Friday, May 4, 2007

Credit Suisse Investment Banker Charged With Insider Trading

Federal prosecutors and the SEC filed criminal and civil insider trading charges against Hafiz Naseem, who worked in the Global Energy Group at Credit Suisse.  Naseem is accused of tipping an unnamed Pakistani banker about the impending buy-out of TXU by private equity funds in early March 2007.  In addition, he is accused of tipping the banker about a number of other deals in which Credit Suisse acted as an investment adviser.  An SEC press release (here) states:

According to the SEC's complaint, after receiving the insider information from Naseem, the Pakistani banker purchased 6,700 TXU call option contracts with March 2007 expiration dates through UBS AG London, and made profits of approximately $5 million following public announcement of the buyout.

The SEC's complaint further alleges that Naseem also divulged pending, but unannounced, business combinations and deals involving eight other issuers: Hydril Company, Trammell Crow Co., John Harland Co., Energy Partners Ltd., Veritas DGC Inc., Jacuzzi Brands, Caremark Rx, Inc., and Northwestern Corporation. The complaint notes that Credit Suisse served as an investment banker or financial advisor in all of these deals, and Naseem's phone calls from his work phone to the Pakistani banker's home and cell phones were made immediately before announcements of the proposed deals. The complaint alleges that the Pakistani banker also purchased securities in those companies in advance of public merger announcements, obtaining additional profits of more than $2.4 million.

Nothing like trying to cover your tracks by using your office telephone to make the tips.  The SEC initially filed a complaint against "unknown purchasers" because of the use of overseas accounts to buy TXU options, so it needed to move quickly before the money left the country, never to be seen again.  The criminal complaint filed against Naseem charges him with one count of conspiracy and twenty-five counts of securities fraud.  A Reuters story (here) discusses the criminal charges. (ph)

Civil Enforcement, Insider Trading, Securities | Permalink

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I find it particularly disturbing that Credit Suisse's compliance department was so "in the dark" for so long. They didn't terminate this employee until March of 2007.

To my knowledge, the SEC and NASD were made aware of "suspicious" trading in the common shares of TXU and call options as early as 0356 AM on the 24th of February.

I find it particularly gratifying that Rose Romero (SEC/DFW) took action so quickly. She's former DOJ and USAF.

It's my opinion that bail won't be granted as this former CS employee will be deemed a "flight risk."

Posted by: SEC/NASD Enforcement Bull | May 4, 2007 3:19:04 AM

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