FOR IMMEDIATE RELEASE 2001-43 SEC SUES CHAIRMAN OF GRUPO MEXICANO DE DESARROLLO, AND 15 RELATIVES, FAMILY FRIENDS AND TRADING ENTITIES FOR MASSIVE INSIDER TRADING DEFENDANTS MADE PROFITS OF OVER $3.7 MILLION SETTLING DEFENDANTS TO PAY OVER $4.7 MILLION IN DISGORGEMENT AND PENALTIES U.S. ATTORNEY FILES CRIMINAL CHARGES Washington DC, May 8, 2001 -- The Securities and Exchange Commission today sued Jorge Eduardo Ballesteros Franco, the Chairman of Grupo Mexicano, a major Mexican construction company, the estate of his brother Jose Luis Ballesteros Franco, Jose Luis Ballesteros' four sons, two friends of the Ballesteros family (all Mexican nationals), and eight related trading entities for engaging in massive and highly profitable insider trading. The action arises out of trading in the securities of Nalco Chemical Company ("Nalco") prior to the June 28, 1999 public announcement that Nalco would be acquired by Suez Lyonnaise des Eaux, a French Company. Jose Luis Ballesteros was a director of Nalco and Vice-Chairman of Grupo Mexicano. He was killed in an automobile accident in Mexico on May 28, 2000. The SEC's complaint alleges that he traded Nalco stock on the basis of nonpublic information regarding the Nalco acquisition that he learned at a Nalco board meeting. In addition, the SEC alleges that Jose Luis Ballesteros tipped his four sons and brother, Jorge E. Ballesteros, all of whom traded on the inside information. All told, the defendants purchased 263,329 Nalco shares at a cost of over $9.8 million and made illegal profits of more than $3.7 million. To carry out their fraud, the Ballesteros family used multiple offshore trusts in names other than the Ballesteros family name, trustees located in the Isle of Jersey, offshore nominee companies, and four different brokerage firms, with accounts located in the United States and Switzerland. Also today, the U.S. Attorney for the Southern District of New York announced the indictments of Jorge Ballesteros and Juan Pablo Ballesteros Gutierrez, one of Jose Luis Ballesteros' sons and a Grupo Mexicano employee, for nine felony counts and three felony counts, respectively, for conspiracy to violate, and violations of, the federal securities laws. Richard H. Walker, Director of the SEC's Division of Enforcement, said, "the prohibitions against insider trading are a hallmark of our securities markets. As global participation in our markets increases, it is imperative that these prohibitions are vigorously enforced for the benefit of all. This case sends a warning that engaging in insider trading from abroad, or using multiple offshore accounts that mask the trader's identity, will not protect the trader from detection and prosecution." THE SEC'S FEDERAL COURT COMPLAINT The SEC charges, filed in U.S. District Court for the Southern District of New York, allege that Jose Luis Ballesteros attended a June 17, 1999 meeting of Nalco's Board of Directors where he was told that a merger with Suez was likely to be finalized within a matter of days. Shortly after the meeting adjourned, Jose Luis Ballesteros placed an order to purchase up to $300,000 of Nalco stock through an offshore Swiss account owned by his family trust. On June 21, 22, 23 and 24, 1999, he purchased an additional 54,700 Nalco shares for over $2 million through the same offshore Swiss account, and two additional Swiss accounts and made illegal profits totaling $956,337. According to the SEC, Jose Luis Ballesteros tipped his brother, Jorge Ballesteros, concerning the pending Nalco merger. Between June 22 and June 24, Jorge Ballesteros placed orders to purchase $5.7 million of Nalco stock through two separate offshore family trusts with Swiss accounts and made illegal profits of over $2.2 million. The SEC also alleges that Jose Luis Ballesteros also tipped his four sons about the Nalco merger. On June 23, 24 and 25, 1999, the four sons bought 17,664 Nalco shares for more than $777,000 and made illegal profits of $152,838. Juan Pablo purchased Nalco stock through his Casford Limited account and the other three brothers all purchased Nalco stock through Jose Luis Ballesteros Gutierrez's Interconsulting Limited account. Finally, Jose Luis Ballesteros Gutierrez tipped his longtime friend, Carlos Minvielle, about Nalco. On June 24, 1999, Carlos bought 4,365 Nalco shares for $178,419 through an account in the name of Dehcot S.A. de C.V. and made illegal profits of $48,015, which he shared with his tipper, Jose Luis Ballesteros Gutierrez. Carlos then tipped his father, Eugenio Minvielle, who, on June 23, 1999, bought 25,000 Nalco shares for $931,275 through an account in the name of Parkesburg Corp. Together the Minvielles made illegal profits of $414,428. SETTLEMENTS The Estate of Jose Luis Ballesteros Franco has consented to pay $3,744,870, representing disgorgement of $3,380,284 (all the profits made by the Ballesteros family from their trading of Nalco stock), and prejudgment interest of $364,586; Eugenio Minvielle and Parkesburg Corp. have consented to pay $788,330, representing disgorgement of $366,413, prejudgment interest of $55,504 and a one-time civil penalty of $366,413; Carlos Minvielle and Dehcot S.A. de C.V. have consented to pay $103,303, representing disgorgement of $48,015, prejudgment interest of $7,273 and a one-time civil penalty of $48,015; Jose Luis Ballesteros Gutierrez and Interconsulting Limited have also agreed to pay a one-time civil penalty of $58,817 on their own trading profits and those of Jose Luis's tippee, Carlos Minvielle; Alejandro Ballesteros Gutierrez has agreed to pay a one-time civil penalty of $14,778 on his trading profits; and Ricardo Ballesteros Gutierrez has agreed to pay a one-time civil penalty of $20,853 on his trading profits. At the time he bought Nalco stock, Ricardo Ballesteros was an analyst in the Investment Banking Division at Lehman Brothers Inc. and, as a result, he has agreed to be barred from the securities industry with the right to reapply after five years. Overall, the settling defendants have agreed to pay a total of $4,730,951 in disgorgement, prejudgment interest and penalties. In addition, all settling defendants, and the entities through which they traded (except the Estate of Jose Luis Ballesteros Franco), have consented to the entry of a permanent injunction prohibiting them 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. The defendants did not admit or deny the SEC's allegations. NON-SETTLED CIVIL CASES Jorge E. Ballesteros and Juan Pablo Ballesteros Gutierrez and the entities through which they traded (Cardinal Trust, Sagitton Limited, Gianni Trust, Gianni Enterprises Limited and Casford Limited), have also been sued by the Commission for violating Sections 10(b) and 14(e) of the Securities Exchange Act of 1934 and Rules 10b-5 and 14e-3 thereunder. None of these defendants has agreed to settle with the Commission. ............ The SEC wishes to thank the United States Attorney's Office for the Southern District of New York, the Swiss Federal Office of Justice, the New York Stock Exchange and the Isle of Jersey Financial Services Commission for their cooperation and assistance in this matter. The Commission is continuing its investigation in this matter. For further information contact: Paul R. Berger, Associate Director (202) 942-4854 # # #