SEC v. Fiore J. Gallucci; Ronald A. Manzo; and Gary B. Taffet, Southern District of New York — Complaint

Thomas C. Newkirk (TN 7271) 
James T. Coffman  
Debra Patalkis (DP 0664)(Trial Counsel) 
David Frohlich 
L. Hilton Foster  
Louis J. Gicale, Jr. 
Christopher J. Chatfield 
 
U.S. Securities and Exchange Commission 
450 Fifth Street, NW 
Mail Stop 9-11 
Washington, D.C.  20549-0911 
Tel.: (202) 942-7133 (Patalkis) 
Fax: (202) 942-9569 
 
U
NITED STATES DISTRICT COURT 
S
OUTHERN DISTRICT OF NEW YORK 
__________________________________________
) 
U.S. SECURITIES AND EXCHANGE COMMISSION,      ) 
P
LAINTIFF,                                         )                                                                                  
)                C
IVIL ACTION 
)               N
O. 04  CIV. 04493  (SAS) 
)  
V.                                                         ) 
) 
F
IORE  J. GALLUCCI ,                                                 ) 
RONALD A. MANZO, AND                                                      ) 
G
ARY B. TAFFET,                                                       ) 
) 
D
EFENDANTS .                                              ) 
__________________________________________) 
 
COMPLAINT 
                    Plaintiff U.S. Securities and Exchange Commission (the "Commission") alleges: 
SUMMARY 
 1. This is an insider trading case involving serial breaches of spousal duties of trust 
and confidence that resulted in an unlawful trading scheme yielding more than $3 million in ill-

 2
 
 
 
gotten  gains.    During  1998  and  1999,  the  defendants  purchased,  and  tipped  others  who  
purchased,  common  stock  or  call  options  for  the  common  stock  of  certain  publicly  traded  
companies  on  the  basis  of  material,  confidential,  nonpublic  information  that  these  companies  
were targets of proposed but unannounced mergers or acquisitions.   Preceding  each  instance  of 
unlawful  trading,  defendant  Fiore  J.  Gallucci  received  information  concerning  the  proposed  
business  combinations  in  confidential  conversations  with  his  wife,  who  learned  it  in  the  course  
of  her  employment  as  secretary  to  a  senior  partner  in  the  mergers  and  acquisitions  practice  at  
Skadden, Arps, Slate, Meagher and Flom (“Skadden”).  
 2. Gallucci misappropriated the inside information from his wife by disclosing it to 
his  close  friend,  defendant  Ronald  A.  Manzo,  who  in  turn  disclosed  it  to,  among  others,  his  
friend and business associate, defendant Gary B. Taffet.  After receiving the inside information, 
Manzo  and  Taffet  purchased  and  tipped  others  who  purchased  the  subject  securities.    The  
defendants' actions resulted in illegal trading profits of at least $3 million when the prices of the 
securities rose in response to the public announcements of the mergers or acquisitions.  
  3.  By  engaging  in  the  conduct  set  forth  in  this  complaint,  each  defendant  violated  
Sections  10(b)  and  14(e)  of  the  Securities  Exchange  Act  of  1934  (“Exchange  Act”)  [15  U.S.C.  
§§  78j(b),  78n(e)]  and  Rules  10b-5  and  14e-3  [17  C.F.R.  §  240.10b-5  and  §  240.14e-3    
promulgated thereunder, and unless enjoined, they will continue to engage in transactions, acts, 
practices, and courses of business similar to those alleged in this complaint.  
 4. The Commission seeks injunctions against future violations, disgorgement of ill-
gotten gains, prejudgment interest thereon, and statutory civil monetary penalties.  

 3
 
 
 
JURISDICTION 
 5. The Court has jurisdiction over this action pursuant to Sections 21(d), 21(e), and 
27 of the Exchange Act [15 U.S.C. §§ 78u(d), 78u(e), and 78aa].  
THE DEFENDANTS 
 6. Defendant Fiore J. Gallucci, age 62, resides in Staten Island, New York and at all 
relevant  times  was  a  bond  salesman  and  vice  president  of  a  broker-dealer  registered  with  the  
Commission.  
  7.  Defendant  Ronald  A.  Manzo,  age  60,  resides  in  New  Jersey  and  at  all  relevant  
times  was  president  and  owner  of  RAM  Insurance  Agency,  a  New  Jersey-based  insurance  
company that specialized in procuring insurance for local government entities in New Jersey.  
 8. Defendant Gary B. Taffet, age 37, resides in New Jersey and at all relevant times 
owned  Highview  Planning  LLC,  a  company  that  brokered  insurance  for  local  government  
entities in New Jersey. 
THE TARGET COMPANIES 
  9.  During  the  relevant  period,  the  following  companies  were  targets  of  proposed  
mergers   or   acquisitions   that,   when   publicly   announced,   caused   the   prices   of   the   target   
companies'  securities  and  related  call-option  contracts  to  increase.    Skadden  provided  legal  
advice to a company involved in each of these business combinations. 
            10.            
Digital  Equipment  Corp.    On  January  26,  1998,  Compaq  Computer  Corp.  
announced that it had agreed to buy Digital Equipment Corp. (“Digital”) for $9.6 billion in cash 

