Washington, D.C., May 3, 2007 – LAWFUEL – The Law Newswire – The Securities and Exchange Commission today charged Hafiz Naseem, an investment banker with Credit Suisse (USA) LLC, with illegally divulging non-public information to a person believed to be a banker in Pakistan concerning the leveraged buyout of TXU Corp. by an investor group led by Kohlberg Kravis Roberts & Co. and Texas Pacific Group. Naseem misappropriated the information from his employer, Credit Suisse, which served as a financial advisor to TXU in connection with the buyout.
The Commission originally filed a complaint in the U.S. District Court for the Northern District of Illinois on March 2, 2007, alleging insider trading ahead of the TXU buyout against Certain Unknown Purchasers of TXU Call Options. Today, the Commission amended its complaint to name Naseem as a defendant. The Commission’s Second Amended Complaint alleges that Naseem, in breach of his duty to Credit Suisse and its client TXU, telephoned the Pakistani banker on several occasions in February 2007 and disclosed non-public, material information about the proposed but unannounced TXU buyout. The Pakistani banker allegedly traded on the inside information provided by Naseem and reaped millions of dollars in profits when the buyout was publicly announced. In addition to tipping at least one of the traders in the TXU case, the SEC alleges that Naseem tipped the Pakistani banker and possibly others concerning eight additional mergers or business deals since joining Credit Suisse’s New York office in March 2006.
“The SEC has made insider trading ahead of mergers and acquisitions one of its top priorities,” said Linda Thomsen, Director of the SEC’s Division of Enforcement. “Naseem’s illicit insider trading activities ahead of the TXU buyout transaction, and eight other merger transactions, demonstrate both the complex nature of insider trading and the SEC’s aggressive pursuit of people who commit such violations, no matter where in the world the evidence may lead. The Commission will continue its aggressive efforts to seek out and punish every wrongdoer in the TXU case and in any other instance of insider trading.”
Rose L. Romero, Regional Director of the SEC’s Fort Worth Regional Office, said, “Naseem seriously abused his position of trust with Credit Suisse and its clients by blatantly stealing market-moving information. Through his insider trading activities, Naseem schemed to line his own pockets, as well as the pockets of others, with unlawful profits to the detriment of innocent shareholders.”
Katherine S. Addleman, Associate Regional Director of the SEC’s Fort Worth Regional Office, added, “This action and the continuing investigation into the tipping by Naseem is a remarkable example of the public and private sector working together to unravel a complex web of international insider trading. The SEC is especially appreciative of the tremendous assistance provided by Credit Suisse in the process of identifying Naseem and the cooperation afforded by the NYSE, Chicago Board Options Exchange, the Swiss Federal Banking Commission and the Financial Services Authority of the United Kingdom in helping to piece together evidence from across the globe, such as phone and brokerage records, to uncover Naseem’s unlawful insider trading.”
According to the SEC’s complaint, after receiving the insider information from Naseem, the Pakistani banker purchased 6,700 TXU call option contracts with March 2007 expiration dates through UBS AG London, and made profits of approximately $5 million following public announcement of the buyout.
The SEC’s complaint further alleges that Naseem also divulged pending, but unannounced, business combinations and deals involving eight other issuers: Hydril Company, Trammell Crow Co., John Harland Co., Energy Partners Ltd., Veritas DGC Inc., Jacuzzi Brands, Caremark Rx, Inc., and Northwestern Corporation. The complaint notes that Credit Suisse served as an investment banker or financial advisor in all of these deals, and Naseem’s phone calls from his work phone to the Pakistani banker’s home and cell phones were made immediately before announcements of the proposed deals. The complaint alleges that the Pakistani banker also purchased securities in those companies in advance of public merger announcements, obtaining additional profits of more than $2.4 million.
According to the SEC’s complaint, Naseem opened a brokerage account in Pakistan in May 2006 and granted the Pakistani banker trading authority over that account to conceal his personal financial benefit from his misappropriations. The Commission is seeking injunctive relief, disgorgement, and money penalties against Naseem.
In its complaint, the SEC also identified another previously unidentified trader who purchased in advance of the public announcement regarding TXU. The SEC alleges that Francisco Javier Garcia, believed to be a resident of Switzerland, purchased TXU securities through Fimat Frankfurt and is believed to have done so on inside information.