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Confidential information leaked by a secretary to a senior corporate partner at Skadden, Arps, Slate, Meagher & Flom fed an insider trading ring that included the former chief of staff of New Jersey Governor James McGreevey, said the Southern District U.S. Attorney’s Office and the Securities and Exchange Commission. The SEC brought civil insider trading charges Wednesday in federal court in Manhattan against Fiore J. Gallucci, Ronald A. Manzo and Gary B. Taffet. Taffet served as McGreevey’s chief of staff from 2000 to 2003. Southern District U.S. Attorney David N. Kelley also announced Wednesday that Gallucci and Manzo had pleaded guilty to criminal charges. There are currently no criminal charges against Taffet. According to the SEC complaint, Gallucci heard about proposed merger activity from his wife, who learned about it in the course of her work as a secretary in Skadden’s New York headquarters. He then shared the information with Manzo, a longtime friend and head of a New Jersey company specializing in procuring municipal insurance. Manzo in turn allegedly shared the information with Taffet, who after leaving the governor’s office also went into business brokering insurance for local governments. In 1998 and 1999, Manzo and Taffet allegedly made trades relating to several transactions in which Skadden was a legal advisor. These transactions included Compaq Computer Corp.’s $9.6 billion acquisition of Digital Equipment Corp., and Alcatel Inc.’s $4.4 billion acquisition of DSC Communications, Inc. According to the SEC, Manzo made almost $1 million in profits from his trading and Taffet made over $247,000. The SEC claims Taffet, 37, passed information along to five other individuals who may have earned more than $1.5 million. Gallucci received payments from Manzo that his lawyer, Michael Bachner of Bachner & Herskovits, Wednesday said amounted to no more than $15,000. The complaint does not name Gallucci’s wife or the partner she worked for, but a source familiar with the matter said she was the secretary at the time for Roger S. Aaron, presently the senior partner in charge of all of Skadden’s corporate practices. No charges have been brought against the secretary. The SEC complaint states that, although she knew the information she had learned was confidential, she provided it to her husband only after he expressly promised her he would not disclose it to others or use it for trading purposes. The source said Gallucci’s wife continued to work for Skadden Arps until she was terminated Tuesday, even though the firm has been cooperating with prosecutors and the SEC for months. Skadden executive partner Robert C. Sheehan declined to comment on the secretary’s status at the firm but stressed the firm’s cooperation in the investigation and its commitment to maintaining client confidentiality. “Obviously we take very seriously any disclosure of client confidential information,” he said. He said all employees at the firm was required to sign a statement each year certifying that they had read the firm’s confidentiality policy. He also said there was no indication of harm to any of the clients whose matters had been disclosed. Gallucci, 63, pleaded guilty to five counts of insider trading and one count of conspiracy. Though announced Wednesday, Gallucci’s plea had actually been entered in November. Manzo, 60, pleaded guilty to three counts of insider trading, one of conspiracy and one of perjury. Conspiracy carries a maximum sentence of 5 years in prison; insider trading, 10 years; and perjury, 5 years. Each count carries a potential fine of $250,000 and up. The SEC is also seeking disgorgement and other civil remedies. Bachner said Gallucci had lived an exemplary life except for this matter and he hoped to reach a settlement with the SEC. “This is a single blemish on that otherwise exemplary life, and he’s looking forward to putting this sad chapter behind him,” said Bachner. Manzo was represented by Lawrence Horn, the head of the business crimes practice at Newark’s Sillis Cummis Epstein & Gross. Horn said his client regretted his “poor exercise of judgment” and was looking forward to reaching a settlement with the SEC. In a statement, Taffet’s lawyer, John B. Harris of Stillman & Friedman said he had not had a chance to make an analysis of the SEC’s complaint but said he was “disturbed” by the charges. “The reality is that Mr. Taffet did not know or deal with any insider at the companies he traded, nor did he knowingly disclose nonpublic information to any third party,” Harris said. “As the case unfolds and the allegations in the civil complaint are tested, we believe the legal and factual underpinning of the SEC’s case against Mr. Taffet will be found to be paper-thin.” Taffet and another former McGreevey aide, chief counsel Paul Levinsohn, are also the focus of a separate federal investigation in New Jersey. Prosecutors there are looking into whether the two, who earned nearly $2.5 million each selling a billboard company soon after McGreevey’s 2001 inauguration, improperly used their influence to win billboard placements on public land.

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