 4
 
 
 
and stock, or about $60 per share.  Compaq agreed to pay a 25 to 30 percent premium to acquire 
the company.  Skadden represented Digital in the transaction. 
            11.            
DSC  Communications  Corp.    On  June  4,  1998,  Alcatel  Alsthom  SA  announced  
that  it  had  agreed  to  buy  DSC  Communications  Corp.  (“DSC”)  for  $3.98  billion  in  stock  in  a  
transaction  that  valued  DSC  at  $31.84  a  share,  an  80  percent  premium  above  DSC's  previous  
closing price. Skadden represented Alcatel Alsthom SA in the transaction. 
            12.            
Sundstrand Corp.  On February 22, 1999, United Technologies Corp. announced 
that it had agreed to buy Sundstrand Corp. (“Sunstrand”) for approximately $4.3 billion in cash, 
stock, and assumed debt in a transaction that valued Sundstrand at approximately $70 per share, 
a  21  percent  premium  above  Sundstrand’s  previous  closing  price  of  $58  per  share.    Skadden  
represented Sundstrand in the transaction. 
            13.            
Chock  Full  O’  Nuts  Corp.    On  April  22,  1999,  Sara  Lee  Corp.  announced  its  
proposed tender offer for the outstanding shares of Chock Full O’ Nuts Corp. (“Chock Full”) for 
$10.50  per  share,  a  65  percent  premium  above  Chock  Full’s  previous  closing  price.    Skadden  
represented Sara Lee Corp. in the transaction. 
            14.            
Orion  Capital  Corp.    On  July  12,  1999,  Royal  &  Sun  Alliance  Insurance  Group  
PLC  announced  that  it  had  agreed  to  buy  Orion  Capital  Corp.  (“Orion”)  for  $1.4  billion  in  a  
tender offer transaction that valued Orion at $50 per share, a 23 percent premium above Orion’s 
previous closing price.  Skadden represented Orion in the transaction.  
            15.                                                
 Nielsen Media Research, Inc.   On August 16, 1999, VNU NV announced that it 
had agreed to buy Nielsen Media Research, Inc. (“Nielsen”) for $2.7 billion in cash and debt in a 

 5
 
 
 
tender offer transaction that valued Nielsen at $37.75, a 15 percent premium above its previous 
closing price.  Skadden represented VNU NV in the transaction. 
Gallucci Learns the Names of the Target Companies 
 16. At all material times, Gallucci and his wife resided in New York, New York. 
  17.  In  October  1996,  Gallucci’s  wife  became  employed  as  secretary  to  a  senior  
partner in the mergers and acquisitions practice at Skadden’s Manhattan office.  In the course of 
her   work   at   Skadden,   Gallucci’s   wife   routinely   learned   material   nonpublic,   confidential   
information,  including  the  names  of  publicly  traded  companies  that  were  the  targets  of  
contemplated   but   unannounced   mergers   or   acquisitions.      Galluci’s   wife   knew   that   this   
information was material, nonpublic, and confidential. 
  18.  Beginning  in  or  around  1998,  at  Gallucci’s  request,  his  wife  disclosed  to  him  
highly confidential information that she had learned at Skadden, including the names of publicly 
traded  companies  that  were  the  targets  of  unannounced  merger  or  acquisition  plans.    She  
disclosed this information to Gallucci after he expressly assured her that he would not disclose it 
to others or use it for trading purposes.  Gallucci knew this information was material, nonpublic, 
and confidential, and he knew that his wife had learned it in the course of her work as secretary 
to the head of Skadden’s mergers and acquisitions department.  

 6
 
 
 
Gallucci Tips Manzo
 
 19. Gallucci and Manzo have been friends for more than 20 years.  
 20. Commencing in or around 1998, in violation of the duties of trust and confidence 
he  owed  to  his  wife,  Gallucci  started  tipping  Manzo  about  the  identities  of  the  companies  
targeted for acquisition in transactions in which Skadden was involved.  From the onset, Gallucci 
told Manzo that the tips were based on information that he obtained from his wife, who had learned 
it in the course of her employment by an attorney who worked on mergers and acquisitions. Gallucci 
disclosed this information to Manzo with the knowledge and intent that Manzo would use it for 
trading purposes.  
  21.    Thereafter,  Gallucci  continued  to  tip  Manzo,  and  Manzo  continued  to  purchase  
securities of the target companies and to recommend them to others.  
  22.  Gallucci  conveyed  the  tips  in  telephone  calls  from  New  York  and  in  person,  at  
Manzo’s office in New Jersey.  
  23.  After  Gallucci  tipped  Manzo,  Manzo  purchased  the  target  companies’  securities  
through  several  securities  brokerage  accounts,  including:  an  account  in  the  name  of  RAM  
Insurance  Agency  at  Oscar  Gruss  Securities,  Inc.  in  New  York,  New  York;  an  account  in  his  
wife’s  name  at  Morgan  Stanley  Dean  Witter,  Inc.  in  New  York,  New  York;  an  account  in  his  
name at FSC Securities, Inc. in Atlanta, Georgia; and an account in his wife’s name at Scottsdale 
Securities, Inc. in Paramus, New Jersey. 

