Two Former Pharmaceutical/Medical Technology Executives Sentenced for Their Roles in Insider Trading Scheme
Pair Netted More Than $1.4 Million in Illicit Profits Over Five Years

NEWARK, NJ—Two former pharmaceutical and medical technology firm executives were sentenced today for their involvement in an extensive insider trading network that repeatedly exploited non-public material information for financial gain, U.S. Attorney Paul J. Fishman announced.

Mark Cupo, 53, of Morris Plains, New Jersey, was sentenced to 16 months in prison, and Mark Foldy, 44, also of Morris Plains, New Jersey, was sentenced to two years of probation, including six months of home confinement with electronic monitoring. Cupo previously pleaded guilty before U.S. District Judge Katharine S. Hayden to a seven-count information charging him with two counts of conspiracy to commit securities fraud and five counts of securities fraud. Foldy previously pleaded guilty before Judge Hayden to a four-count information charging him with one count of conspiracy to commit securities fraud and three counts of securities fraud. Judge Hayden imposed both sentences today in Newark federal court.

According to documents filed in this case and statements made in court:

From 2007 to 2012, Cupo, who was an executive at Sanofi-Aventis, a global pharmaceutical company based in New Jersey, repeatedly obtained non-public material information from his friend and former employee, John Lazorchak, 43, of Long Valley, New Jersey, who was director of financial reporting at Celgene Corp., another global pharmaceutical company based in New Jersey. The inside information included non-public merger and acquisition plans, quarterly earnings results, and a regulatory application decision. Cupo would pass the information to his friends, Lawrence Grum, 50, of Livingston, New Jersey, and Michael Castelli, 50, of Morris Plains, New Jersey, who would then execute numerous profitable trades based on that information and share the profits with Cupo and Lazorchak.

During the course of the multi-year insider trading operation, Cupo divulged inside information to Grum and Castelli regarding then-confidential plans by his own employer, Sanofi-Aventis, to acquire Chattem Inc. Grum and Castelli traded on the Chattem-related inside information prior to its public announcement, reaping substantial profits.

Foldy, a friend and high school classmate of Lazorchak, was a marketing executive at Stryker Corp., a leading medical technology business with a major division located in New Jersey. Through the course of his employment at Stryker, Foldy learned of Stryker’s then-confidential plans to acquire Orthovita Inc. Foldy leaked news of the planned acquisition to Lazorchak prior to public announcement, and Lazorchak, in turn, passed the inside information to Cupo. Cupo informed Grum and Castelli of the impending deal so that they could trade ahead of the public announcement of the Orthovita acquisition for substantial profits.

Foldy also received inside information from Lazorchak regarding Celgene’s planned acquisition of Pharmion Corp. and profitably traded on the Pharmion-related inside information. Foldy passed inside information on to a family member and friend.

In addition to the prison terms, Judge Hayden sentenced Cupo to two years of supervised release.

Cupo and Foldy are the third and fourth defendants charged with participating in this insider trading network to be sentenced. On April 9, 2014, Grum was sentenced to one year and one day in prison, and Castelli was sentenced to nine months in prison. Lazorchak is scheduled to be sentenced by Judge Hayden on April 22, 2014, and another conspirator and high school friend of Lazorchak, Michael Pendolino, is scheduled to be sentenced by Judge Hayden on May 5, 2014.

U.S. Attorney Fishman credited special agents of the FBI, under the direction of Special Agent in Charge Aaron T. Ford in Newark, for the investigation leading to today’s sentences. He also thanked the U.S. Securities and Exchange Commission’s Market Abuse Unit, under the direction of Daniel M. Hawke.

The government is represented by Assistant U.S. Attorney Shirley U. Emehelu of the U.S. Attorney’s Office Economic Crimes Unit in Newark.

Today’s sentencing is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorney’s offices and state and local partners, it is the broadest coalition of law enforcement, investigatory, and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state, and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions, and other organizations. Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,700 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.