U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20754 / September 29, 2008
Securities and Exchange Commission v. Carlos J. Petry, United States District Court for the District of Massachusetts, Civil Action No. 08-CV-11658
SEC Files Settled Insider Trading Action Against Former Director of Brazilian Steel Producer
The Securities and Exchange Commission filed a settled enforcement action today in U.S. District Court for the District of Massachusetts, charging Carlos J. Petry with insider trading in the stock of Texas-based Chaparral Steel Co., prior to the announcement of its acquisition by Florida-based Gerdau Ameristeel, S.A. on July 10, 2007. At the time of his trading, Petry was a director of Gerdau Ameristeel's Brazilian parent, Gerdau, S.A. Petry has agreed to the entry of a final judgment that will enjoin him from violating certain provisions of the federal securities laws, will require him to pay a total of $166,331 in disgorgement, prejudgment interest, and a civil penalty, and will bar him from being an officer or director of a public company for five years.
The Commission's Complaint alleges that in or about May 2007, through his position as a director of Gerdau, Petry learned that Gerdau Ameristeel had identified Chaparral as one of seven or eight possible acquisition targets. During early June 2007, again through his position as a director of Gerdau, Petry learned that Gerdau Ameristeel had begun conducting extensive due diligence work on Chaparral in connection with a possible acquisition and that Gerdau Ameristeel planned on requesting approval from the Gerdau board at its next meeting to make an acquisition proposal to Chaparral. According to the Complaint, On June 26, 2007, Petry attended the Gerdau board of directors meeting at which the Gerdau board authorized Gerdau Ameristeel to proceed with its bid to acquire Chaparral. The possible acquisition of Chaparral by Gerdau Ameristeel was material, nonpublic information that Petry was privy to by virtue of his position as a member of Gerdau's board of directors.
The Commission's Complaint further alleges that, between June 25 and 27, 2007, Petry, while in the possession of this material, non-public information concerning the possible acquisition of Chaparral by Gerdau Ameristeel, purchased 8,500 shares of Chaparral stock. On the afternoon of July 10, 2007, after the closing of the market, Gerdau Ameristeel issued a press release publicly announcing its acquisition of Chaparral. The closing price of Chaparral stock increased 11 percent the next day. As a result, the Complaint alleges that Petry profited by $105,044.
The Commission's complaint charges Petry with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. To settle the Commission's charges, Petry has consented, without admitting or denying the allegations in the Commission's Complaint, to the entry of a final judgment permanently enjoining him from committing future violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. Petry also has agreed to pay disgorgement in the amount of $105,044, pre-judgment interest thereon in the amount of $8,765, and a civil penalty of $52,522, for a total payment of $166,331. Finally, Petry will be prohibited from acting as an officer or director of any publicly-traded company for a period of five (5) years from the date of the entry of the judgment.
The SEC acknowledges the assistance and cooperation of the Financial Industry Regulatory Authority (FINRA) in this matter.