 7
 
 
 
  24.    The  prices  of  the  target  companies’  securities  increased  in  response  to  the  public  
announcements of the proposed mergers or acquisitions. 
  25.  As  illustrated  by  the  following  chart,  Manzo’s  ill-gotten  gains  from  his  illegal  
trading totaled more than $980,000. 
Manzo's Insider Trading Profits 
        Account Name    Issuer  Public Announcement                 Profits
        Rose Manzo         Digital                      January 26, 1998                       $    15,937 
        Rose Manzo         DSC                                June 4, 1998                            131,043 
        Rose Manzo         Orion                              July 12, 1999                           133,906 
        Rose Manzo         Nielsen                     August 16, 1999                            153,437 
 
        Ronald Manzo     Orion                               July 12, 1999                              4,781 
        Ronald Manzo     Nielsen                        August 16, 1999                             7,937 
        RAM Insurance   Sundstrand               February 22, 1999                         115,875 
        RAM Insurance   Chock Full                    April 22, 1999                            56,406 
        RAM Insurance   Orion                               July 12, 1999                          174,312 
        RAM Insurance   Nielsen                        August 12, 1999                         
195,000
Total Profits                                                                                $988,634 
  26.    Gallucci  tipped  Manzo  in  order  to  increase  his  status  with  a  more  successful  
friend whom he had historically relied upon for financial and other assistance.  During this time 
period, Manzo loaned Gallucci money and gave him several thousand dollars in cash.   
Manzo Tips Taffet and Others 
  27.  At  all  relevant  times,  Manzo  and  Taffet  were  business  associates  and  friends.    
Manzo  knew  that  Taffet,  as  president  of  Highview  Financial,  and  as  a  person  with  strong  
political ties in New Jersey, was in a position to assist his company, RAM Insurance Agency, in 
obtaining insurance business from local government entities in New Jersey. 

 8
 
 
 
  28.  Taffet  knew  or  was  reckless  in  not  knowing  that  Manzo’s  information  was  
material, nonpublic and provided in violation of duties of trust and confidence.  Initially, Manzo 
tipped  Taffet  about  the  business  combination  plans  of  the  Skadden  clients  described  above  
without  revealing  the  source  of  the  information.    Later,  after  Taffet  had  realized  significant  
trading profits on the tips provided by Manzo on DSC and Chock Full, he asked Manzo to reveal 
the source of his recommendations.  Manzo told him that he had a good friend who worked for 
an  attorney  that  did  mergers  and  acquisitions.    After learning the source of Manzo’s stock tips, 
Taffet  continued  to  trade  on  tips  from  Manzo  by  purchasing  common  stock  and  call  options,  
including near-term, out-of-the-money call options for the common stock of Nielsen and Orion, 
and also pressed Manzo to provide more inside information.   
  29.    Manzo  also  tipped  two  other  individuals  who  purchased  the  securities  of  certain  
target companies for total profits of more than $7,000. 
Taffet Purchases Target Companies’ Securities 
  30.  During  the  relevant  period,  Taffet  maintained  a  securities  brokerage  account  in  
his  name  at  Prime  Charter  in  Manhattan.    Taffet  also  controlled  a  second  account  at  Prime  
Charter in the name of his business, Highview Planning.  
 31.  During 1998 and 1999, after receiving the tips from Manzo described above, and 
prior to the public announcements of the proposed mergers or acquisitions involving the target 
companies, Taffet purchased common stock, or call options for the common stock, of the target 
companies.  The prices of these securities increased in response to the public announcements of 

 9
 
 
 
the  proposed  mergers  or  acquisitions.    As  illustrated  by  the  following  chart,  Taffet  realized  
profits of more than $240,000.  
Taffet's Profits 
 
Account Name                Issuer                       Public Announcement                      Profits 
   Gary Taffet                        DSC                             June 4, 1998                                      $ 39,468 
   Gary Taffet                     Chock Full              April 22, 1999                                        5,250 
   Gary Taffet                     Orion                      July 12, 1999                                        96,227 
   Highview                        Orion                      July 12, 1999                                          4,471 
   Gary Taffet                     Nielsen                    August 16, 1999                                    90,425 
   Highview          Nielsen                   August 16, 1999                                    
11,618
 Total Profits                                                                                                                   $247,459 
Taffet's Tippees Purchase Target Company Securities  
  32.  During  1999,  after  receiving  the  tips  from  Manzo  described  above,  Taffet  
recommended  target  company  securities  to  five  individuals  based  on  material,  nonpublic,  and  
confidential information he received from Manzo.  These five individuals traded certain of the 
target  companies’  securities  for  total  profits  of  more  than  $280,000.    At  least  one  of  those  
individuals  also  tipped  two  other  individuals  who  traded  certain  of  the  target  companies’  
securities for total profits of more than $1.549 million.  All of these trades occurred prior to the 
public announcements of the business combinations. 
VIOLATIONS OF SECTION 10(b) OF 
THE EXCHANGE ACT [I5 U.S.C. § 78j(b)] 
AND RULE 10b-5 [17 C.F.R. § 240.10b-5] 
 
      33.  Paragraphs 1 through 32 are realleged and incorporated herein by reference. 
 34. At all relevant times, defendant Gallucci knew that the information he possessed 
concerning the proposed but unannounced business combinations, which had been conveyed to 

