INDIANAPOLIS (AP) -- Three Indianapolis residents have been ordered to pay
a total of $1.75 million in penalties and fines after a federal judge found
they had engaged in an insider trading scheme.
U.S. District Judge Larry McKinney found that Michael Maio, Patricia Ladavac
and Darrin Duncan used inside, nonpublic information on the impending sale of
Xidex Corp. to Anacomp Inc., a Carmel-based computer services company, to buy
and sell stock.
According to the Securities and Exchange Commission's complaint, Anacomp
chairman Louis Ferrero tipped Maio off to the impending purchase of Palo Alto,
Calif.-based Xidex in June 1988 when both men were in Las Vegas.
Court documents indicate Maio made numerous phone calls to his stockbroker
while he was still in Las Vegas, asking him to purchase large quantities of
Xidex stock and sell off his shares in Anacomp.
Maio also called Ladavac, a friend and former business associate, and she,
too, began purchasing Xidex stock and selling off her shares in Anacomp.
Duncan, who was dating Maio's daughter in June 1988, also began buying and
Between Maio, Ladavac and Duncan, the three made more than $450,000 in
illegal profits from their purchase of Xidex stock, while avoiding losses of
more than $100,000 by selling their Anacomp stock before the deal was made
All three were ordered Monday to disgorge the profits they made in the
scheme, as well as pay more than $240,000 in interest accrued since July 1988,
when the deal was made public.
McKinney levied the maximum fine against Maio -- three times the total
profits gained and losses avoided -- and ordered him to pay $838,875.
Ladavac was fined $94,500, and Duncan $16,562.50. Ferrero reached an
out-of-court settlement with the SEC and agreed to pay a $277,750 fine.
"As far as I'm aware, it was the first time that a case that went to trial
had the maximum penalty imposed," Barry Goldsmith, the SEC's chief litigation
counsel, said Wednesday.
"We think that sends a strong message out to the community that if you
commit insider trading, you will have to pay the fiddler," said Daniel Shea, an
SEC attorney who prosecuted the case.
Maio's attorney, David Mernitz, refused to comment on the judgment. Ronald
Elberger, Ladavac's attorney, said he believed that both sides were given a
fair trial, but was disappointed with the settlement.
It is not known whether any of the three plan to appeal McKinney's judgment.