EB, GameStop insider trading lawsuit settled

A lawsuit alleging insider trading relating to the merger of US videogame chains Electronics Boutique and GameStop has been settled, with the accused parties fined in excess of USD 1 million.

The Securities and Exchange Commission alleges that prior to the announcement of a merger between the two retail chains in April 2005, Stephen J. Messina made USD 300,000 from selling Electronics Boutique stock after a tip off from Robert J. Downs Jr., a former lawyer at the law firm involved with the merger.

Messina denies any wrongdoing, but has pleaded guilty to trying to hide his source of information, which he initially told federal investigators came from "two men in a bar." Messina will pay a fine of USD 963,000.

William Harvey, managing partner of Klehr Harrison Harvey Branzburg & Ellers, the law firm involved in the merger and former employers of Robert J. Downs Jr. told The Inquirer: "We support the SEC's action today, and we support the resolutions." Downs Jr. will pay a fine of USD 308,000 for his part in the allegations, although he too denies any wrongdoing.