                               10
 
 
 
him  by  his  wife,  was  material,  confidential,  and  nonpublic.    In  breach  of  the  duty  of  trust  and  
confidence that he owed to his wife, Gallucci disclosed this information to defendant Manzo, as 
set  forth  above,  with  the  understanding  that  Manzo  would  use  the  information  for  trading  
purposes. 
    35.    At  all  relevant  times,  defendant  Manzo  knew  that  the  information  he  possessed  
concerning the proposed but unannounced business combinations was material, nonpublic, and 
confidential, and had been conveyed to him by Gallucci through misappropriation or in breach 
of  a  duty  of  trust  and  confidence.    While  in  possession  of  this  material,  nonpublic,  and  
confidential,  information,  Manzo  purchased,  common  stock,  or  call  options  of  the  target  
companies  as  alleged  above.    When  Manzo  tipped  others  as  alleged  above,  he  knew  or  was  
reckless in not knowing that his tippees would both trade in the securities and recommend them 
to others.   
  36.  Taffet,  knew,  or  was  reckless  in  not  knowing,  that  the  information  he  possessed  
concerning the proposed but unannounced business combination plans, as described above, was 
material,  nonpublic,  and  confidential,  and  had  been  conveyed  to  him  by  Manzo,  directly  or  
indirectly  through  misappropriation  or  in  breach  of  a  duty  of  trust  and  confidence.    While  in  
possession of this material, nonpublic, and confidential, information, Taffet purchased common 
stock, or call options for the common stock, of the target companies as set forth above.  When 
Taffet tipped others as alleged above, he knew or was reckless in not knowing that his tippees 
would both trade in the securities and recommend them to others. 

                               11
 
 
 
  37.    By  reason  of  the  foregoing,  defendants  Gallucci,  Manzo,  and  Taffet  each  violated  
Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 
240.10b-5]. 
       VIOLATIONS OF SECTION 14(e) OF 
THE EXCHANGE ACT [I5 U.S.C. § 78n(e)] 
AND RULE 14e-3 [17 C.F.R. § 240.14e-3] 
 
      38. Paragraphs 1 through 36 are realleged and incorporated herein by reference. 
 39.  Prior to the public announcements of the tender offers for Chock Full, Orion, and 
Nielsen,  and  after  a  substantial  step  or  steps  to  commence  the  tender  offers  for  Chock  Full,  
Orion,  and  Nielsen  had  been  taken,  defendant  Gallucci,  while  in  possession  of  material  
information  relating  to  such  tender  offers,  and  while  knowing  that  said  information  had  been  
disclosed to him, directly or indirectly by a person acting on behalf of the offering person or the 
issuer  of  the  securities  sought  or  to  be  sought  by  the  tender  offers,  directly  or  indirectly,  
engaged in fraudulent, deceptive, or manipulative acts or practices in connection with the tender 
offers  by  causing  Manzo  to  purchase  common  stock,  or  call  options  for  the  common  stock,  of  
the issuers of the securities sought or to be sought by such tender offers, as described more fully 
above. 
 40.  On or before April 22, 1999, after Sara Lee Corp. had taken a substantial step or 
steps  to  commence  a  tender  offer  for  the  common  stock  of  Chock  Full,  defendant  Manzo,  
directly  or  indirectly,  engaged  in  fraudulent,  deceptive,  or  manipulative  acts  or  practices  in  
connection  with  the  tender  offer  by  purchasing  or  causing  to  be  purchased,  common  stock,  or  
call  options  for  the  common  stock,  of  Chock  Full  while  in  possession  of  material,  nonpublic  

                               12
 
 
 
information relating to the tender offer, which information he knew or had reason to know was 
nonpublic and had been acquired, directly or indirectly, from Skadden or another person acting 
on behalf of Sara Lee Corp., as more fully described above. 
  41.    On  or  before  July  12,  1999,  after  Royal  &  Sun  Alliance  Insurance  Group  PLC  
had taken a substantial step or steps to commence a tender offer for the common stock of Orion, 
defendants  Manzo  and  Taffet,  directly  or  indirectly,  engaged  in  fraudulent,  deceptive,  or  
manipulative acts or practices in connection with the tender offer by purchasing or causing to be 
purchased, common stock, or call options for the common stock, of Orion while in possession 
of material, nonpublic information relating to the tender offer, which information each of them 
knew or had reason to know was nonpublic and had been acquired, directly or indirectly, from 
Skadden or another person acting on behalf of Orion, as more fully described above.     
 42. On or before August 16, 1999, after VNU NV had taken a substantial step or steps 
to  commence  a  tender  offer  for  the  common  stock  of  Nielsen,  defendants  Manzo  and  Taffet,  
directly  or  indirectly,  engaged  in  fraudulent,  deceptive,  or  manipulative  acts  or  practices  in  
connection  with  the  tender  offer  by  purchasing  or  causing  to  be  purchased,  common  stock,  or  
call  options  for  the  common  stock,  of  Nielsen  while  in  possession  of  material,  nonpublic  
information relating to the tender offer, which information each of them knew or had reason to 
know  was  nonpublic  and  had  been  acquired,  directly  or  indirectly,  from  Skadden  or  another  
person acting on behalf of VNU NV, as more fully described above.     

                               13
 
 
 
 43. By reason of the foregoing, defendants Gallucci, Manzo, and Taffet each directly 
or  indirectly  violated  Section  14(e)  of  the  Exchange  Act  [15  U.S.C.  §  78n(e)]  and  Rule  14e-3  
thereunder [17 C.F.R. § 240.14e-3].  
 
