The Securities and Exchange Commission recently charged five individuals who were involved in separate insider trading schemes that were detected through surveillance of unusual trades preceding the merger announcement between Liberty Mutual Insurance Company and Safeco Corporation.
The SEC alleges that those five individuals, including a former investment banker at Goldman Sachs & Co., illegally tipped or traded on confidential information ahead of an announcement last year that Liberty Mutual Insurance Company would acquire Safeco Corporation, a Seattle-based insurance company.
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.
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.
Hipp has agreed to pay a total of $239,770 to settle the SEC’s charges against him without admitting or denying the allegations.
First announced in April 2008, Liberty Mutual’s $6.2 billion acquisition of the publicly traded Safeco closed Sept. 22 for $68.25 per share in cash. The merger created the sixth-largest property/casualty insurance group in the United States, based on 2007 direct written premium, with $94.7 billion of consolidated assets, $82.4 billion in consolidated liabilities and $26 billion in annual consolidated revenue.
