UPDATE 1-SEC prevails over absent Wells broker on Burger King trades
NEW YORK, Jan 14 (Reuters) - A former Wells Fargo & Co broker in Miami has been ordered to pay $5.63 million for trading Burger King securities ahead of a 2010 buyout of the fast-food chain based on inside information he received from a client.
But the judgment, announced Tuesday by the U.S. Securities and Exchange Commission against former broker Waldyr Da Silva Prado Neto, may be largely uncollectible because the defendant is believed to have fled to Brazil, has not mounted a defense, and has ignored SEC efforts to reach him.
While the SEC in September 2012 won a court order freezing Prado's assets, including a condominium unit in Miami Beach, Florida, the assets amount to only about one-fifth of the judgment. Prado had put the home up for sale and began moving his assets out of the country shortly before the freeze.
Prado, a Brazilian who had worked for Wells Fargo Advisors, was accused of trading in Burger King stock and options after learning from a long-time client that private equity firm 3G Capital Partners was going to buy the chain.
The client, an investor in a 3G buyout fund, often shared confidential financial information with Prado on the understanding it would be kept confidential, the SEC said.
But Prado instead used the Burger King information to generate $175,000 in profit, and tipped at least four of his clients ahead of the buyout, court papers show.
One client, former banker Igor Cornelsen, allegedly started betting on Burger King the prior May after Prado told him in an email written in Portuguese: "I have some info ... You have to hear this."
It said Cornelsen would later seek tips by sending cryptic emails such as "Is the sandwich deal going to happen?"
The roughly $3.26 billion buyout announced in September 2010 valued Burger King at $24 per share, 46 percent above where the shares traded two days earlier when buyout rumors surfaced.
Under the final judgment imposed last week by U.S. District Judge Katherine Polk Failla in Manhattan, Prado was ordered to pay a nearly $5.2 million fine, plus $397,110 in ill-gotten gains and $41,622 of interest.
Prado left Wells Fargo in May 2012 for Morgan Stanley , but was terminated four months later for job abandonment when he fled the country, according to the SEC. He is now in Brazil, a person familiar with the case said.
A lawyer who has represented Prado did not immediately respond to requests for comment. Prado could not be reached. Cornelsen settled with the SEC for $5.18 million in November 2012.
Burger King is now known as Burger King Worldwide Holdings Inc. The Miami-based company again became publicly traded in June 2012 through a "reverse merger" involving a shell company co-founded by hedge fund manager William Ackman.
The SEC and other regulators have also been examining whether there was insider trading ahead of last February's buyout of ketchup maker H.J. Heinz Co by 3G and Warren Buffett's Berkshire Hathaway Inc.
The case is SEC v. Prado, U.S. District Court, Southern District of New York, No. 12-07094.