker marketing executive Mark Foldy about the impending, $316 million deal for Orthovita in May 2011, according to the feds, who alleged that the scheme generated $1.7 million in illegal profits and kickbacks.
Foldy allegedly plotted with Sanofi (NYSE:SNY) accounting & reporting director Mark Cupo and Celgene (NSDQ:CELG) financial reporting director John Lazorchak, illegally leaking confidential information about their companies to Grum and Castelli, high school friends who conducted the trades.
Foldy, Lazorchak, Cupo and another defendant, Michael Pendolino, pleaded guilty Oct. 7 and are slated to be sentenced Jan. 20, 2014. Grum and Castelli each face a maximum of 5 years in prison and a fine of $250,000 on the conspiracy counts and a maximum of 20 years in prison and a fine of $5 million on the securities fraud counts. They’re expected to be sentenced Feb. 20, 2014.