The Securities and Exchange Commission (SEC) has charged that five individuals, including a former investment banker at Goldman Sachs & Co., illegally tipped or traded on confidential information ahead of an announcement in April 2008 that Liberty Mutual Insurance Co. would acquire Safeco Corp., a Seattle-based insurance company.
Robert Khuzami, director of the SEC’s Division of Enforcement, charged that these individuals “traded on confidential information with reckless disregard for the fairness of the markets and utter disrespect for their jobs or close-knit relationships. But their greed left a trail for investigators to follow.”
The SEC filed three separate complaints against individuals involved in insider trading schemes prior to the announcement of the Safeco acquisition:
- In a complaint filed in federal court in Orlando, the SEC alleges that Anthony Perez of Maitland, Fla., illegally tipped his brother Ian C. Perez of Orlando with material non-public information that he obtained through his job at Goldman Sachs while working on a potential acquisition of Safeco for a client. Ian Perez then bought Safeco call options one day ahead of the public announcement and later sold them for a profit of more than $152,000.
- In a complaint filed in federal court in Massachusetts, the SEC alleges that Peter E. Talbot of Springfield, Mass., then a financial analyst at a subsidiary of The Hartford Financial Services Group, tipped his nephew Carl E. Binette of Ludlow, Mass., after he learned at work that Safeco was an acquisition target. Using Binette’s brokerage account, Talbot and Binette bought Safeco call options over a six-day period leading up to the public announcement and sold them afterwards for a profit of more than $615,000.
- In a complaint filed in U.S. District Court for the Western District of Washington, the SEC alleges that Math J. Hipp of Seattle engaged in insider trading based on confidential information he misappropriated from his wife, an executive assistant at Safeco. Hipp bought Safeco call options six days ahead of the public announcement and later sold them for a profit of more than $118,000.
According to the SEC, the Perez brothers have agreed to settle the SEC’s charges without admitting or denying the allegations. Anthony Perez will pay a penalty of $25,000 and Ian Perez agreed to pay disgorgement and prejudgment interest totaling $152,992.
The SEC said that Hipp has agreed to pay a total of $239,770 to settle the SEC’s charges against him without admitting or denying the allegations.
Anthony Perez, of Maitland, Florida, worked with Goldman’s financial institutions group in New York from July 2007 to May 2008, according to the SEC’s lawsuit.
A Goldman spokesman, Ed Canaday, told Reuters that the analyst was fired immediately after the firm learned of the SEC matter.
Talbot’s lawyer told Reuters that the investment decision Talbot’s family made was based upon publicly available information.
The Libery Mutual-Safeco transaction closed in September.
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