(Adds SEC statement, judges' reviews of other SEC accords;
paragraphs 8 and 15)
By Jonathan Stempel
NEW YORK, April 2 A federal judge has approved
the U.S. Securities and Exchange Commission's $4.8 million
settlement with two Brazilian brothers it accused of insider
trading in H.J. Heinz Co, after earlier having questioned why
the accord did not include an admission of wrongdoing.
U.S. District Judge Jed Rakoff in Manhattan said the
"substantial additional information" provided by the SEC, "the
unique circumstances of this case, and further guarantees of
prompt payment of the proposed fines" justified approval,
according to an order made public on Wednesday.
Rakoff is a leading critic of SEC settlements that say the
defendants neither admit nor deny wrongdoing. In 2011, he
rejected Citigroup Inc's $285 million fraud settlement
with the regulator for that reason.
In the Heinz case, Michel and Rodrigo Terpins will pay $3
million of fines and give up $1.81 million of profit related to
their purchase of Heinz stock options one day before Warren
Buffett's Berkshire Hathaway Inc and Brazilian private
equity firm 3G Capital agreed to buy the ketchup maker.
The SEC said Rodrigo Terpins, who was at the time
vacationing at Walt Disney World in Orlando, Florida, bought
$90,000 Heinz options based on an illegal tip from his brother.
It said the options were bought through a family-owned
Cayman Islands entity, Alpine Swift Ltd, and rose 2,000 percent
in value in a single day after the roughly $23.3 billion
takeover was announced in February 2013.
Dwight Bostwick, a lawyer for Michel Terpins, and Steve
Kaufman, a lawyer for Rodrigo Terpins, did not immediately
respond to requests for comment.
SEC spokesman John Nester said: "We're pleased with the
decision approving our settlement."
Responding on Jan. 30 to Rakoff's request for more facts in
the Heinz case, the SEC said it believed the
settlements with the brothers "reflect a fair, adequate and
Heinz agreed to the buyout four months before SEC Chair Mary
Jo White modified a decades-old SEC practice of letting
defendants settle without addressing the alleged wrongdoing.
The SEC now requires admissions in a broader array of cases,
and since June at least seven settlements have included them.
In the Heinz case, settlement papers do not contain the
"no-admit, no-deny" language about which Rakoff expressed
concern, but according to the SEC they include a clause that
makes clear that the removal "should not be construed as an
Rakoff has said judges cannot easily review the fairness of
SEC settlements that do not require admissions of wrongdoing,
and that the practice does not serve the public interest.
In February 2013, the 2nd U.S. Circuit Court of Appeals
heard arguments on whether Rakoff was correct to reject the
Citigroup accord, which concerned securities sold before the
financial crisis. The appeals court has yet to rule.
Rakoff's approach has won support from some other federal
judges. U.S. District Judge Victor Marrero in Manhattan, for
example, last April conditioned approval of a $602 million SEC
settlement with billionaire Steven A. Cohen's SAC Capital
Advisors LP on the Citigroup ruling.
The case is SEC v. Certain Unknown Traders in the Securities
of H.J. Heinz Co, U.S. District Court, Southern District of New
York, No. 13-01080.
(Reporting by Jonathan Stempel in New York; Editing by Leslie
Adler and Mohammad Zargham)