Former S&P Analyst Convicted In Insider Trading Schemes
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that SEBASTIAN PINTO-THOMAZ, a former credit ratings analyst at Standard & Poor’s, was convicted today of participating in two schemes to trade on material, nonpublic information in advance of the Sherwin-Williams Company’s acquisition of the Valspar Corporation, following a seven-day jury trial before U.S. District Judge Jed S. Rakoff.
U.S. Attorney Geoffrey Berman said: “Sebastian Pinto-Thomaz stole confidential information from his employer and passed it to two men he had known for years – and he did it for his own personal benefit. While the defendant attempted to blame his mother for this conduct at trial, as a unanimous jury found, it was Pinto-Thomaz who committed insider trading.”
According to the evidence presented during the trial and statements made in related court filings and proceedings:
Rating Evaluation Services and the Insider
When a company announces an acquisition, the acquiring company often seeks the opinion of a credit rating agency regarding the potential impact that the acquisition could have on the acquiring company’s creditworthiness. Therefore, companies often contact rating agencies before an acquisition is publicly announced. All the major rating agencies offer a service – sometimes known as a Rating Evaluation Service (“RES”) – that provides the company with a rating committee decision with respect to a proposed acquisition.
In March 2016, Standard and Poor’s (“S&P”), a credit rating agency in New York, New York, assigned SEBASTIAN PINTO-THOMAZ, a credit ratings analyst, to work on a RES for the Sherwin-Williams Company (“Sherwin-Williams”) in advance of its contemplated but unannounced acquisition of the Valspar Corporation (“Valspar”). In connection with this assignment, PINTO-THOMAZ received material, nonpublic information (the “Inside Information”) about Sherwin-Williams’s planned acquisition of Valspar prior to the public announcement of the acquisition. S&P’s written policies prohibited the unauthorized disclosure of confidential information, which included the Inside Information. During his tenure at S&P, PINTO-THOMAZ reviewed and certified his duties of loyalty and confidentiality to S&P and its clients.
The Insider Trading Scheme
In March 2016, PINTO-THOMAZ misappropriated the Inside Information about Sherwin-Williams’s acquisition of Valspar and passed it to Jeremy Millul, his friend, and Abell Oujaddou, his hairdresser, so that they could use it to make profitable trades in Valspar stock and options. On March 21, 2016, the first trading day after the public announcement of the acquisition, the price of Valspar stock increased approximately 23 percent over the prior day’s close.
Millul is a Manhattan jeweler who had a close personal friendship with PINTO-THOMAZ. After receiving a tip about the impending Valspar deal from PINTO-THOMAZ, Millul opened a brokerage account on March 13, 2016, and shortly thereafter purchased 480 shares of Valspar common stock. On March 18, 2016, the last trading day before the acquisition was publicly announced, Millul also purchased 75 out-of-the-money Valspar call options. After the acquisition was publicly announced, Millul sold his Valspar stock and options for approximately $106,806 in profits.
Oujaddou is a Manhattan hairstylist and salon owner who has known PINTO-THOMAZ for years, and who is close friends with PINTO-THOMAZ’s mother. During a haircut on March 8, 2016, or March 9, 2016, PINTO-THOMAZ provided Oujaddou with the Inside Information about the impending Valspar deal in exchange for a portion of his trading profits. Then, from March 10, 2016, through March 18, 2016, Oujaddou, who had never previously purchased Valspar or Sherwin-Williams securities, used the Inside Information he had received from PINTO-THOMAZ to purchase 8,630 shares of Valspar stock. After the acquisition was publicly announced, Oujaddou sold his Valspar shares for approximately $192,080 in profits. Following his successful trading, Oujaddou met PINTO-THOMAZ in the paint aisle of a hardware store and paid him a kickback.
Later, in June 2016, the Financial Industry Regulatory Authority (“FINRA”) sent S&P a list of individuals and entities that had traded in Valspar in advance of the public announcement of the acquisition (the “List”). S&P forwarded the List to its employees who had worked on the Sherwin-Williams RES, including PINTO-THOMAZ, asking the employees to respond by stating whether they had a past or present relationship with any individual or entity on the List. Although both Oujaddou and Millul were on the List, PINTO-THOMAZ denied having a relationship with anyone on the List.
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SEBASTIAN PINTO-THOMAZ, 32, of New York, New York, was convicted of two counts of conspiracy to commit securities fraud and two counts of securities fraud. The conspiracy counts each carry a maximum prison term of five years; the securities fraud counts each carry a maximum sentence of 20 years. The securities fraud charges also carry a maximum fine of $5 million, or twice the gross gain or loss from the offense. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant would be determined by the Court.
PINTO-THOMAZ is scheduled to be sentenced before Judge Rakoff on July 29, 2019, at 4:00 p.m.
Abell Oujaddou and Jeremy Millul each previously pled guilty and await sentencing before Judge Rakoff.
Mr. Berman praised the work of the FBI, and thanked the SEC for its assistance.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Christine I. Magdo and Andrew Thomas are in charge of the prosecution.