PRAYER FOR RELIEF 
WHEREFORE, the Commission respectfully requests that this Court: 
(a)     permanently  restrain  and  enjoin defendants  Gallucci,  Manzo,  and  Taffet  and  their  
agents, servants, employees, attorneys, and assigns and those persons in active concert 
or  participation  with  them,  and  each  of  them,  from  violating  Section  10(b)  of  the  
Exchange Act and Rule 10b-5 thereunder;  
(b)        permanently  restrain  and  enjoin  defendants  Gallucci,  Manzo,  and  Taffet  and  their  
agents, servants, employees, attorneys, and assigns and those persons in active concert 
or  participation  with  them,  and  each  of  them,  from  violating  Section  14(e)  of  the  
Exchange Act and Rule 14e-3 thereunder; 
(c)    order defendants Gallucci, Manzo, and Taffet to disgorge jointly and severally the ill- 
gotten  gains  derived  from  the  unlawful  trading  alleged  herein,  including  without  
limitation the trading profits of their tippees, plus prejudgment interest thereon;  
(d)    order defendants Gallucci, Manzo, and Taffet to pay civil penalties pursuant to Section 
21A of the Exchange Act [15 U.S.C. § 78u-1]; and 

                               14
 
 
 
(e)    grant such other relief as the Court deems just and proper. 
Dated: June 16, 2004  
                                                                                     Respectfully submitted,  
 
         _______________________  
         Thomas C. Newkirk (TN7271) 
                                                                                  Debra Patalkis (DP 0664) [Trial Counsel] 
         U.S. SECURITIES AND 
         EXCHANGE COMMISSION 
            450 Fifth Street, NW  
                                                                              Washington, DC 20549  
                                                                              Tel.(202)942-7133(Patalkis)                       
                                                                              Fax (202) 942-9569  (Patalkis) 
 
Of Counsel: 
       James T. Coffman 
David Frohlich  
L. Hilton Foster  
Louis J. Gicale, Jr. 
      Christopher J. Chatfield 
 
 

Thomas C. Newkirk (TN 7271) 
James T. Coffman  
Debra Patalkis (DP 0664)(Trial Counsel) 
David Frohlich 
L. Hilton Foster  
Louis J. Gicale, Jr. 
Christopher J. Chatfield 
 
U.S. Securities and Exchange Commission 
450 Fifth Street, NW 
Mail Stop 9-11 
Washington, D.C.  20549-0911 
Tel.: (202) 942-7133 (Patalkis) 
Fax: (202) 942-9569 
 

UNITED STATES DISTRICT COURT 
SOUTHERN DISTRICT OF NEW YORK 
__________________________________________

) 
U.S. SECURITIES AND EXCHANGE COMMISSION,      ) 

PLAINTIFF, )  
)                CIVIL ACTION 
)               NO. 04  CIV. 04493  (SAS) 
)  

V.                                                         ) 
) 

FIORE  J. GALLUCCI ,                                                 ) 
RONALD A. MANZO, AND                                                      ) 
GARY B. TAFFET,                                                       ) 

) 
DEFENDANTS .                                              ) 

__________________________________________) 

 

COMPLAINT 

                    Plaintiff U.S. Securities and Exchange Commission (the "Commission") alleges: 

SUMMARY 

 1. This is an insider trading case involving serial breaches of spousal duties of trust 

and confidence that resulted in an unlawful trading scheme yielding more than $3 million in ill-



 2

 

 
 

gotten gains.  During 1998 and 1999, the defendants purchased, and tipped others who 

purchased, common stock or call options for the common stock of certain publicly traded 

companies on the basis of material, confidential, nonpublic information that these companies 

were targets of proposed but unannounced mergers or acquisitions.   Preceding each instance of 

unlawful trading, defendant Fiore J. Gallucci received information concerning the proposed 

business combinations in confidential conversations with his wife, who learned it in the course 

of her employment as secretary to a senior partner in the mergers and acquisitions practice at 

Skadden, Arps, Slate, Meagher and Flom (“Skadden”).  

 2. Gallucci misappropriated the inside information from his wife by disclosing it to 

his close friend, defendant Ronald A. Manzo, who in turn disclosed it to, among others, his 

friend and business associate, defendant Gary B. Taffet.  After receiving the inside information, 

Manzo and Taffet purchased and tipped others who purchased the subject securities.  The 

defendants' actions resulted in illegal trading profits of at least $3 million when the prices of the 

securities rose in response to the public announcements of the mergers or acquisitions.  

 3. By engaging in the conduct set forth in this complaint, each defendant violated 

Sections 10(b) and 14(e) of the Securities Exchange Act of 1934 (“Exchange Act”) [15 U.S.C. 

§§ 78j(b), 78n(e)] and Rules 10b-5 and 14e-3 [17 C.F.R. § 240.10b-5 and § 240.14e-3  

promulgated thereunder, and unless enjoined, they will continue to engage in transactions, acts, 

practices, and courses of business similar to those alleged in this complaint.  

 4. The Commission seeks injunctions against future violations, disgorgement of ill-

gotten gains, prejudgment interest thereon, and statutory civil monetary penalties.  



 3

 

 
 

JURISDICTION 

 5. The Court has jurisdiction over this action pursuant to Sections 21(d), 21(e), and 

27 of the Exchange Act [15 U.S.C. §§ 78u(d), 78u(e), and 78aa].  

THE DEFENDANTS 

 6. Defendant Fiore J. Gallucci, age 62, resides in Staten Island, New York and at all 

relevant times was a bond salesman and vice president of a broker-dealer registered with the 

Commission.  

 7. Defendant Ronald A. Manzo, age 60, resides in New Jersey and at all relevant 

times was president and owner of RAM Insurance Agency, a New Jersey-based insurance 

company that specialized in procuring insurance for local government entities in New Jersey.  

 8. Defendant Gary B. Taffet, age 37, resides in New Jersey and at all relevant times 

owned Highview Planning LLC, a company that brokered insurance for local government 

entities in New Jersey. 

