NEW YORK (Reuters) - The U.S. government on Tuesday criminally charged a Standard & Poor’s credit ratings analyst and two friends, all from Manhattan, with insider trading related to Sherwin-Williams Co’s $9.3 billion purchase of Valspar Corp.
According to prosecutors, the analyst Sebastian Pinto-Thomaz, 32, tipped Abell Oujaddou and Jeremy Millul in early March 2016 about the impending transaction between the two paint makers, after learning about it in confidential memos at work.
Oujaddou, 55, who runs an upscale Manhattan hair salon, and Millul, 31, who manages a jewelry boutique in Manhattan’s Diamond District, allegedly made about $300,000 of illegal profit by buying Valspar shares and options, and selling them after the merger was announced on March 20, 2016.
Prosecutors also said that after the Financial Industry Regulatory Authority began examining trades in Valspar that occurred before the announcement, Pinto-Thomaz lied to S&P by denying he knew Oujaddou and Millul.
Sherwin-Williams, which is based in Cleveland, agreed to buy Valspar for $113 per share, 35 percent above where it traded before the all-cash merger was announced. Shares of Valspar rose about 23 percent on the next trading day.
S&P spokesman John Piecuch said Pinto-Thomaz has been suspended, and that the unit of S&P Global Inc is cooperating with authorities.
“We hold our employees to the highest standards of honesty and integrity and take adherence to our compliance policies very seriously,” Piecuch said in a statement.
A lawyer for Pinto-Thomaz did not immediately respond to requests for comment. Oujaddou’s lawyer had no immediate comment. Michael Bachner, a lawyer for Millul, said his client denied wrongdoing and will defend himself.
All three defendants were arrested on Tuesday, and charged with securities fraud and conspiracy. Each faces up to 20 years in prison on the securities fraud counts.
The U.S. Securities and Exchange Commission filed related civil charges against the defendants.
Sherwin-Williams completed the purchase of Minneapolis-based Valspar on June 1, 2017, after divesting $431 million of assets.
The cases are U.S. v. Pinto-Thomaz et al, U.S. District Court, Southern District of New York, No. 18-mag-05432; and SEC v Pinto-Thomaz et al in the same court, No. 18-05757.
Reporting by Jonathan Stempel in New York; Additional reporting by Brendan Pierson; Editing by Frances Kerry and Lisa Shumaker