Credit Suisse Group AG (CSGN) sued its former vice president of emerging markets, Agostina Pechi, claiming she stole the bank’s trade secrets in a bid to win clients for her new employer, Goldman Sachs Group Inc (GS).
In February and March, Pechi secretly sent e-mails with client lists and other confidential bank information from her work account to her personal inbox, and printed “critical transaction documents” late at night from her office, when she was supposed to be on vacation, Credit Suisse (CSGN) said in a complaint filed yesterday in state court in Manhattan.
Pechi, who made $950,000 last year and lives in New York, resigned from the Zurich-based bank on April 2, telling Credit Suisse’s human-resources department she was accepting a position at New York-based Goldman Sachs (GS), according to the complaint.
“Pechi decided to steal confidential Credit Suisse information and contacts that she had learned during the course of her employment for Credit Suisse,” according to the complaint. She plans to use the data “to compete with Credit Suisse, and intends to provide this information to her new employer to specifically target Credit Suisse’s clients.”
A message left on a mobile phone listed for Pechi, seeking comment on the lawsuit, wasn’t immediately returned yesterday. Michael DuVally, a Goldman Sachs spokesman, declined to comment on the lawsuit.
Credit Suisse, the second-biggest Swiss bank, alleges Pechi started systematically taking secret bank data by at least Feb. 4, when she e-mailed “highly confidential deal-structuring documents” related to a sensitive deal with a client.
Around March 19, Pechi allegedly sent an e-mail to herself containing databases that she had helped build with the bank’s emerging markets team. She’s also accused of sending her client list from Credit Suisse, as well as client lists that she didn’t personally cover and other “important contacts in the emerging markets space,” according to the complaint.
“There is no question that the databases that Pechi mailed to herself were and are the property of Credit Suisse, developed by Credit Suisse using its own resources,” the bank said in the complaint.
Credit Suisse (CSGN) also claims Pechi deliberately obscured the status of deals with a critical client and in one case, told the bank the client had a “flagging” interest in current and future business while meeting with them on her own.
“Pechi held these in-person meetings in an effort to shore up her relationship with the client in preparation for her departure, and to explicitly discuss moving its business to Pechi’s new firm,” according to Credit Suisse’s complaint. “Based upon Pechi’s representations, senior Credit Suisse employees did not meet with the client.”
The Swiss bank claims that after Pechi resigned, she cooperated with a probe into her activities, including allowing Credit Suisse’s third-party investigators to search some of her personal effects at her home on April 12, and granting them access to her personal e-mail and work BlackBerry.
When about 60 bank e-mails were located in her personal account, she agreed to let investigators review them the next day, and then allegedly deleted them before they had a chance, Credit Suisse claims.
“Less than 24 hours later, the e-mails had been deleted from Pechi’s personal e-mail account and could not be recovered, despite the fact that Pechi was aware that Credit Suisse’s investigators had returned solely to extract these 60 emails,” the bank said.
Goldman Sachs and the ‘Suspicious’ Heinz Trades
Goldman Sachs may be co-operating with the SEC over suspicious GS trades that netted someone in Goldman $1.8 million in call options but co-operation should also include transparency in Goldman’s subsidiaries so that people who do such trades can be identified.
Goldman thrives on secrecy and opaqueness.
US judge freezes Goldman Sachs account over ‘suspicious’ Heinz trading
A US judge froze a Goldman Sachs account that regulators say was used to make suspicious trades in H J Heinz, after unknown traders failed to appear in court to defend their claims to the assets.
When the unidentified traders didn’t show up at a hearing on Friday in Manhattan, a US district judge, Jed Rakoff, said he would grant the US Securities and Exchange Commission‘s (SEC) request to freeze the Goldman Sachs account in Zurich until the case was resolved.
“They can hide, but their assets can’t run,” Mr Rakoff announced, saying he had granted the SEC’s request and signed the freeze order.
The agency said in its complaint that the trades came a day before Warren Buffett‘s Berkshire Hathaway and 3G Capital announced the US$23 billion (Dh84.4bn) takeover of Pittsburgh-based Heinz. The suspicious trading involved call-option contracts, the SEC said.
