Insider Trading; Neither Admit nor Deny; and Mom

There has been a great deal of controversy about the SEC’s policy of permitting defendants to settle enforcement actions without admitting or denying the facts alleged in the complaint. While the policy traces its origins to the early days of the Enforcement Division, and is used by many Federal agencies, some critics claim it should be abandoned and that settling defendants should be required to make admissions. The Commission has staunchly defended its policy. Thus those settling with the agency typically are not required to make admissions. There may be some instances, however, in which a defendant may not be able to rely on the policy. That may well have been the case for Juan Carlos Bertini, accused of insider trading by the Commission. SEC v. Bertini, Case No. C 13 1292 (N.D. Cal. Filed March 22, 2013).

The case centers around the acquisition of Del Monte Foods Company by an investor group composed of Centerview Partners, Kohlberg Kravis Roberts & Co. and Vestar Capital Partners. The deal was announced on November 25, 2010 at $19 per share, a premium to market.

Mr. Bertini was employed at Del Monte as a vice president of finance. In that position he regularly had confidential, sensitive information of the company. He was subject to the firm’s insider trading policy.

By no later that November 11, 2010 Mr. Bertini was invited to join a select group of Del Monte employees working on the deal. Specifically, the group was charged with acquiring information for the investor group and the Del Monte Board of Directors. Mr. Bertini reported directly to the CEO and CFO. Through his position Mr. Bertini came into possession of material, non-public information about the proposed transaction. To help preserve the confidentiality of the deal, it was code named “Project Cambridge.”

Within days of becoming a member of the working group Mr. Bertini began purchasing shares of his company. Between November 18, 2010 and November 23, 2010 he spend $135,000 to acquire 8,000 shares of Del Monte stock. Although he had a brokerage account, the purchases were made through his mother’s account.

Subsequently, FINRA contacted Del Monte about certain trading that took place in advance of the take-over announcement. As part of the inquiry Del Monte’s counsel questioned Mr. Bertini. Rather than admit his error, Mr. Bertini claimed that the trades had actually been placed by his mother. The purchases were based on articles his mother read, Mr. Bertini told investigators. When he learned of the trades he insisted they were unacceptable and directed her to sell the shares.

Mr. Bertini settled insider trading charges with the Commission. He consented to the entry of a permanent injunction prohibiting future violations of Exchange Act Section 10(b) and agreed to pay disgorgement of $16,035, prejudgment interest and a civil penalty of $32,070. He also agreed to the entry of a five year officer and director bar. In entering into the settlement Mr. Bertini did not admit or deny the facts alleged in the complaint to the Commission. Chances are, however, that Mr. Bertini was not able to take that position with his mother. See also Lit. Rel. No. 22659 (March 22, 2013).

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