tuesday, 28 january of 2014

Burger King ´sandwich deal´ yields U.S. criminal insider charges

Criminal charges

Burger King 'sandwich deal' yields U.S. criminal insider charges

U.S. prosecutors have criminally charged a former Wells Fargo & Co broker and a banker with insider trading in Burger King securities ahead of a 2010 buyout of the fast-food chain.

Waldyr Da Silva Prado Neto, who worked for Wells Fargo Advisors, alleged learned from a client that private equity firm 3G Capital Partners planned to buy Burger King, and passed the news to Igor Cornelsen, a banker and fellow Brazilian who had been prodding him for tips.

Prosecutors said the unnamed client was an investor in a 3G buyout fund who often shared confidential financial information with Prado on the understanding it would be kept confidential.

Instead, investigators said the defendants communicated with each other in Portuguese about a possible buyout.

They said this included an Aug. 18, 2010 email exchange in which Cornelsen asked "is the sandwich deal going to happen," prompting Prado to reply "it's going to happen."

The roughly $3.26 billion buyout was announced two weeks later and valued Burger King at $24 per share, 46 percent above where it traded before buyout rumors surfaced. Prosecutors said Cornelsen and Prado both traded illegally in Burger King, making a respective $1.68 million and $175,000 of profit.

"When Waldyr Prado and Igor Cornelsen traded around a 'sandwich deal,' the defendants knew they were committing insider trading," U.S. Attorney Preet Bharara in Manhattan said in a statement.

Prado, 43, lives in Porto Seguro, Brazil, and Cornelsen, 65, in Sao Paolo. Neither has been arrested.

Each was charged with securities fraud, fraud in connection with a tender offer, and conspiracy. They face up to 20 years in prison on each fraud count.

Cornelsen and his firm Bainbridge Group Inc in November 2012 agreed to pay $5.18 million to settle related U.S. Securities and Exchange Commission civil charges. A federal judge this month entered a $5.63 million default judgment against Prado in another SEC case.

James Benjamin, a lawyer who has represented Cornelsen, did not immediately respond to a request for comment. Prado could not be reached and it is unclear whether he has a lawyer. 3G has not been charged.

Burger King is now known as Burger King Worldwide Holdings Inc. The Miami-based company again became publicly traded in June 2012 through a "reverse merger" involving a shell company co-founded by hedge fund manager William Ackman.

The SEC and other regulators are also examining whether there was insider trading ahead of last February's buyout of ketchup maker H.J. Heinz Co by 3G and Warren Buffett's Berkshire Hathaway Inc.

The case is U.S. v. Prado et al, U.S. District Court, Southern District of New York, No. 13-mag-02201.

(Published by Reuters – January 27, 2014)

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