Opinion ID: 692992
Heading Depth: 2
Heading Rank: 1

Heading: The Relationships Between Ferrero, Maio and Ladavac

Text: 4 Some time in the 1970's Ferrero and Maio met each other through their mutual friend Dr. Ronald Palamara (Palamara), the founder of Anacomp, a large publicly-held company that specializes in information services. Maio knew Palamara from childhood; they grew up together in Indianapolis and remained friends until Palamara died in 1985. Ferrero met Palamara in the mid 1970's when Ferrero sold his business to Anacomp and took a position there. Ferrero soon became close friends with Palamara. 5 Over the years of their mutual friendship, Palamara, Maio, and Ferrero traveled to Las Vegas together to gamble or attend prize fights and they regularly attended each other's family weddings. But perhaps the best evidence of their close friendship is that shortly before Palamara died in 1986 he asked Ferrero to look after three people for him: his younger son, his long-time secretary, and Michael Maio. As Palamara put it: So now [that] you are in the big business world, don't forget about Michael. According to Ferrero, he had no problem accepting this commitment because he was grateful to Palamara for his leading role in having Anacomp purchase his family company and for following Maio's recommendation that Ferrero succeed Palamara as President of Anacomp. Of course, he also considered Maio to be a good friend. 6 Ferrero kept his commitment. In 1987 Ferrero loaned Maio $250,000 to finance construction at an amusement park owned by Maio's family and the Palamara estate, which was financially vulnerable at this time. Although this was the largest personal loan Ferrero ever made, Maio signed no promissory note, paid no interest, and gave no mortgage. According to Ferrero, he saw this loan as an opportunity to help both Maio and Palamara's family. 7 Ferrero also helped Maio by providing information relevant to Maio's speculation in the stock market. For example, in August of 1987 Anacomp entered a bidding contest to acquire Endata Corporation (Endata). When Endata's management privately advised Ferrero that it had decided to accept a competing offer and would soon be acquired, Ferrero passed this non-public information on to Maio who called his broker. Both Maio and his broker purchased Endata stock and, when the tender offer was announced the next day, Maio sold the stock for about a $100,000 profit. 8 Both Maio and Ferrero knew Patricia Ladavac. By 1988 Maio and Ladavac had been good friends for over twenty years and Maio staked Ladavac on many investment projects. For example, Maio loaned Ladavac over $248,000 between August 1987, and May 1989. All of the loans were informal and interest-free. Ladavac met Ferrero through Maio. She knew that Maio and Ferrero were good friends, and she knew Ferrero's position at Anacomp. In fact, when Anacomp was interested in purchasing Endata, Ladavac arranged a meeting between Ferrero and one of Endata's directors. Against the backdrop created by these close friendships, we consider the securities trading that gave rise to this case. 9