NEW YORK — The insider trading conviction of a former Prudential Securities Inc. broker who was tipped off in advance about companies mentioned in Business Week's "Inside Wall Street" column has been upheld by a federal appeals court.
Joseph Falcone, who worked in Prudential's office in Melville, New York, earned $5,000 to $6,000 between June 1995 and early 1996 from illegal trades he made based on the Business Week information, authorities said. He got a year's probation after the 1999 conviction.
Falcone's attorney, John L. Kase, said he was disappointed with the ruling by the U.S. 2nd Circuit Court of Appeals and may appeal to the U.S. Supreme Court. Kase contends that anything that appears in Business Week is public information.
Each week, before the magazine hit newsstands, Larry Smath, a broker with another firm, gave Falcone early notice of the companies cited in the Business Week column, authorities said. Smath got the column by fax from Gregory Salvage, a foreman at a New Jersey company that distributes the magazine, authorities said.
Smath, Falcone and others obtained the information on Thursday mornings, giving them time to buy stock in the companies before the magazine reached the public later the same day, authorities said. Stocks mentioned in the column would often rise on the news.
The U.S. Securities and Exchange Commission began an investigation after Business Week, a publication of the McGraw-Hill Companies Inc., ran an article in its Feb. 5, 1996, edition noting the unusually heavy Thursday trading in stocks that were to appear in the column.
It's not the first time the column has been used for illegal insider trading. Since 1998, 11 other people, including three stockbrokers, were convicted of, or settled charges related to, insider trading on companies mentioned in Inside Wall Street.