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FBI investigating potential insider trading in Heinz

| Tuesday, Feb. 19, 2013, 5:27 p.m.

Trading anomalies the day before H.J. Heinz Co. announced its $28 billion acquisition led the FBI to join an investigation of alleged insider trading, the agency said on Tuesday.

The FBI said it would investigate with the Securities and Exchange Commission, which last week filed suit against traders the SEC accused of using knowledge of the pending deal to reap $1.7 million in profit.

“The FBI is aware of the trading anomalies the day before Heinz's announcement,” said a statement from the FBI's field office in New York. “The FBI is consulting with the SEC to determine if a crime was committed.”

Pittsburgh-based Heinz, maker of ketchup and pickles, among other foods, on Thursday said it agreed to be acquired by Warren Buffett's Berkshire Hathaway and Brazilian investment firm 3G Capital for $28 billion, including debt.

The next day, the SEC obtained an emergency court order to freeze assets in a Zurich-based trading account.

“The SEC alleges that prior to any public awareness that Berkshire Hathaway and 3G Capital had agreed to acquire H.J. Heinz Co. in a deal valued at $28 billion, unknown traders took risky bets that Heinz's stock price would increase,” the SEC said.

The SEC did not make public the names of the traders. The FBI declined further comment.

“Despite the obvious logistical challenges of investigating trades involving offshore accounts, we moved swiftly to locate and freeze the assets of these suspicious traders, who now have to make an appearance in court to explain their trading if they want their assets unfrozen,” Sanjay Wadhwa, senior associate director of the SEC's New York Regional Office, said last week.

The SEC and FBI have worked more closely in recent years in the fallout from the financial crisis, said Robert Strauss, economics and public policy professor at Carnegie Mellon University's H.J. Heinz School of Public Policy.

The Heinz acquisition also is “a major transaction,” Strauss said. “One shouldn't be surprised that somebody tries to benefit from inside information.”

The SEC considers insider trading “a high priority,” and last year brought 58 insider-trading actions against 131 individuals and companies, the commission said.

But a majority of those cases were settled, according to an analysis by NERA Economic Consulting, a subsidiary of New York-based Marsh & McLennan Cos. The SEC settled insider-trading cases with 118 individuals and eight companies last year, “almost double the total number” in 2011, NERA said.

Under the proposed acquisition, which requires approval from Heinz shareholders and government regulators, Berkshire Hathaway and 3G Capital would pay Heinz stockholders $72.50 a share. If completed, it would be the largest-ever transaction involving a food industry company.

Alex Nixon is a staff writer for Trib Total Media. He can be reached at 412-320-7928 or anixon@tribweb.com.

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