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The Unemployed Divorcee Sister of the CEO

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Jan 7, 2010 6:09 pm

An irreverent Wall Street Blog
by Bill Singer

Blog Home | Past Entries

Did You Hear the One About the CEO, His Parents, and His Divorced Sister?

Written: January 7, 2010

Okay, so, here’s the teaser:

[T]he next trading day, Monday, March 18, Kirincic began placing orders to purchase substantial amounts of KILN stock for his sister, Susan Paduano, and would continue to do so through April 22 (the "Trading Period"). Kirincic, who testified that he exercised time and price discretion over Paduano's orders and also determined how to route them in the market, placed most of these orders not through Herzog but through BRUT, an electronic communications network ("ECN"), for execution. A significant feature of trading on ECNs, as Applicants' expert explained, is that, when a broker places an order with an ECN at a price above the highest, or "inside" bid, the ECN automatically displays that bid as its own, creating a new inside bid price that is displayed to the market. According to Applicants' expert, of the 65 orders Kirincic placed for Paduano on the BRUT ECN during the Trading Period, 41 of them were priced at or above the inside bid, and an additional 20 of them were priced at or above the inside ask; more than 93% of Kirincic's orders were therefore responsible for setting a new inside bid. Paduano's KILN purchases would total over $200,000 in a five-week period, account for 43% of the total trading volume in KILN, and increase the price of KILN over 57%.

In March 2002, Paduano was divorced, unemployed, caring for three children, and receiving as income only $3,600 per month in alimony. She nevertheless testified that she gave instructions to Kirincic to purchase shares in large dollar amounts, such as $25,000 or $50,000, depending on what she was "comfortable with" at the time.17 During the hearing, neither Paduano nor Kirincic could recall specific details about any of the orders she gave Kirincic.18 Although Paduano had not been an active purchaser of KILN shares in the four years preceding 2002 and had purchased none in January or February 2002,19 she testified that she wanted to acquire KILN stock because "it was [her] desire to always hold a large position in the company" that her ex-husband (formerly a partner of Kirincic and Lindner) and brother had built. The KILN shares were intended, she said, to be a "legacy for my children." Although each of Paduano's children had a custodial account at another financial institution, all the KILN purchases Paduano made in 2002 were bought through her own account at Kirlin. There is no evidence that Paduano transferred any of the acquired KILN shares to her children's accounts . . .

See Page 7 of the Opinion.

Do I have your attention?  Is your interest piqued?  Well, read more at


Jan 7, 2010 7:06 pm

LOL!  And they honestly think they will get away with it?