SEC Charges Five With Insider Trading Related to Liberty Mutual Purchase of Safeco

By Chad Hemenway, associate editor, BestWeek
BestWire Services, A.M. Best Company, Inc.
July 16, 2009

The U.S. Securities and Exchange Commission has charged five people in separate incidents of insider trading in order to profit from the pending purchase by Liberty Mutual Insurance Co. of Safeco Corp. last year.

According to a statement from the SEC, three of those charged already have agreed to settlements that include permanent injunctions and disgorgement and civil penalties of more than $417,000.

First announced in April 2008, Liberty Mutual's $6.2 billion acquisition of the publicly traded Safeco closed Sept. 22 for $68.25 per share in cash. The merger created the sixth-largest property/casualty insurance group in the United States, based on 2007 direct written premium, with $94.7 billion of consolidated assets, $82.4 billion in consolidated liabilities and $26 billion in annual consolidated revenue.

According to documents filed by the SEC, Math J. Hipp of Seattle, "misappropriated material, nonpublic information" about a potential sale of Safeco from his wife, who was working as an executive assistant to the company's executive vice president of insurance operations. Hipp bought Safeco call options and sold them from April to May last year for a profit of about $118,000.

Hipp has agreed to pay the money back as well as a prejudgment fine of $3,280 and a civil penalty equal to that he profited on the sale of his Safeco stock.

Anthony Perez of Florida, who worked as an investment banker at Goldman Sachs & Co., tipped off his brother, Ian Perez, about the potential acquisition. Ian Perez purchased Safeco stock on April 22, selling them a day later for a profit of about $152,000 the SEC said.

The SEC is holding the brothers, who have settled, jointly and severally liable for disgorgement of $152,000. The settlement does not include a civil penalty for Ian Perez, but his brother Anthony will pay $25,000.

Finally, the SEC continues to seek final judgments against Peter E. Talbot of Springfield, Mass., and his nephew, Carl E. Binette of Ludlow, Mass. The SEC alleges Talbot, a financial analyst with Hartford Financial Services group at the time, told his nephew that Safeco was an acquisition target. Talbot, the SEC said, looked through a co-worker's folder to find the information. Talbot allegedly told Binette to buy Safeco call options from April 17 to April 22 last year. The options were sold April 23 for a profit of about $616,000.

None of those who struck a deal admit or deny the allegations against them, the SEC said.

Liberty Mutual Insurance Cos. currently has a Best's Financial Strength Rating of A (Excellent).

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