The SEC has accused a tax partner of New York-based KPMG (FY15 gross revenue of $7.9 billion) of alerting his broker to three pending mergers involving clients of the firm. A friend of the broker allegedly profited by more than $110,000, CFO.com reported.
The SEC asserts in a civil complaint that Thomas Avent specialized in M&A due diligence at KPMG, giving him access to “some of the most valuable, sensitive, nonpublic information that exists within the sphere of the stock markets.” The SEC states, “Through his work, Avent learns secret, proprietary, carefully guarded information about upcoming corporate acquisitions, including tender offers for publicly traded companies.”
In 2011 and 2012, the complaint says, he provided advance information about three deals to broker Raymond Pirrello, who then passed the tips on to Lawrence Penna, a former colleague and longtime friend.
“As a result, Penna got an illegal jump on other investors, and he and his family made over $111,000 in illicit insider-trading profits,” the SEC said.
Avent, Pirrello and Penna are all accused of insider trading. According to the SEC, Pirrello rewarded Avent by paying him $50,000 in cash, providing him with investment advice and servicing his brokerage account, and arranging for another of his clients to buy an illiquid $250,000 investment that Avent wanted to sell.
KPMG said it was “deeply troubled” by the allegations and had placed Avent on administrative leave, according to CFO.com.
The alleged tips to Pirrello involved NCR’s 2011 purchase of Radiant Systems, TBC’s 2011 acquisition of Midas Incorporated, and Ingram Micro’s 2012 takeover of BrightPoint. Both NCR and TBC were clients of KPMG and the firm provided advice to Tech Data, which had also considered acquiring BrightPoint.
The SEC said Pirrello also used the information he received from Avent to recommend the target companies to other associates, who then bought shares in those companies in advance of the deal announcements.