U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20157 / June 19, 2007
SEC v. Romano Ancelmo Fontana Filho, C.A. No. 1:07CV01095 (PLF) (D.D.C.)
SEC Files Settled Insider Trading Charges Against Former Director of Sadia S.A.
The Securities and Exchange Commission today filed a settled civil injunctive action in the United States District Court for the District of Columbia against Romano Ancelmo Fontana Filho, a former Director at Sadia S.A. ("Sadia"), a Brazilian food products company. The Commission charged Fontana with engaging in illegal insider trading both by purchasing securities of Perdigão S.A. ("Perdigão") prior to Sadia's tender offer for Perdigão and by selling the same securities of Perdigão prior to Sadia's subsequent revocation of the tender offer. Without admitting or denying the allegations in the Commission's complaint, Fontana has consented to the entry of a final judgment imposing injunctive and monetary relief and barring him from acting as an officer or director of a publicly traded company for a period of five years.
The Commission's complaint alleges that Fontana learned of the contemplated tender offer on April 26, 2006, through a conversation with the chairman of Sadia's board of directors. According to the complaint, Fontana subsequently purchased 18,000 American Depositary Shares ("ADSs") of Perdigão at an average cost of $19.12 per ADS through three transactions executed between July 5 and 12, 2006, on the basis of material, nonpublic information concerning the proposed acquisition, and in breach of a duty of trust and confidence he owed to Sadia. On Sunday, July 16, 2006, Sadia announced the tender offer for Perdigão. The following day, the price of Perdigão ADSs increased to $24.50, up $4.25 (21%) from the previous closing price. On the morning of July 21, 2006, Fontana participated by conference call in a meeting at which Sadia's board of directors decided to revoke the tender offer. As the complaint alleges, after this meeting — but before Sadia announced the revocation later that day — Fontana sold all 18,000 ADSs of Perdigão at an average selling price of $26.85 per ADS. By selling in advance of the public announcement of the revocation, the complaint alleges, Fontana again engaged in illegal insider trading, in breach of a duty of trust and confidence he owed to Sadia. The complaint alleges that Fontana realized ill-gotten profits of $139,114.50 from his unlawful trading.
Without admitting or denying the allegations in the complaint, Fontana has agreed to settle the Commission's charges by consenting to the entry of a final judgment that would: (i) permanently enjoin him from further violations of Sections 10(b) and 14(e) of the Securities Exchange Act of 1934, and Rules 10b-5 and 14e-3 thereunder; (ii) require him to pay $142,848.95 in disgorgement and prejudgment interest; (iii) order him to pay a 1.25-time civil penalty of $173,893.13; and (iv) bar him for a period of five years from serving as an officer or director of a publicly traded company.
The Commission wishes to acknowledge the assistance of the Brazilian Comissão de Valores Mobilários. This is the third settled insider trading action filed by the Commission arising out of Sadia's tender offer for Perdigão. See SEC v. Luiz Gonzaga Murat Júnior, C.A. No. 1:07CV00381 (PLF) (D.D.C.) (filed Feb. 22, 2007), Litigation Release No. 20013 (Feb. 22, 2007); SEC v. Alexandre Ponzio De Azevedo, C.A. No. 1:07CV00380 (PLF) (D.D.C.) (filed Feb. 22, 2007), Litigation Release No. 20013 (Feb. 22, 2007). The Commission's investigation in this matter is continuing.