A Credit Suisse investment banker faces criminal charges of insider trading before nine merger transactions, including the blockbuster leveraged buyout of TXU.
Hafiz Muhammad Zubair Naseem, a member of Credit Suisse’s Global Energy Group in New York, allegedly netted more than $7 million in proceeds, according to a 26-count complaint announced by Michael Garcia, U.S. Attorney for the Southern District of New York.
According to Garcia, from April 2006 through February 2007, Naseem and others executed securities transactions based on material, nonpublic information regarding pending announcements concerning acquisitions of nine publicly traded companies: TXU, Northwestern, Energy Partners, Veritas DGC, Jacuzzi Brands, Trammell Crow, Hydril, Caremark RX, and John H. Harland Co.
Separately, the Securities and Exchange Commission charged Naseem with illegally divulging nonpublic information to an unnamed person, believed to be a banker in Pakistan, concerning the TXU buyout as well as the eight other transactions.
In March the SEC charged “unknown purchasers” with improperly purchasing TXU call options before the buyout; the commission has amended that complaint to name Naseem as a defendant.
In their criminal complaint, federal prosecutors assert that Naseem had access to information about the nine transactions by virtue of his employment with the Global Energy Group. The complaint also observes that Naseem’s desk was located near a printer used in connection with certain transactions being handled by persons outside the group.
Prosecutors allege that Naseem “regularly and repeatedly” called a co-conspirator — referred to in the complaint only as “CC-1” — and provided him with material nonpublic information regarding the deals. According to the government, Naseem would typically call CC-1 at CC-1’s home or cell phone in advance of a public announcement that a particular company was to be acquired by another; CC-1 would then purchase securities of the target company based on the insider information.
Naseem was charged with one count of conspiracy to commit securities fraud and 25 counts of securities fraud. The conspiracy charge carries a maximum sentence of five years’ imprisonment and a maximum fine of the greater of $250,000 or twice the gross gain or gross loss from the offense. Each fraud charge carries a maximum sentence of 20 years’ imprisonment and a maximum fine of $5 million or twice the gross gain or gross loss from the offense.
The SEC, which made similar accusations against Naseem, alleges that the Pakistani banker to whom he divulged information earned “millions of dollars” from the TXU buyout and more than $2.4 million from his improper investing in the other eight companies. The commission is seeking injunctive relief, disgorgement, and monetary penalties.
An attorney for Naseem did not immediately respond to a request for comment.