Five people, including a former investment banker at Goldman Sachs & Co., were charged with tipping or trading on confidential information with respect to the sale last year of Safeco Corp to Liberty Mutual Insurance Co.
The charges came after the U.S. Securities and Exchange Commission conducted surveillance of unusual trades before the April 2008 announcement that Liberty Mutual would buy Safeco, a Seattle-based insurance company, for $6.2 billion.
“The SEC and self-regulatory organizations work together to detect and investigate suspicious trades surrounding company mergers,” said Robert Khuzami, director of the SEC’s Division of Enforcement, said in a statement about the Liberty Mutual case, as well as another one where six people were charged with insider trading. “These individuals traded on confidential information with reckless disregard for the fairness of the markets and utter disrespect for their jobs or close-knit relationships. But their greed left a trail for investigators to follow.”
The SEC filed three separate complaints – in Florida, in Massachusetts and in Washington state – against people allegedly involved in insider trading schemes prior to the announcement of the Safeco acquisition.
In a complaint filed in federal court in Orlando, the SEC alleges that Anthony Perez of Maitland, Fla., illegally tipped his brother Ian C. Perez of Orlando, with material non-public information that he obtained through his job at Goldman Sachs while working on a potential acquisition of Safeco for a client. Ian Perez then bought Safeco call options one day ahead of the public announcement and later sold them for a profit of more than $152,000.
The Perez brothers have agreed to settle the SEC’s charges without admitting or denying the allegations. Anthony Perez will pay a penalty of $25,000 and Ian Perez agreed to pay disgorgement and prejudgment interest totaling $152,992.
In a complaint filed in federal court in Massachusetts, the SEC alleges that Peter E. Talbot of Springfield, Mass., then a financial analyst at a subsidiary of The Hartford Financial Services Group, tipped off his nephew, Carl E. Binette of Ludlow, Mass., after he learned at work that Safeco was an acquisition target. Using Binette’s brokerage account, Talbot and Binette bought Safeco call options over a six-day period leading up to the public announcement and sold them afterwards for a profit of more than $615,000.
In the Talbot and Binette case, the SEC is seeking injunctions against further violations, the return of money obtained illegally and financial penalties, the government agency said.
In a complaint filed in U.S. District Court for the Western District of Washington state, the SEC alleges that Math J. Hipp of Seattle engaged in insider trading based on confidential information he misappropriated from his wife, an executive assistant at Safeco. Hipp bought Safeco call options six days ahead of the public announcement and later sold them for a profit of more than $118,000.
Hipp has agreed to pay a total of $239,770 to settle the SEC’s charges against him without admitting or denying the allegations.
Officials said the Financial Industry Regulatory Authority (FINRA) and the Chicago Board Options Exchange assisted in the cases.