THE TARGET COMPANIES 

 9. During the relevant period, the following companies were targets of proposed 

mergers or acquisitions that, when publicly announced, caused the prices of the target 

companies' securities and related call-option contracts to increase.  Skadden provided legal 

advice to a company involved in each of these business combinations. 

 10. Digital Equipment Corp.  On January 26, 1998, Compaq Computer Corp. 

announced that it had agreed to buy Digital Equipment Corp. (“Digital”) for $9.6 billion in cash 



 4

 

 
 

and stock, or about $60 per share.  Compaq agreed to pay a 25 to 30 percent premium to acquire 

the company.  Skadden represented Digital in the transaction. 

 11. DSC Communications Corp.  On June 4, 1998, Alcatel Alsthom SA announced 

that it had agreed to buy DSC Communications Corp. (“DSC”) for $3.98 billion in stock in a 

transaction that valued DSC at $31.84 a share, an 80 percent premium above DSC's previous 

closing price. Skadden represented Alcatel Alsthom SA in the transaction. 

 12. Sundstrand Corp.  On February 22, 1999, United Technologies Corp. announced 

that it had agreed to buy Sundstrand Corp. (“Sunstrand”) for approximately $4.3 billion in cash, 

stock, and assumed debt in a transaction that valued Sundstrand at approximately $70 per share, 

a 21 percent premium above Sundstrand’s previous closing price of $58 per share.  Skadden 

represented Sundstrand in the transaction. 

 13. Chock Full O’ Nuts Corp.  On April 22, 1999, Sara Lee Corp. announced its 

proposed tender offer for the outstanding shares of Chock Full O’ Nuts Corp. (“Chock Full”) for 

$10.50 per share, a 65 percent premium above Chock Full’s previous closing price.  Skadden 

represented Sara Lee Corp. in the transaction. 

 14. Orion Capital Corp.  On July 12, 1999, Royal & Sun Alliance Insurance Group 

PLC announced that it had agreed to buy Orion Capital Corp. (“Orion”) for $1.4 billion in a 

tender offer transaction that valued Orion at $50 per share, a 23 percent premium above Orion’s 

previous closing price.  Skadden represented Orion in the transaction.  

 15.     Nielsen Media Research, Inc.   On August 16, 1999, VNU NV announced that it 

had agreed to buy Nielsen Media Research, Inc. (“Nielsen”) for $2.7 billion in cash and debt in a 



 5

 

 
 

tender offer transaction that valued Nielsen at $37.75, a 15 percent premium above its previous 

closing price.  Skadden represented VNU NV in the transaction. 

Gallucci Learns the Names of the Target Companies 

 16. At all material times, Gallucci and his wife resided in New York, New York. 

 17. In October 1996, Gallucci’s wife became employed as secretary to a senior 

partner in the mergers and acquisitions practice at Skadden’s Manhattan office.  In the course of 

her work at Skadden, Gallucci’s wife routinely learned material nonpublic, confidential 

information, including the names of publicly traded companies that were the targets of 

contemplated but unannounced mergers or acquisitions.  Galluci’s wife knew that this 

information was material, nonpublic, and confidential. 

 18. Beginning in or around 1998, at Gallucci’s request, his wife disclosed to him 

highly confidential information that she had learned at Skadden, including the names of publicly 

traded companies that were the targets of unannounced merger or acquisition plans.  She 

disclosed this information to Gallucci after he expressly assured her that he would not disclose it 

to others or use it for trading purposes.  Gallucci knew this information was material, nonpublic, 

and confidential, and he knew that his wife had learned it in the course of her work as secretary 

to the head of Skadden’s mergers and acquisitions department.  



 6

 

 
 

Gallucci Tips Manzo 

 19. Gallucci and Manzo have been friends for more than 20 years.  

 20. Commencing in or around 1998, in violation of the duties of trust and confidence 

he owed to his wife, Gallucci started tipping Manzo about the identities of the companies 

targeted for acquisition in transactions in which Skadden was involved.  From the onset, Gallucci 

told Manzo that the tips were based on information that he obtained from his wife, who had learned 

it in the course of her employment by an attorney who worked on mergers and acquisitions. Gallucci 

disclosed this information to Manzo with the knowledge and intent that Manzo would use it for 

trading purposes.  

 21.  Thereafter, Gallucci continued to tip Manzo, and Manzo continued to purchase 

securities of the target companies and to recommend them to others.  

 22. Gallucci conveyed the tips in telephone calls from New York and in person, at 

Manzo’s office in New Jersey.  

 23. After Gallucci tipped Manzo, Manzo purchased the target companies’ securities 

through several securities brokerage accounts, including: an account in the name of RAM 

Insurance Agency at Oscar Gruss Securities, Inc. in New York, New York; an account in his 

wife’s name at Morgan Stanley Dean Witter, Inc. in New York, New York; an account in his 

name at FSC Securities, Inc. in Atlanta, Georgia; and an account in his wife’s name at Scottsdale 

Securities, Inc. in Paramus, New Jersey. 



 7

 

 
 

 24.  The prices of the target companies’ securities increased in response to the public 

announcements of the proposed mergers or acquisitions. 

 25. As illustrated by the following chart, Manzo’s ill-gotten gains from his illegal 

trading totaled more than $980,000. 