Goldman Sachs told the regulator it doesn’t have “direct access” to information about the beneficial owner behind transactions in the account. The New York-based bank told the agency the account holder is a Zurich private-wealth client, the SEC said. Goldman has said it is co-operating with authorities.
The SEC on February 15 sued “unknown” traders who used an “omnibus account” and invested almost $90,000 in Heinz option positions the day before the deal was announced. As a result, their position increased to more than $1.8 million, a rise of almost 2,000 per cent in one day.
The SEC, which obtained a preliminary freeze on the funds from Mr Rakoff on February 15, said that the traders had material nonpublic information about the impending deal when they bought 2,533 call options, which had a strike price of $65 on February 13. Shares closed that day at $60.48.
Heinz shares jumped 20 per cent to $72.50 on February 14, following the announcement that Berkshire Hathaway and Jorge Paulo Lemann‘s 3G Capital had agreed to buy Heinz. As a result of the takeover announcement, the price of the June call options jumped to a close of $7.33 on February 14 from 40 cents the day before, an increase of more than 1,700 per cent.
Mr Rakoff, who on February 15 put a temporary freeze on the assets in the Goldman Sachs account, directed anyone connected to the trades to appear before him at 2pm local time on Friday to explain why the assets should not be permanently restrained.
The FBI said last week that it was also investigating the matter and was working with the SEC.
The SEC wants the assets frozen until the case is resolved because there is a “serious risk that the substantial proceeds from the defendants’ trading will leave the jurisdiction of the US courts in the next few days and may never be recovered,” according to a court filing.
* Bloomberg News
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It will be interesting to see what comes of the insider trading prompted by the Heinz sale.
U.S. securities regulators filed suit on Friday against unknown traders in the options of ketchup maker H.J. Heinz Co, alleging they traded on inside information before the company announced a deal to be acquired for $23 billion by Warren Buffett‘s Berkshire Hathaway Inc and Brazil’s 3G Capital.
The suit, in federal court in Manhattan, cites “highly suspicious trading” in Heinz call options just prior to the Feb. 14 announcement of the deal. The regulator has frequently in past filed suit against unnamed individuals where it has evidence of wrongdoing, but is still trying to uncover the identities of those involved.
That trading, the suit said, caused the price of the particular call option they bought to soar 1,700 percent and generated unrealized profits of more than $1.7 million.
The regulator claims the traders are either in, or trading through accounts in, Zurich, Switzerland. The account had no history of trading in Heinz over the last six or so months.
It has also obtained an emergency order to freeze assets in the Swiss account linked to the trading. In the suit, the SEC refers to the account as the “GS Account” and in a statement Goldman Sachs Group Inc said it was cooperating with the regulator’s investigation.
“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,” Daniel Hawke, chief of the SEC’s Division of Enforcement’s Market Abuse Unit said in a statement.
Representatives of Heinz and Berkshire Hathaway were unavailable for immediate comment. A 3G representative declined to comment. The founder of 3G, Jorge Paulo Lemann, is from Brazil, but has made a home in Switzerland since the 1990s. He has not been implicated in any wrongdoing related to the deal.
After the deal was revealed on Thursday, options market experts called Wednesday’s trading “suspicious and incredibly well-timed.”
The suit marks the second time in less than six months that the SEC has taken action over a 3G acquisition. In September 2012, the regulator got a court order to freeze the assets of a Wells Fargo & Co stockbroker who allegedly traded on inside information about 3G’s 2010 acquisition of Burger King.
In that case, the SEC said the stockbroker got the information from a client who had invested in one of 3G’s funds.
The suit also marks the second time in two years that controversy has erupted over a Berkshire acquisition target.
In March 2011, Berkshire struck a deal to buy chemical company Lubrizol for $9 billion. Less than three weeks later, Berkshire said Buffett lieutenant David Sokol was resigning and disclosed he had been buying Lubrizol shares while pushing Buffett to acquire the company. The SEC dropped a probe into Sokol’s trading earlier this year.
The suit is Securities and Exchange Commission v. Certain Unknown Traders in the Securities of H.J. Heinz Co, U.S. District Court, Southern District of New York, No. 13-1080.