A former Fidelity employee was sentenced yesterday for fraudulent trading in index options.

Thomas J. Connolly was sentenced to three years of probation for conspiring to defraud Fidelity in connection with index options trading on the Chicago Board of Options Exchange in 1997. Connolly pled guilty on May 10, 2001 to hatching a scheme with Richard P. Callipari and others that using index options traded on the CBOE, resulted in a loss to Fidelity of $2.39 million.

Connolly was employed at Fidelity's index options desk in Boston in 1997 and placed trades in index options on the CBOE, without having an order from a Fidelity customer. Profitable trades were sent to an account being managed by Richard P. Callipari, of Johnson, Rhode Island, for JAS Securities, Inc., a New York City hedge fund.

During the period July to September 12, 1997, Connolly's trading resulted in a net gain of $572,000 to the account Callipari managed and Callipari received $200,000 of those profits. During the week of September 15, 1997, however, Connolly's trading resulted in losses of $2.39 million, which Callipari sought to disavow. Yet, Connolly never received profits from his illegal trading.

Last February, Callipari was convicted of conspiracy, wire fraud and endeavoring to obstruct a Securities and Exchange Commission investigation into the illegal trading. Then, in April 2003, Callipari was sentenced to 2 years and six months in prison and ordered to pay a $7,500 fine.

Connnolly cooperated the investigation and entered a plea agreement where he was required to testify at Callipari's trial.  

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