Two Former Fidelity Employees Indicted for Defrauding Fidelity Through Index Options Trades, Reports U.S. Attorney

Apr 25, 2001, 01:00 ET from U.S. Attorney

    BOSTON, April 25 /PRNewswire/ -- A federal grand jury returned an
 indictment today charging two former Fidelity employees with conducting a
 scheme to defraud Fidelity.  The scheme caused Fidelity to lose approximately
 $2.4 million.
     United States Attorney Donald K. Stern and Charles S. Prouty, Special
 Agent in Charge of the Federal Bureau of Investigation in New England,
 announced that earlier today a federal grand jury indicted THOMAS J. CONNOLLY,
 presently of Florida and RICHARD P. CALLIPARI, age 37, presently of New York,
 on charges that they conspired to commit wire fraud.  The indictment also
 charges CALLIPARI with substantive wire fraud counts and with perjury.
     The indictment alleges that CONNOLLY, using his position at Fidelity and
 acting with CALLIPARI, conducted trades in volatile index options.  CONNOLLY
 was not permitted by Fidelity to make such trades, since he had no customers
 for the trades, but rather was trading on his own.  He concealed from Fidelity
 that he was conducting such trades by failing to complete the paperwork
 required by Fidelity to document such trades.  Since CONNOLLY was a Fidelity
 employee, he put Fidelity at risk for covering any losses incurred by the
 trades.  Thus, when the trades produced a loss, CALLIPARI was in a position to
 falsely assert that he was surprised to learn the trades were in his account,
 and thereby cause Fidelity to cover the loss.
     The indictment alleges that over several months CONNOLLY, unbeknownst to
 Fidelity, traded the index options through the Chicago Board Options Exchange
 ("CBOE").  His trades usually produced a profit, sometimes a small loss, and
 were placed, with the assistance of CALLIPARI, in an account at JAS
 Securities, Inc. in New York ("JAS").  After CALLIPARI left Fidelity, he took
 a job at JAS, which gave him a pool of funds to trade for JAS's benefit with
 him receiving a percentage of the profits.  At JAS, CALLIPARI authorized
 CONNOLLY to conduct index options trades on his behalf and from July 7, 1997,
 through September 12, 1997, accepted over $500,000 in trades and profits into
 the JAS account he controlled.  CONNOLLY and CALLIPARI took steps to conceal
 their trades from Fidelity, which they both knew had not authorized the
 trades.
     The indictment further alleges that during the week of September 15, 1997,
 CONNOLLY and CALLIPARI traded extensively in index options, several of which
 caused large losses.  For example, on September 15th, CONNOLLY purchased for
 CALLIPARI 255 OEW SEP 905 put options at a price between $19.00 and $19.35 per
 option contract, for a total cost of $488,250.  On September 17, 1997,
 CALLIPARI instructed a clerk at a trading firm on the floor of the CBOE to
 sell at a price of about $2.50 255 OEW SEP 905 put options, the same number
 and series of options that he had instructed CONNOLLY to purchase two days
 earlier, which trade was directed initially to CALLIPARI's JAS account.
     On September 18, 1997, CALLIPARI falsely told CONNOLLY's supervisor at
 Fidelity that he had not authorized CONNOLLY to trade in his JAS account and
 that he wanted the trades out of that account.  On or about September 18,
 1997, CALLIPARI bought 255 OEW SEP 905 put options at a price of between $5/16
 and $1 3/8.  On or about September 18, 1997, CALLIPARI falsely led CONNOLLY's
 supervisor at Fidelity to believe that the 255 OEW SEP 905 put contracts that
 he was returning to Fidelity were the same 255 OEW SEP 905 put options that
 CONNOLLY had acquired on September 15 at approximately $19 per option, when,
 in fact, CALLIPARI had already sold those put options and was returning to
 Fidelity 255 OEW SEP 905 put options that he had just purchased for
 approximately $1.00 per option.  Based on CALLIPARI's false statements to
 Fidelity, CALLIPARI caused Fidelity to incur a loss of approximately $428,000.
     In addition, between September 16, 1997 and September 17, 1997, when it
 appeared that the 255 OEW SEP 905 put options that CONNOLLY had purchased for
 CALLIPARI's account were losing trades, CONNOLLY, with CALLIPARI's knowledge,
 traded heavily in various other stock index options in an effort to avoid a
 loss for CALLIPARI.  These trades were not performed for any Fidelity
 customer, but rather, were done in an effort to benefit CALLIPARI.  When by
 the end of the trading day on September 17, 1997, CONNOLLY had not yet
 succeeded in trading out of large losses incurred on September 16, 1997 and
 September 17, 1997, he did not direct those trades to  CALLIPARI's account.
 Rather, these trades were sent to Fidelity, ultimately resulting in a loss to
 Fidelity of approximately $1.96 million.
     The indictment further alleges that during an investigation of this matter
 by the Securities and Exchange Commission, CALLIPARI was put under oath and
 made false statements about his role in the scheme.
     Throughout the course of this investigation, Fidelity has been fully
 cooperative with law enforcement authorities.
     The case is being investigated by the Federal Bureau of Investigations and
 is being prosecuted by Assistant U.S. Attorneys Diana K. Lloyd, Jonathan L.
 Kotlier and Adam J. Bookbinder of Stern's Economic Crime Unit.
 
