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Former SEC Chairman Harvey Pitt on the allegations of insider trading before the announcement of Berkshire Hathaway’s acquisition of Heinz.
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We'll just one day after Berkshire Hathaway and three G capital -- they were buying consumer giant Heinz the Securities and Exchange Commission filed a lawsuit against unknown traders for alleged.
Insider trading.
The SEC says traders -- highly suspicious trades we've been one point seven million dollars in profits using Swiss based trading accounts.
With us now former SEC chair and power of a partner CEO and founder Harvey Pitt.
-- first the news breaks everybody is saying -- this is unbelievable Warren Buffett gets together with three G capital and suddenly there's this gigantic deal biggest ever in the food industry.
What then.
Caught the eye of SEC investigators.
That made them start looking at Swiss bank accounts this all looks unbelievably intriguing to me.
Well the first thing was there was an inordinate amount of options activity second they were purchasing.
Out of the money options.
They -- 65 dollar calls send.
At the time the stock was so far removed from -- so this was a clear indication that somebody thought.
They have a lot of good information.
-- I think they purchased.
3000.
Of these contracts.
Whereas there have been only a handful of contracts traded in the days prior to the announcement.
Now Harvey you have been quite critical of various times of the SEC have for various reasons but you work.
A strong advocate of its its track record particularly in cases like this.
They do have a good track record didn't in his insider trading but.
I'm just wondering there must be so many trades in the options market how could they zero win on this -- Well.
First thing that happens is when there's an announcement.
-- a immediately.
Go back and they look at the last 36 the day's worth of transactions.
Second they have clear indications of looking -- trades from foreign locales and third they look for the purchase of out of the money options has occurred here.
All of these are red flags and they would have set off alarm bells in the SEC's.
Computer system.
We -- on Friday.
CME trader -- set out what's the big deal we we see trades all the time but then he went on to say I noticed this.
This option passing the tape so we looks at what 7508000.
Different to publicly traded companies passing the tape and suddenly he's -- -- one.
In a company that is usually staid and quiet.
What happens next in this investigation and could very well be an American who was so who was understanding of what was going on -- maybe Brazilian because of three G guys are down numbers out.
It absolutely could be both an American and it could be somebody related to one of the players.
Thing that happens next is the SEC has to -- -- and pain -- efforts to go through telephone records email records.
They have to break down every single transaction.
And find out who is responsible for them all of this was done in an account.
Based out of Switzerland which has an affiliation apparently with Goldman Sachs.
That had not traded any options for the prior six months so there are all sorts of invitations.
But -- -- untoward.
Was going on here and now the SEC has to break it down.
Harvey -- used to cover Latin America I know there's a lot of good traders down there but there -- some traders to get away with murder frankly by.
By our standards and in the way they trade on insider information does this.
Point out the difficulty that we're gonna see a lot more of -- and in months and years ahead of this is -- folks who were not accustomed to -- standards vis -- B insider trading.
I think that's a real possibility.
There's always this impression of people have.
That the government of the US's never gonna find chew you're just one of a million different trades and you're hidden.
From public view that is really not the case it's hard work but the SEC has done that often and they've done it well.
Harvey Pitt have -- -- partners former SEC chair will be watching this alongside -- -- bet thank you so banks are every good to see it.
In Q.
