We have an update on one of the members of Caleb’s fantasy KPMG insider trading golf team.
With a trial looming, a Georgia federal judge has granted approval of the U.S. Securities and Exchange Commission’s settlement with a former KPMG LLP partner accused of tipping off a stockbroker about the upcoming acquisitions of three publicly traded companies.
Under the deal approved Friday [Aug. 2] by U.S. District Judge William M. Ray II, Thomas W. Avent Jr. — former partner-in-charge of the accounting and consulting giant’s mergers and acquisitions tax practice for the Southeast region — will be required to pay a $125,000 civil penalty but will not be required to admit to the allegations against him.
Avent, who is accused of accepting cash from stockbroker Raymond J. Pirrello Jr. in exchange for insider information that Pirrello and his friend turned into profits, also agreed to testify in Pirrello’s trial, which began Monday.
Avent, 67, was a partner at KPMG in Atlanta from 1999 until 2016, the year the SEC filed a civil complaint against Avent, Pirrello, and Lawrence Penna, a former colleague and longtime friend of Pirrello.
The SEC accused Avent of having access to material, non-public information regarding three separate acquisitions, which he gave to Pirrello:
- NCR Corp.’s 2011 purchase of Radiant Systems Inc.
- TBC Corp.’s 2011 acquisition of Midas Incorporated Inc.
- Ingram Micro Inc.’s 2012 takeover of BrightPoint Inc.
Pirrello then passed on the info to his buddy, Penna, who he had known since he was a teenager. Penna arranged to buy stocks or call options of all three target companies before the acquisitions were announced to the public. 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, according to the SEC.
For this information, Penna then made payments to Pirrello. Within two weeks after one of the acquisition announcements, Penna paid $7,000 toward Pirrello’s American Express credit card bill. One week after another announcement, Penna paid $14,500 toward Pirrello’s AMEX bill, according to the complaint.
And while the illegal tips and insider trading were occuring, Pirrello made payments and provided other benefits to Avent, such as paying him $50,000 in cash and arranging for another one of his brokerage clients to buy an illiquid $250,000 investment that Avent wanted to sell.
In October 2016, Penna entered into a consent judgment to end the claims against him, agreeing, without admitting liability, to disgorge $79,922 in ill-gotten gains and to pay $11,766 in prejudgment interest and an additional $79,922 civil penalty, according to Law360.
The agreement also prohibits Penna from making future transactions based on non-public information in violation of the Securities Exchange Act.