The Securities and Exchange Commission has settled a lawsuit with the U.S. District Court for the Eastern District of Pennsylvania against Stephen J. Messina for allegedly making $300,000 from trading Electronics Boutique Holdings Corp. stock following the April 18, 2005 announcement of a merger
of the major U.S.-headquartered specialty video game retailer and competitor GameStop Corp.
The SEC alleges in its lawsuit that Messina received a tip that the merger would take place prior to its announcement. The tip came from Robert J. Downs Jr., a former lawyer at the law firm Klehr Harrison Harvey Branzburg & Ellers, which was involved in the merger of the two retail chains. While both men denied wrongdoing, Messina agreed to pay a fine of approximately $963,000, while Harrison paid a smaller yet considerable sum of $308,000.
Messina's attorney, James M. Becker, said to the Philadelphia Inquirer that while his client would not admit liability, he would plead guilty to trying to hide the source of his information. When first questioned by federal investigators, he said that the tip had come from "two men in a bar", rather than from the aforementioned lawyer.
William Harvey, Klehr Harrison's managing partner, commented to the Inquirer: "We support the SEC's action today, and we support the resolution." No implication was made that any of GameStop or EB's more senior staff had tried to profit in any unethical way from the merger.