Manzo's Insider Trading Profits 

        Account Name    Issuer  Public Announcement                 Profits

        Rose Manzo         Digital                      January 26, 1998                       $    15,937 
        Rose Manzo         DSC                                June 4, 1998                            131,043 
        Rose Manzo         Orion                              July 12, 1999                           133,906 
        Rose Manzo         Nielsen                     August 16, 1999                            153,437 

 
        Ronald Manzo     Orion                               July 12, 1999                              4,781 
        Ronald Manzo     Nielsen                        August 16, 1999                             7,937 
        RAM Insurance   Sundstrand               February 22, 1999                         115,875 
        RAM Insurance   Chock Full                    April 22, 1999                            56,406 
        RAM Insurance   Orion                               July 12, 1999                          174,312 
        RAM Insurance   Nielsen                        August 12, 1999                         195,000

Total Profits                                                                                $988,634 

 26.  Gallucci tipped Manzo in order to increase his status with a more successful 

friend whom he had historically relied upon for financial and other assistance.  During this time 

period, Manzo loaned Gallucci money and gave him several thousand dollars in cash.   

Manzo Tips Taffet and Others 

 27. At all relevant times, Manzo and Taffet were business associates and friends.  

Manzo knew that Taffet, as president of Highview Financial, and as a person with strong 

political ties in New Jersey, was in a position to assist his company, RAM Insurance Agency, in 

obtaining insurance business from local government entities in New Jersey. 



 8

 

 
 

 28. Taffet knew or was reckless in not knowing that Manzo’s information was 

material, nonpublic and provided in violation of duties of trust and confidence.  Initially, Manzo 

tipped Taffet about the business combination plans of the Skadden clients described above 

without revealing the source of the information.  Later, after Taffet had realized significant 

trading profits on the tips provided by Manzo on DSC and Chock Full, he asked Manzo to reveal 

the source of his recommendations.  Manzo told him that he had a good friend who worked for 

an attorney that did mergers and acquisitions.  After learning the source of Manzo’s stock tips, 

Taffet continued to trade on tips from Manzo by purchasing common stock and call options, 

including near-term, out-of-the-money call options for the common stock of Nielsen and Orion, 

and also pressed Manzo to provide more inside information.   

 29.  Manzo also tipped two other individuals who purchased the securities of certain 

target companies for total profits of more than $7,000. 

Taffet Purchases Target Companies’ Securities 

 30. During the relevant period, Taffet maintained a securities brokerage account in 

his name at Prime Charter in Manhattan.  Taffet also controlled a second account at Prime 

Charter in the name of his business, Highview Planning.  

 31.  During 1998 and 1999, after receiving the tips from Manzo described above, and 

prior to the public announcements of the proposed mergers or acquisitions involving the target 

companies, Taffet purchased common stock, or call options for the common stock, of the target 

companies.  The prices of these securities increased in response to the public announcements of 



 9

 

 
 

the proposed mergers or acquisitions.  As illustrated by the following chart, Taffet realized 

profits of more than $240,000.  

Taffet's Profits 
 

Account Name                Issuer                       Public Announcement                      Profits 
   Gary Taffet                        DSC                             June 4, 1998                                      $ 39,468 
   Gary Taffet                     Chock Full              April 22, 1999                                        5,250 
   Gary Taffet                     Orion                      July 12, 1999                                        96,227 
   Highview                        Orion                      July 12, 1999                                          4,471 
   Gary Taffet                     Nielsen                    August 16, 1999                                    90,425 
   Highview          Nielsen                   August 16, 1999                                    11,618
 Total Profits                                                                                                                   $247,459 

Taffet's Tippees Purchase Target Company Securities  

 32. During 1999, after receiving the tips from Manzo described above, Taffet 

recommended target company securities to five individuals based on material, nonpublic, and 

confidential information he received from Manzo.  These five individuals traded certain of the 

target companies’ securities for total profits of more than $280,000.  At least one of those 

individuals also tipped two other individuals who traded certain of the target companies’ 

securities for total profits of more than $1.549 million.  All of these trades occurred prior to the 

public announcements of the business combinations. 

VIOLATIONS OF SECTION 10(b) OF 
THE EXCHANGE ACT [I5 U.S.C. § 78j(b)] 
AND RULE 10b-5 [17 C.F.R. § 240.10b-5] 

 
  33.  Paragraphs 1 through 32 are realleged and incorporated herein by reference. 

 34. At all relevant times, defendant Gallucci knew that the information he possessed 

concerning the proposed but unannounced business combinations, which had been conveyed to 



 10

 

 
 

him by his wife, was material, confidential, and nonpublic.  In breach of the duty of trust and 

confidence that he owed to his wife, Gallucci disclosed this information to defendant Manzo, as 

set forth above, with the understanding that Manzo would use the information for trading 

purposes. 

  35.  At all relevant times, defendant Manzo knew that the information he possessed 

concerning the proposed but unannounced business combinations was material, nonpublic, and 

confidential, and had been conveyed to him by Gallucci through misappropriation or in breach 

of a duty of trust and confidence.  While in possession of this material, nonpublic, and 

confidential, information, Manzo purchased, common stock, or call options of the target 

companies as alleged above.  When Manzo tipped others as alleged above, he knew or was 

reckless in not knowing that his tippees would both trade in the securities and recommend them 

to others.   

 36. Taffet, knew, or was reckless in not knowing, that the information he possessed 

concerning the proposed but unannounced business combination plans, as described above, was 

material, nonpublic, and confidential, and had been conveyed to him by Manzo, directly or 

indirectly through misappropriation or in breach of a duty of trust and confidence.  While in 

possession of this material, nonpublic, and confidential, information, Taffet purchased common 

stock, or call options for the common stock, of the target companies as set forth above.  When 

Taffet tipped others as alleged above, he knew or was reckless in not knowing that his tippees 

would both trade in the securities and recommend them to others. 



