Stupid is as stupid does. With all the high-tech and extensive monitoring systems the stock exchanges use to keep an eye on large numbers of transactions each day, searching for trades that are out of the ordinary is no biggie. And, when there is a huge M&A transaction like Dell Inc.'s (NASDAQ:DELL) $3.9 billion takeover of Perot Systems Corp. (NYSE:PER), any anomaly will sound an alarm.
So did an employee of Perot Systems -- a computer services company, mind you -- really think no one (or no machine) would notice that he loaded up on call options before the deal was announced and then dumped them after the deal announcement, walking away with an $8.6 million profit? Evidently, the answer remarkably is yes.
The Securities and Exchange Commission was ready to pounce. No criticism this time for being too slow off the mark. The agency charged Reza Saleh, who works for Perot Investments Inc. and Parkcentral Capital Management, private firms affiliated with Perot Systems, with insider trading.
The SEC said Saleh learned in early September about the proposed sale to Dell. Between Sept. 4 and Sept. 18, he bought at least 9,332 options to buy Perot shares at a preset price through two accounts at TD Ameritrade Inc., the SEC says.
"This offense was brazen and blatant; our response was swift and certain," Stephen Korotash, an SEC lawyer who handled the investigation, said in a statement.
The agency is also bringing charges against two other companies that had knowledge about the acquisition. TD Ameritrade, Saleh's broker, has frozen his assets. - Donna Block
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