Possible Insider Trading With Heinz Deal

1 Mar

On February 15th, the U.S. Securities and Exchange Commission (SEC) sued “unknown” traders for “suspicious trading” of Heinz shares just one day before the takeover deal was announced. The trading came from a Goldman Sachs Group Inc. account based out of Zurich, Switzerland, and the traders in question earned a whopping $1.7 million.

 

The deal, a $23 billion takeover from Warren Buffet’s Berkshire Hathaway Inc. and Brazil’s 3G Capital Inc., is the largest deal ever in the food industry. The account that was used to trade the shares had never been used for Heinz before and the timing and amount of shares traded are highly suspect, says the SEC.

 

“The FBI is aware of trading anomalies the day before the Heinz announcement,” said Peter Donald, spokesman for the FBI’s New York office. “The FBI is consulting with the SEC to determine if a crime was commited.”

 

Goldman Sachs said in a statement that they would be cooperating with the SEC during its investigation, and the bank has already placed a temporary freeze on the assets of the account used. Anyone connected to the account is being asked to appear before U.S. District Judge Jed S. Rakoff by February 22 to explain why the freeze should not be made permanent.

 

The users of the account invested nearly $90,000 in option positions the day before the deal, when they purchased 2,533 June call options for a strike price of $65. Just 14 were sold the day before, and in the past three months no more than 61 had been bought in one day. The next anomaly came when the deal was announced the very next day and shares jumped to $72.50 each. The June call options went up by $7.33, as compared to $0.40 the day before—increasing by about 1,700 percent.

 

“The timing, size and profitability of the defendants’ trades, as well as the lack of prior history of significant trading in Heinz… [was] highly suspicious,” according to the SEC. As of now, neither 3G nor its employees stand accused. However, this is the second deal involving 3G in the past six months that has been suspected of insider trading.

 

On the same day the Heinz deal was made public, Moody’s, headed by CEO Ray McDaniel, announced that the company would be put on review for a possible downgrade. “The review for downgrade reflects the possibility that the proposed transaction… will result in a significantly higher financial leverage at Heinz,” the company said in a statement.

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One Response to “Possible Insider Trading With Heinz Deal”

  1. freecorporateamericaofcoruption March 10, 2013 at 11:44 am #

    Reblogged this on free corporate america of corruption.

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