A former Wells Fargo & Co. broker and a banker have been indicted by US prosecutors with insider trading in Burger King securities well before a deal to takeover the hamburger fast food chain in 2010, Reuters said in a report.
According to the report, Waldyr Da Silva Prado Neto allegedly acquired information from a client that New York private equity firm 3G Capital Partners LP sought to acquire Burger King. Prado then worked for brokerage firm and Wells Fargo & Co. subsidiary Wells Fargo Advisors. Prado passed the information to banker and fellow Brazilian Igor Cornelsen, who had been asking him for news about the deal.
Prosecutors identified the unnamed client as an investor in a buyout fund controlled by 3G. The said client reportedly shared confidential financial information with Prado under the impression that it would be kept private, Reuters said.
Investigators found out that the two defendants passed on information about Burger King's possible buyout in Portuguese. On August 18, 2010, Cornelsen in an e-mailed message asked Prado "is the sandwich deal going to happen". The former broker replied "it's going to happen", the report said.
Burger King's $3.26 billion buyout was made public two weeks following the e-mail exchange between Prado and Cornelsen. The deal valued the hamburger fast food chain at $24 per share, a premium of 46% over its trading price before takeover rumors surfaced. Prosecutors said that Cornelsen and Prado cashed in $1.68 million and $175,000 respectively on trading illegally in Burger King, Reuters wrote.
US Attorney Preet Bharara in a statement said "When Waldyr Prado and Igor Cornelsen traded around a 'sandwich deal', the defendants knew they were committing insider trading."
Prado, 43, resides in the Brazilian city of Porto Seguro, whilst Cornelsen, 65, lives in Sao Paolo. Neither of the two defendants has been arrested, the report said.
Prado and Cornelsen were each charged with securities fraud, fraud in connection with a tender offer, and conspiracy. The two defendants face 20 years of prison sentence on each fraud count, Reuters said.
