U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21133 / July 15, 2009
SEC v. Anthony Perez and Ian C. Perez., Civil Action No. 6:09-CV-1225-ORL-19 DAB (M.D. Fla.) (July 15, 2009); SEC v. Math J. Hipp Jr., Civil Action No. C09-0987-MAT (W.D. Wa.) (July 15, 2009); SEC v. Carl E. Binette and Peter E. Talbot, 09:CV-30107-MAP (D. Mass.) (July 15, 2009)
SEC Charges Five Individuals With Insider Trading In Connection With Safeco Corp.'s Merger Announcement
Three Defendants Agree to Settlements Including Permanent Injunctions and Payment of Disgorgement and Civil Penalties Totaling Over $417,000
The Securities and Exchange Commission (Commission) announced today the filing of three separate civil injunctive actions charging five individuals with violations of Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder, based on their tipping, or trading on, material, non-public information. Specifically, the Commission's complaints allege that the defendants either tipped or purchased securities of Safeco Corp. (Safeco) in advance of the April 23, 2008 announcement that it was being acquired by Liberty Mutual Insurance Company for an all-cash price of $68.50 per share (a $23.02 premium over the prior day's closing price).
In the first civil action, in the United States District Court for the Western District Washington, the Commission alleges that Math J. Hipp Jr., of Seattle, Washington, misappropriated material, non-public information about a potential sale of Safeco from his wife, an executive assistant to Safeco's Executive Vice President of Insurance Operations. Hipp's wife was working on projects related to the potential sale of Safeco and received material, non-public information about merger-related developments. Hipp bought Safeco call options on April 17, 2008, and sold them on April 23, 2008 through early May 2008, for a realized profit of over $118,245. Hipp has consented to entry of a proposed final judgment, without admitting or denying the allegations of the Commission's complaint, permanently enjoining him from further violations of Sections 10(b) of the Exchange Act and Rule 10b-5, and ordering him to pay disgorgement of $118,245 and pre-judgment of $3,280, and a civil penalty of $118,245.
In the second civil action, the Commission alleges that Anthony Perez, of Maitland, Florida, then an investment banker at Goldman Sachs & Co. (Goldman Sachs), misappropriated material non-public information from Goldman Sachs and its client regarding a potential acquisition of Safeco, and unlawfully tipped his brother, Ian C. Perez. Ian C. Perez bought Safeco call options on April 22, 2008, and sold them on April 23, 2008, for a realized profit of over $152,000. Both defendants have consented to entry of proposed final judgments, without admitting or denying the allegations of the Commission's complaint, permanently enjoining them from further violations of Sections 10(b) of the Exchange Act and Rule 10b-5 and holding them jointly and severally liable for payment of disgorgement of $152,231 and prejudgment interest in the amount of $761. The proposed final judgment against Ian C. Perez does not order him to pay a civil penalty based upon his sworn Statement of Financial Condition; the proposed final judgment against Anthony Perez orders him to pay a penalty in the amount of $25,000, but does not impose a higher penalty based upon his sworn Statement of Financial Condition.
In a third action, filed in the United States District Court for the District of Massachusetts, the Commission alleges Peter E. Talbot, of Springfield, Massachusetts, then a financial analyst at a subsidiary of The Hartford Financial Services Group, Inc. (the Hartford) tipped his nephew, Carl E. Binette, of Ludlow, Massachusetts, after he learned at work that Safeco was an acquisition target. The Commission's complaint alleges that Talbot learned this information because he was snooping in a co-worker's folder on the shared computer network which contained Safeco's Form 10-K and detailed analyses and evaluations of Safeco's assets. When Talbot subsequently noticed that key employees were working long hours and in unusual pairings, Talbot told Binette to buy Safeco call options because Safeco was an acquisition target. Using Binette's brokerage account, Talbot and Binette bought Safeco call options from April 17, 2008 to April 22, 2008 and sold them on April 23, 2008, for a realized profit of $615,833. The Commission seeks a final judgment enjoining Talbot and Binette from further violations of Section 10(b) of the Exchange Act and Rule 10b-5, and ordering Talbot and Binette to disgorge their illegal trading profits, with prejudgment interest, and imposing civil penalties against each of them.
The Commission acknowledges the assistance of the Chicago Board Options Exchange and New York Stock Exchange for their cooperation in this matter.