The Securities and Exchange Commission said two brothers in Brazil agreed to pay nearly $5 million to settle allegations that they were behind suspicious trading in H.J. Heinz Co. call options a day before the ketchup maker was acquired in a $23 billion deal earlier this year.
The takeover of Heinz by Warren Buffett's Berkshire Hathaway Inc. (BRKA, BRKB) and Brazilian private-equity firm 3G Capital was one of the largest acquisitions ever in the food industry.
The Wall Street Journal has reported that regulators and criminal investigators have scrutinized what they see as suspicious purchases of securities in the ketchup maker ahead of the merger announcement.
The SEC alleged Rodrigo Terpins placed the order to purchase the Heinz options while he was vacationing at Walt Disney World in Florida and he was trading on nonpublic information allegedly received from his brother Michael Terpins. According to the SEC, the trades were made through an account belonging to a Cayman Islands-based entity named Alpine Swift that holds assets for one of their family members.
Michel Terpins' attorney didn't have an immediate comment. Rodrigo Terpins' attorney couldn't immediately be reached to comment.
According to the SEC, Alpine Swift's brokerage account was used to purchase 2,533 out-of-the-money June $65 calls--effectively a wager that Heinz's stock would rise by about $5 a share.
The SEC alleged that prior to the Feb. 14 announcement of the Heinz acquisition, Michel Terpins learned that an investment consortium including 3G Capital was about to announce a major acquisition and that Heinz was the target. He is accused of providing the information to his brother Rodrigo who allegedly placed the trades Feb. 13. Apparently Rodrigo Terpins communicated with a broker who cautioned him that his firm rated Heinz a "sell." But he instructed the broker to place the trade anyway.
The Terpins brothers and Alpine Swift, which has been named as a relief defendant, have agreed to disgorge the $1.8 million in illegal profits and the Terpins brothers also will pay $3 million in penalties.
Write to Tess Stynes at email@example.com
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(END) Dow Jones Newswires
October 10, 2013 12:05 ET (16:05 GMT)Copyright (c) 2013 Dow Jones & Company, Inc.