IRREGULAR OPTIONS TRADING IN FRONT OF H.J. HEINZ CO. ACQUSITION LEADS TO ASSET FREEZE

FROM: U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C., Feb. 15, 2013 — The Securities and Exchange Commission today obtained an emergency court order to freeze assets in a Zurich, Switzerland-based trading account that was used to reap more than $1.7 million from trading in advance of yesterday’s public announcement about the acquisition of H.J. Heinz Company.

The SEC’s immediate action ensures that potentially illegal profits cannot be siphoned out of this account while the agency’s investigation of the suspicious trading continues.

In a complaint filed in federal court in Manhattan, the SEC alleges that prior to any public awareness that Berkshire Hathaway and 3G Capital had agreed to acquire H.J. Heinz Company in a deal valued at $28 billion, unknown traders took risky bets that Heinz’s stock price would increase. The traders purchased call options the very day before the public announcement. After the announcement, Heinz’s stock rose nearly 20 percent and trading volume increased more than 1,700 percent from the prior day, placing these traders in a position to profit substantially.

"Irregular and highly suspicious options trading immediately in front of a merger or acquisition announcement is a serious red flag that traders may be improperly acting on confidential nonpublic information," said Daniel M. Hawke, Chief of the Division of Enforcement’s Market Abuse Unit.

Sanjay Wadhwa, Senior Associate Director of the SEC’s New York Regional Office, added, "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."

The SEC alleges that the unknown traders were in possession of material nonpublic information about the impending acquisition when they purchased out-of-the-money Heinz call options the day before the announcement. The timing and size of the trades were highly suspicious because the account through which the traders purchased the options had no history of trading Heinz securities in the last six months. Overall trading activity in Heinz call options several days before the announcement had been minimal.

The emergency court order obtained by the SEC freezes the traders’ assets and prohibits them from destroying any evidence. The SEC’s complaint charges the unknown traders with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. In addition to the emergency relief, the SEC is seeking a final judgment ordering the traders to disgorge their ill-gotten gains with interest, pay financial penalties, and be permanently barred from future violations.

The SEC’s expedited investigation is being conducted by Market Abuse Unit members Megan Bergstrom, David S. Brown, and Diana Tani in the Los Angeles Regional Office with substantial assistance from Charles Riely, Market Abuse Unit member in the New York Regional Office who will handle the SEC’s litigation. The SEC appreciates the assistance of the Options Regulatory Surveillance Authority (ORSA).

SEC ANNOUNCES MORE CHARGES, INCLUDING A PRO-BASEBALL PLAYER IN INSIDER TRADING CASE

FROM: SECURITIES AND EXCHANGE COMMISSION
New Charges in Insider Trading Case Include Former CEO and Professional Baseball Player

Washington, D.C., Aug. 17, 2012 – The Securities and Exchange Commission today announced a second round of charges in an insider trading case involving former professional baseball players and the former top executive at a California-based medical eye products company that was the subject of the illegal trading.
　
The SEC brought initial charges in the case last year, accusing former professional baseball player Doug DeCinces and three others of insider trading on confidential information ahead of an acquisition of Advanced Medical Optics Inc. DeCinces and his three tippees made more than $1.7 million in illegal profits, and they agreed to pay more than $3.3 million to settle the SEC’s charges.
　
Now the SEC is charging the source of those illegal tips about the impending transaction – DeCinces’s close friend and neighbor James V. Mazzo, who was the Chairman and CEO of Advanced Medical Optics. The SEC also is charging two others who traded on inside information that DeCinces tipped to them – DeCinces’ former Baltimore Orioles teammate Eddie Murray and another friend David L. Parker, who is a businessman living in Utah.
The SEC alleges that Murray made approximately $235,314 in illegal profits after Illinois-based Abbott Laboratories Inc. publicly announced its plan to purchase Advanced Medical Optics through a tender offer. Murray agreed to settle the SEC’s charges by paying $358,151. The SEC’s case continues against Parker and Mazzo, the latter of whom was directly involved in the tender offer and tipped the confidential information to DeCinces along the way.
　
"It is truly disappointing when role models, particularly those who have achieved so much in their professional careers, give in to the temptation of easy money," said Daniel M. Hawke, Chief of the SEC Enforcement Division’s Market Abuse Unit and Director of the Philadelphia Regional Office. "Mazzo had repeated personal contacts and communications with DeCinces, who promptly traded and tipped Murray, Parker and others that a deal involving Mazzo’s company was imminent. CEOs and other employees of public companies must resist the lure of sharing confidential information with their friends and always put the interests of their shareholders and company first."
　
According to the SEC’s complaint filed in U.S. District Court for the Central District of California, the total unlawful profits resulting from Mazzo’s illegal tipping was more than $2.4 million. Once Mazzo began tipping DeCinces with confidential information about the upcoming transaction, DeCinces began to purchase Advanced Medical Optics stock in several brokerage accounts. DeCinces bought more and more shares as the deal progressed and as he continued communicating with Mazzo. DeCinces tipped at least five others who traded on the inside information, including Murray, Parker, and the three traders who settled their charges along with DeCinces last year – physical therapist Joseph J. Donohue, real estate lawyer Fred Scott Jackson, and businessman Roger A. Wittenbach.
　
According to the SEC’s complaint, Mazzo and DeCinces had been close friends for quite some time and lived in the same exclusive gated community in Laguna Beach, Calif. They socialized together with their wives, belonging to the same Orange County country club and vacationing together overseas. They also communicated frequently by e-mail and through phone calls. Mazzo invested in the restaurant business of DeCinces’ son, and DeCinces’ daughter provided interior decorating services for Mazzo and his wife. Mazzo was directly involved in the impending Advanced Medical Optics/Abbott transaction from its inception in October 2008. With knowledge of confidential information about the deal and his duty not to disclose it, Mazzo illegally tipped DeCinces, who made significant purchases of Advanced Medical Optics shares on Nov. 5, 2008, and continuing up until and near the time of the public announcement of the acquisition.
　
The SEC alleges that Parker and DeCinces had been friends and business associates at the time of the illegal trading. Between Jan. 6 and Jan. 8, 2009, Parker bought 25,000 shares of Advanced Medical Optics stock on the basis of confidential information received from DeCinces about the impending transaction. Parker made approximately $347,920 when he sold the stock on the same day as the public announcement. Meanwhile on January 7, Murray used all of the available cash in his self-directed brokerage account to purchase 17,000 shares of Advanced Medical Optics stock on the basis of the confidential information that DeCinces communicated to him. Murray sold all of his shares following the public announcement.
　
Murray agreed to settle the charges against him without admitting or denying the SEC’s allegations by consenting to the entry of a final judgment permanently enjoining him from violating Sections 10(b) and 14(e) of the Securities Exchange Act of 1934 and Rules 10b-5 and 14e-3 thereunder. Murray agreed to pay disgorgement of $235,314, prejudgment interest of $5,180, and a penalty of $117,657 for a total of $358,151. The settlement is subject to final approval by the court.
　
The SEC’s investigation, which is continuing, has been conducted by Colleen K. Lynch, John S. Rymas, and David W. Snyder, who are members of the Market Abuse Unit in Philadelphia, as well as Elaine C. Greenberg, Associate Regional Director in the Philadelphia office, and Sanjay Wadhwa, Deputy Unit Chief in New York. G. Jeffrey Boujoukos, Michael J. Rinaldi, and Scott A. Thompson are handling the litigation. The SEC appreciates the assistance of the Financial Industry Regulatory Authority (FINRA) and the Internal Revenue Service.