Two brothers in Brazil have agreed to pay $5 million as part of a settlement over suspicious trading in call options the day before the H.J. Heinz Co. announced the sale of the company to Berkshire Hathaway and 3G Capital.
The Securities and Exchange Commission this morning announced the deal, which follows its emergency enforcement action taken the day after the Feb. 14 announcement of the Heinz sale to private investors.
Court approval is still needed for the settlements that Rodrigo and Michel Terpins consented to without admitting or denying the allegations, according to this morning's announcement by the SEC.
According to the SEC, it has filed papers in New York federal court alleging that the order to purchase the Heinz options was placed by Rodrigo Terpins while he was vacationing at Walt Disney World in Orlando, Fla. "The trading was based on material non-public information that he received from his brother Michel Terpins," according to the SEC.
Earlier this summer, court papers had been served on a Cayman Islands investment holding company. The SEC said the company, Alpine Swift, holds assets for one of the Terpins' family members.
The SEC alleges that Rodrigo Terpins purchased nearly $90,000 in option positions in Heinz the day before the announcement. The agency had estimated the purchases reaped more than $1.8 million from trading in advance of the Heinz announcement.
Since the agency moved quickly to freeze the accounts, the profits were not released.
"The Terpins brothers and Alpine Swift, which has been named as a relief defendant for the purposes of recovering ill-gotten gains, have agreed to disgorge the entire $1,809,857 in illegal profits made from trading Heinz options. The Terpins brothers also will pay $3 million in penalties," according to the SEC statement.
"Rodrigo and Michel Terpins obtained confidential information prior to any public awareness that a Heinz deal was in the works, and they exploited it to the disadvantage of all other traders in the marketplace," said Sanjay Wadhwa, senior associate director for enforcement in the SEC's New York regional office, in a prepared statement.
The SEC alleges that Michel Terpins learned "an investment consortium including 3G Capital" was about to announce a major acquisition and discovered that Heinz was the company being bought.
According to the SEC, a broker told Rodrigo Terpins that his firm rated Heinz a "sell," but he went ahead with the trade. "The timing, size, and profitability of the trades as well as the lack of a prior history of Heinz trading in the Alpine Swift account made the transactions highly suspicious in the wake of the Heinz announcement, hence the SEC's emergency action at the time."breaking - businessnews
Teresa F. Lindeman: email@example.com or at 412-263-2018. First Published October 10, 2013 8:13 AM