April 23, 2014 / 7:51 PM / 5 years ago

U.S. SEC wins asset freeze vs ex-Santander exec in insider case

NEW YORK, April 23 (Reuters) - The U.S. Securities and Exchange Commission on Wednesday won an asset freeze against a former Banco Santander SA executive it accused of insider trading ahead of a proposed 2010 takeover of Potash Corp of Saskatchewan Inc.

The $3.84 million freeze against Cedric Cañas Maillard, a former adviser to Banco Santander’s chief executive and a graduate of Harvard Business School, represents $961,000 of alleged illegal profit plus $2.88 million for potential civil fines. It was imposed by U.S. District Judge Valerie Caproni in Manhattan.

Jose Lopez, a partner at Perkins Coie, representing Cañas, did not immediately respond to requests for comment.

According to the SEC, Cañas learned on Aug. 5, 2010, that Santander was helping Anglo-Australian mining group BHP Billiton Ltd prepare a bid for Potash and tipped co-defendant Julio Marín Ugedo, a close friend and fellow resident of Spain who is also a former judge.

The SEC said Cañas bought the equivalent of 30,000 Potash shares through contracts-for-difference (CFD), a leveraged security not traded in the United States, while Marín bought 1,393 Potash shares.

It said these bets paid off when Potash shares shot up more than 25 percent on Aug. 17, 2010, although the Saskatoon-based company had that day rejected BHP Billiton’s $38.6 billion bid.

Cañas argued he could not be liable for insider trading under a 2010 U.S. Supreme Court precedent, Morrison v. National Australia Bank. He said this was because the CFDs, which he bought in Luxembourg, were not transactions “in connection with” the purchase or sale of a security listed on a U.S. exchange.

Morrison is often cited for imposing a presumption against applying U.S. law to conduct that occurred outside the country.

But Caproni rejected Cañas’ “crabbed” reading of Morrison, calling him a “sophisticated investor” who knew his transactions required purchases and sales on the New York Stock Exchange by Internaxx, a service now known as TD Direct Investing International and owned by Toronto-Dominion Bank.

“Although Internaxx was an unwitting player, the domestic market was harmed by the trades that were directly and inextricably bound with (Cañas’) fraudulent conduct,” she wrote.

Cañas also argued that the SEC civil case should be dropped because a Spanish court had acquitted him of related criminal charges in January. Caproni disagreed, noting the different burdens of proof in criminal and civil cases.

Santander and Toronto-Dominion were not accused of wrongdoing in the SEC case. Marín has not responded to the SEC complaint, court records show.

Canada ultimately blocked the Potash takeover on the ground that it did not provide a “net benefit” to the country.

The case is SEC v. Cañas Maillard et al, U.S. District Court, Southern District of New York, No. 13-05299. (Reporting by Jonathan Stempel in New York. Editing by Andre Grenon)

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