 11

 

 
 

 37.  By reason of the foregoing, defendants Gallucci, Manzo, and Taffet each violated 

Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 

240.10b-5]. 

       VIOLATIONS OF SECTION 14(e) OF 
THE EXCHANGE ACT [I5 U.S.C. § 78n(e)] 

AND RULE 14e-3 [17 C.F.R. § 240.14e-3] 
 

  38. Paragraphs 1 through 36 are realleged and incorporated herein by reference. 

 39.  Prior to the public announcements of the tender offers for Chock Full, Orion, and 

Nielsen, and after a substantial step or steps to commence the tender offers for Chock Full, 

Orion, and Nielsen had been taken, defendant Gallucci, while in possession of material 

information relating to such tender offers, and while knowing that said information had been 

disclosed to him, directly or indirectly by a person acting on behalf of the offering person or the 

issuer of the securities sought or to be sought by the tender offers, directly or indirectly, 

engaged in fraudulent, deceptive, or manipulative acts or practices in connection with the tender 

offers by causing Manzo to purchase common stock, or call options for the common stock, of 

the issuers of the securities sought or to be sought by such tender offers, as described more fully 

above. 

 40.  On or before April 22, 1999, after Sara Lee Corp. had taken a substantial step or 

steps to commence a tender offer for the common stock of Chock Full, defendant Manzo, 

directly or indirectly, engaged in fraudulent, deceptive, or manipulative acts or practices in 

connection with the tender offer by purchasing or causing to be purchased, common stock, or 

call options for the common stock, of Chock Full while in possession of material, nonpublic 



 12

 

 
 

information relating to the tender offer, which information he knew or had reason to know was 

nonpublic and had been acquired, directly or indirectly, from Skadden or another person acting 

on behalf of Sara Lee Corp., as more fully described above. 

 41.  On or before July 12, 1999, after Royal & Sun Alliance Insurance Group PLC 

had taken a substantial step or steps to commence a tender offer for the common stock of Orion, 

defendants Manzo and Taffet, directly or indirectly, engaged in fraudulent, deceptive, or 

manipulative acts or practices in connection with the tender offer by purchasing or causing to be 

purchased, common stock, or call options for the common stock, of Orion while in possession 

of material, nonpublic information relating to the tender offer, which information each of them 

knew or had reason to know was nonpublic and had been acquired, directly or indirectly, from 

Skadden or another person acting on behalf of Orion, as more fully described above.     

 42. On or before August 16, 1999, after VNU NV had taken a substantial step or steps 

to commence a tender offer for the common stock of Nielsen, defendants Manzo and Taffet, 

directly or indirectly, engaged in fraudulent, deceptive, or manipulative acts or practices in 

connection with the tender offer by purchasing or causing to be purchased, common stock, or 

call options for the common stock, of Nielsen while in possession of material, nonpublic 

information relating to the tender offer, which information each of them knew or had reason to 

know was nonpublic and had been acquired, directly or indirectly, from Skadden or another 

person acting on behalf of VNU NV, as more fully described above.     



 13

 

 
 

 43. By reason of the foregoing, defendants Gallucci, Manzo, and Taffet each directly 

or indirectly violated Section 14(e) of the Exchange Act [15 U.S.C. § 78n(e)] and Rule 14e-3 

thereunder [17 C.F.R. § 240.14e-3].  

 
PRAYER FOR RELIEF 

WHEREFORE, the Commission respectfully requests that this Court: 

(a)     permanently restrain and enjoin defendants Gallucci, Manzo, and Taffet and their 

agents, servants, employees, attorneys, and assigns and those persons in active concert 

or participation with them, and each of them, from violating Section 10(b) of the 

Exchange Act and Rule 10b-5 thereunder;  

(b)    permanently restrain and enjoin defendants Gallucci, Manzo, and Taffet and their 

agents, servants, employees, attorneys, and assigns and those persons in active concert 

or participation with them, and each of them, from violating Section 14(e) of the 

Exchange Act and Rule 14e-3 thereunder; 

(c)    order defendants Gallucci, Manzo, and Taffet to disgorge jointly and severally the ill- 

gotten gains derived from the unlawful trading alleged herein, including without 

limitation the trading profits of their tippees, plus prejudgment interest thereon;  

(d)    order defendants Gallucci, Manzo, and Taffet to pay civil penalties pursuant to Section 

21A of the Exchange Act [15 U.S.C. § 78u-1]; and 



 14

 

 
 

(e)    grant such other relief as the Court deems just and proper. 

Dated: June 16, 2004  

                                                                                     Respectfully submitted,  

 
         _______________________  

         Thomas C. Newkirk (TN7271) 
                                                                                  Debra Patalkis (DP 0664) [Trial Counsel] 
         U.S. SECURITIES AND 

         EXCHANGE COMMISSION 
            450 Fifth Street, NW  
                                                                              Washington, DC 20549  
                                                                              Tel.(202)942-7133(Patalkis)                       
                                                                              Fax (202) 942-9569  (Patalkis) 

 
Of Counsel: 

       James T. Coffman 
David Frohlich  
L. Hilton Foster  
Louis J. Gicale, Jr. 

      Christopher J. Chatfield 
 

 


	COMPLAINT
	SUMMARY
	Account Name                Issuer                       Pub
	Taffet's Tippees Purchase Target Company Securities