Ex-FleetBoston Employee Charged
A former FleetBoston Financial Corp. employee in Argentina used insider information in a bid to profit illegally from the sale of the company to Bank of America Corp., U.S. securities regulators said Tuesday.
In an emergency enforcement action filed in Boston federal court, the Securities and Exchange Commission accused Guillermo Garcia Simon, who once worked at FleetBoston’s Buenos Aires office, and family members of illegal insider trading.
The fast action was unusual because the SEC typically takes months and sometimes years to bring insider trading cases. In this case, however, the commission acted within days of the alleged infraction.
The SEC accused the defendants of buying FleetBoston securities late Friday, before Monday’s announcement that Bank of America would buy the Boston-based bank in a $43-billion stock swap.
A federal judge in Boston granted the SEC’s request to freeze the defendants’ brokerage account and stop them from transferring or selling the call options, the commission said.
Fleet said that although it was cooperating with the SEC, Garcia Simon had not worked for the company for well over a year and the bank had no reason to suspect that a current employee might be involved.
The SEC declined to speculate how Garcia Simon, his wife and his brother were able to get what it maintained was insider information about the sale of Fleet.
“These circumstances were strong enough to convince a federal judge to issue an order freezing the assets,” Juan Marcel Marcelino, district administrator of the SEC’s Boston office, told Reuters.
Marcelino said the SEC was tipped off to the case after the American Stock Exchange noticed unusual trading volumes in Fleet securities.
Garcia Simon, his wife and his brother purchased $11,000 of Fleet call options during the last hours of trading Friday, giving them the right to buy Fleet stock at $35 a share, the SEC said.
At the time, Fleet stock was trading at about $31 a share. FleetBoston’s shares surged more than 20% to $39.20 on the New York Stock Exchange after the announcement of the deal Monday.
Marcelino said the defendants’ purchase of Fleet securities represented more than half the total trading volume in that series of call options Friday.
The SEC said that in addition to its request for an injunction freezing the defendants’ account, which was granted, it wanted the defendants to pay back all illegal profits plus civil fines.
