The US Securities and Exchange Commission has charged a former IBM employee and 24 others with insider trading, alleging they made illegal profits of more than $US1.3 million when they were tipped off to IBM's plans to buy Lotus Development in 1995.
Ex-IBM secretary Lorraine Cassano, her husband and two others have settled the charges against them by agreeing to permanent injunctions barring them from violating the antifraud prohibitions of the federal securities laws and to pay amounts ranging from $15,000 to $193,000, the SEC said in a statement.
Lorraine Cassano learned of IBM's plan to take over Lotus while working in the revenue department of IBM's software group, and told her husband, who then passed the information off to friends, who then spread the word to others, according to the SEC complaint filed in US District Court in New York.
The group allegedly purchased Lotus stock and options during a six-hour period on June 2, 1995, three days before IBM publicly announced its plans to acquire Lotus, according to the complaint.
Several of the defendants have been accused of lying to the SEC under oath and seven defendants have already pleaded guilty to criminal charges of insider trading, perjury and obstructive conduct in related cases brought by the US Attorney for the Southern District of New York.
The SEC case remains pending against the 21 defendants who have not settled. The list of defendants includes a banker, an attorney, a doctor, stock brokers, an engineer, a financial analyst, salesmen, delicatessen and pizzeria owners, a printer repairman and a school teacher.
The SEC lawsuit is the second arising from the Lotus-IBM merger. On April 16, 1998, the SEC charged Robert Scott, a former employee of Chase Manhattan Bank, with trading on inside information concerning the takeover, according to the agency. Scott settled the case, paying nearly $25,000, the SEC said.
An IBM spokesman said the company does not comment on ongoing legal situations.