SEC: 2 people know insider Heinz tipster
By Alex Nixon
Published: Saturday, Feb. 1, 2014, 12:03 a.m.
Two people know who tipped off a pair of Brazilian brothers that H.J. Heinz Co. was going to be sold in a $28 billion deal.
That detail from the government's yearlong insider trading investigation involving the Heinz sale was revealed in a trove of documents filed in federal court in New York on Thursday by the Securities and Exchange Commission.
The documents shed new light on the complexities of the ongoing probe, which started Feb. 15, the day after Heinz announced it would be acquired by Warren Buffett's Berkshire Hathaway and 3G Capital, an investment firm run by Brazilian billionaires.
In October, the SEC announced a settlement with Michel and Rodrigo Terpins, the Brazilian brothers they say traded on inside knowledge that Heinz would be sold and its stock price would jump 20 percent in one day.
But the SEC previously has said nothing about where the Terpins got their information.
Investigators have plenty of potential suspects to examine, court documents show. There were 122 people working for 21 companies who had knowledge that Buffett and 3G partners were in talks with Heinz on a buyout between December 2012 and February 2013, the documents disclosed.
In addition to Buffett, 3G partners and top Heinz executives, those who knew about the deal include investment bankers in New York, a director of Anheuser-Busch InBev, top executives at Burger King Worldwide and lawyers in Washington, Los Angeles and Pittsburgh.
In 2010, 3G took Burger King private, and Heinz CEO Bernardo Hees, a 3G partner, was the fast-food chain's CEO until June. The founders of 3G, Brazilian billionaires Jorge Paulo Lemann, Marcel Herrmann Telles and Carlos Alberto Sicupira, sit on Anheuser-Busch's board.
“Commission counsel has communicated with counsel for two witnesses — one located in the United States and one located in Brazil — who indicated that their clients are able to provide information concerning how the defendants obtained the nonpublic information,” the SEC told the court.
SEC officials declined to comment.
The documents also show the expanse of the SEC's probe that led to the Terpins. Investigators traced ownership of bank and trading accounts in Switzerland and the Cayman Islands, and issued subpoenas for cellphone records, immigration documents and bills from Walt Disney World.
Michel and Rodrigo Terpins, who are members of one of Brazil's wealthiest families, traveled separately to the United States from Brazil in February, the SEC said. Michel received the tip about Heinz and called Rodrigo, who was vacationing at Walt Disney World in Orlando.
Rodrigo emailed his family's Goldman Sachs broker in Switzerland and then placed the order by phone for Heinz options, which are a risky bet that a stock will rise. The trades were executed through a Cayman Islands holding company owned by the Terpins family. They paid $90,000 for the options on Feb. 13. The next day, after Heinz announced the deal, the options were worth $1.8 million.
The Terpins brothers agreed to the $4.8 million settlement with the SEC, which includes each paying a $1.5 million fine and disgorging their profit from Heinz trades. But U.S. District Court Judge Jed Rakoff in New York is opposing part of the settlement that lets the brothers get away without admitting guilt.
The SEC filed the documents, which included 18 exhibits, to argue that Rakoff should approve the settlement because “the sanctions embodied in the proposed settlements reasonably reflect the scope of relief the commission would likely obtain under the applicable law if the commission was successful in litigation.”
Peter Henning, a professor of law at Wayne State University in Detroit and a former fraud investigator for the SEC and Justice Department, said the SEC's lawyers are likely fighting Rakoff on the settlement because they “don't want to give up the no-admission no-denial means of resolving a case,” and they “don't want to have judges dictating when they get admissions.”
They also may be trying to protect the settlement with the Terpins, who would want to avoid admitting guilt because it could be used against them if the Justice Department decides to pursue criminal charges, Henning said.
“They don't want to risk the exposure to a criminal case,” he said.
Alex Nixon is a staff writer for Trib Total Media. He can be reached at 412-320-7928 or email@example.com.
Show commenting policy
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.
- Dick’s Sporting Goods usiness brisk while American Eagle feels chill in profits
- Marcellus shale driller Noble Energy Inc. sinks roots into Pittsburgh
- ‘Fresher, different, lot more fun’ guide changes at Kings Family Restaurants
- Minorities crucial to filling Marcellus shale gas drilling jobs
- Profit falls at American Eagle Outfitters on sales decline, charges
- Regular IRA or Roth? Pick either
- Diaper makers do due diligence
- Stocks dip on gloomy data from Asia
- PNC info sought in fraud investigation
- Samsung introduces free streaming radio service
- Sbarro again files for bankruptcy reorganization