 

SOURCE U.S. Attorney
    BOSTON, April 25 /PRNewswire/ -- A federal grand jury returned an
 indictment today charging two former Fidelity employees with conducting a
 scheme to defraud Fidelity.  The scheme caused Fidelity to lose approximately
 $2.4 million.
     United States Attorney Donald K. Stern and Charles S. Prouty, Special
 Agent in Charge of the Federal Bureau of Investigation in New England,
 announced that earlier today a federal grand jury indicted THOMAS J. CONNOLLY,
 presently of Florida and RICHARD P. CALLIPARI, age 37, presently of New York,
 on charges that they conspired to commit wire fraud.  The indictment also
 charges CALLIPARI with substantive wire fraud counts and with perjury.
     The indictment alleges that CONNOLLY, using his position at Fidelity and
 acting with CALLIPARI, conducted trades in volatile index options.  CONNOLLY
 was not permitted by Fidelity to make such trades, since he had no customers
 for the trades, but rather was trading on his own.  He concealed from Fidelity
 that he was conducting such trades by failing to complete the paperwork
 required by Fidelity to document such trades.  Since CONNOLLY was a Fidelity
 employee, he put Fidelity at risk for covering any losses incurred by the
 trades.  Thus, when the trades produced a loss, CALLIPARI was in a position to
 falsely assert that he was surprised to learn the trades were in his account,
 and thereby cause Fidelity to cover the loss.
     The indictment alleges that over several months CONNOLLY, unbeknownst to
 Fidelity, traded the index options through the Chicago Board Options Exchange
 ("CBOE").  His trades usually produced a profit, sometimes a small loss, and
 were placed, with the assistance of CALLIPARI, in an account at JAS
 Securities, Inc. in New York ("JAS").  After CALLIPARI left Fidelity, he took
 a job at JAS, which gave him a pool of funds to trade for JAS's benefit with
 him receiving a percentage of the profits.  At JAS, CALLIPARI authorized
 CONNOLLY to conduct index options trades on his behalf and from July 7, 1997,
 through September 12, 1997, accepted over $500,000 in trades and profits into
 the JAS account he controlled.  CONNOLLY and CALLIPARI took steps to conceal
 their trades from Fidelity, which they both knew had not authorized the
 trades.
     The indictment further alleges that during the week of September 15, 1997,
 CONNOLLY and CALLIPARI traded extensively in index options, several of which
 caused large losses.  For example, on September 15th, CONNOLLY purchased for
 CALLIPARI 255 OEW SEP 905 put options at a price between $19.00 and $19.35 per
 option contract, for a total cost of $488,250.  On September 17, 1997,
 CALLIPARI instructed a clerk at a trading firm on the floor of the CBOE to
 sell at a price of about $2.50 255 OEW SEP 905 put options, the same number
 and series of options that he had instructed CONNOLLY to purchase two days
 earlier, which trade was directed initially to CALLIPARI's JAS account.
     On September 18, 1997, CALLIPARI falsely told CONNOLLY's supervisor at
 Fidelity that he had not authorized CONNOLLY to trade in his JAS account and
 that he wanted the trades out of that account.  On or about September 18,
 1997, CALLIPARI bought 255 OEW SEP 905 put options at a price of between $5/16
 and $1 3/8.  On or about September 18, 1997, CALLIPARI falsely led CONNOLLY's
 supervisor at Fidelity to believe that the 255 OEW SEP 905 put contracts that
 he was returning to Fidelity were the same 255 OEW SEP 905 put options that
 CONNOLLY had acquired on September 15 at approximately $19 per option, when,
 in fact, CALLIPARI had already sold those put options and was returning to
 Fidelity 255 OEW SEP 905 put options that he had just purchased for
 approximately $1.00 per option.  Based on CALLIPARI's false statements to
 Fidelity, CALLIPARI caused Fidelity to incur a loss of approximately $428,000.
     In addition, between September 16, 1997 and September 17, 1997, when it
 appeared that the 255 OEW SEP 905 put options that CONNOLLY had purchased for
 CALLIPARI's account were losing trades, CONNOLLY, with CALLIPARI's knowledge,
 traded heavily in various other stock index options in an effort to avoid a
 loss for CALLIPARI.  These trades were not performed for any Fidelity
 customer, but rather, were done in an effort to benefit CALLIPARI.  When by
 the end of the trading day on September 17, 1997, CONNOLLY had not yet
 succeeded in trading out of large losses incurred on September 16, 1997 and
 September 17, 1997, he did not direct those trades to  CALLIPARI's account.
 Rather, these trades were sent to Fidelity, ultimately resulting in a loss to
 Fidelity of approximately $1.96 million.
     The indictment further alleges that during an investigation of this matter
 by the Securities and Exchange Commission, CALLIPARI was put under oath and
 made false statements about his role in the scheme.
     Throughout the course of this investigation, Fidelity has been fully
 cooperative with law enforcement authorities.
     The case is being investigated by the Federal Bureau of Investigations and
 is being prosecuted by Assistant U.S. Attorneys Diana K. Lloyd, Jonathan L.
 Kotlier and Adam J. Bookbinder of Stern's Economic Crime Unit.
 
 SOURCE  U.S. Attorney