Share This Page

SEC investigation to continue into 'suspicious' acquisition of Heinz stock option

| Wednesday, June 19, 2013, 12:01 a.m.

High-risk bets placed ahead of the announcement that H.J. Heinz Co. would be acquired for $28 billion will expire on Saturday.

But that doesn't mean the trader is off the hook from authorities who began an insider-trading investigation.

A Securities and Exchange Commission's investigation will continue, said Peter Henning, a professor of law at Wayne State University in Detroit and a former fraud investigator for the SEC and Justice Department.

The trader ultimately lost the chance to cash in when the Heinz deal closed on June 7, making it a private company and ending trading of the stock.

“You don't have to profit to have violated the insider trading laws,” Henning said.

“The violation took place when there was trading on the basis of inside information,” he said. “They're going to keep bringing it.”

On Feb. 13, the day before Warren Buffett's Berkshire Hathaway and Brazilian investment firm 3G Capital announced they were taking over the Pittsburgh ketchup maker, an unknown trader purchased 2,593 option contracts to buy Heinz stock. Each option gave him or her the right to buy 100 shares at $65 a piece.

Heinz shares were trading around $60 that day. But the next day, when the deal was announced and Heinz stock jumped 20 percent, the trader could have pocketed $1.7 million — the difference between the purchase price and the increased value of the stock.

SEC has called the trading activity, which was executed using a Goldman Sachs account in Zurich, highly suspicious.

A federal judge froze the options in February, and no one has stepped forward to claim them. The decision effectively prevented the trader from cashing in on his or her trade. Officials with the SEC and FBI, which also is investigating, did not respond to requests for comment.

Because of Swiss banking secrecy laws, U.S. authorities have been waiting for Finma, the Swiss equivalent of the SEC, to turn over the identities of the owners of the Goldman Sachs account. Finma said in February that it was cooperating with the SEC, but it has since declined to comment on the probe.

Goldman Sachs officials in New York have said they are cooperating with the investigation but they don't know the identities, also because of Swiss laws.

Henning said the SEC has the challenge of not only persuading the Swiss to turn over information, which could take months, but also the difficulty of establishing a connection between the traders and someone with advance knowledge of the deal.

“It may be that they never find it,” he said. But, he said, “They're going to keep looking.”

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

TribLIVE commenting policy

You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.

We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.

While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.

We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers

We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.

We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.

We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.

We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.