The FBI is looking into possible insider trading in the options of H.J. Heinz before its blockbuster deal to be acquired by Warren Buffett and Brazil's 3G Capital, a bureau spokesman said Feb. 19.But both the FBI and the Securities and Exchange Commission (SEC), which filed suit against unknown traders using a Goldman Sachs account on Feb. 15 the day after the deal was announced have a tough job ahead of them.
Buffett's Berkshire Hathaway and 3G are paying $23 billion for Heinz, which makes Weight Watchers and Smart Ones entrees and Ore-Ida frozen potato products as well as ketchup. Options market players noted there had been extremely unusual activity the day before the deal was announced.
A spokesman for Goldman Sachs said the bank is cooperating with the investigations, which involve an account in Switzerland called "GS Bank IC Buy Open List Options GS & Co." Described in the SEC complaint as an "omnibus account," it operates as a kind of train station for securities trading by other banks an brokerages working through Goldman to access United States markets for their customers.
The challenges for the SEC and the FBI will be to overcome obstacles to figuring out who was actually involved in the trading, then linking that person or group to a source of information about the Heinz deal. The suspect trading involved more than 2,500 call options, which give the purchaser the right to acquire 250,000 shares of Heinz stock at $65 each until June 22.
The omnibus account probably handles trading for a number of foreign banks that allow customers to use a trust or other entity that masks the identity of the true owner. Thus, the omnibus account may be just the first of many layers the SEC and FBI will have to peel back before it finds out who actually bought the Heinz call options.
