Risk & Compliance

SEC Flags Premerger Trades

Two Brazilian former executives, a CFO and a banker, allegedly bought stock in a company they knew was on the block.
Marie LeoneFebruary 22, 2007

The Securities and Exchange Commission settled insider trading charges against Luiz Gonzaga Murat, the former chief financial officer and director of investor relations of Sadia S.A., a Brazilian food products company. Murat was charged with buying the stock of a company Sadia planned to acquire before the deal was made public, on July 16, 2007. Similarly, charges were also settled against Alexandre Ponzio De Azevedo, a former employee of Banco ABN AMRO Real, who worked on the Sadia deal.

Without admitting or denying the allegations, Murat and Azevedo each agreed to injunctions and fines. Murat has consented to be barred from acting as an officer or director of a publicly traded company for five years. In addition, Murat agreed to pay $184,028.12 in disgorgement and prejudgment interest, and a civil penalty of $180,404.

Azevedo is required to pay $68,215.45 in disgorgement and prejudgment interest, as well as a civil penalty of $67,165. Azevedo will also be barred from working as a broker or dealer for three years.

The SEC complaint asserts that on April 7, Murat and another Sadia executive met with investment bankers to discuss the acquisition of food company Perdigão by Sadia. Later that day, Murat bought American Depositary Shares (ADSs) of Perdigão, and subsequently purchased additional shares on June 29. Both purchases allegedly were made on the basis of material, nonpublic information regarding the proposed acquisition, said the SEC. Similarly, the complaint charges that Azevedo, a member of the ABN AMRO merger team working on the Perdigão deal, learned about the possible acquisition on April 11, and purchased 14,000 ADSs of Perdigão on June 20.

Murat’s holdings totaled 45,900 ADSs of Perdigão by the time Sadia announced its offer in July. By the next day, the price of the ADSs increased by 21 percent, rising to $24.50. Murat reaped $180,404 from his trading, according to the SEC. Likewise, Azevedo sold 10,500 ADSs the day after the acquisition was announced publicly, and reportedly collected $52,290 on the trade.

4 Powerful Communication Strategies for Your Next Board Meeting