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January 27, 2023

Ex-KPMG Partner’s Broker Probably Won’t Be Doing Any Insider Trading For a While

The last man standing in the KPMG insider trading case (the one not involving Scott London) has finally fallen.

From the SEC:

Today [Aug. 14], jurors in Atlanta federal court returned a verdict finding New Jersey securities broker Raymond J. Pirrello, Jr. liable for insider trading in advance of three merger and acquisition transactions.

Thomas Avent

Pirrello was the broker for former KPMG Atlanta partner Thomas Avent Jr., who opted not to go to trial and went the settlement route. The court approved a deal on Aug. 2 that allowed Avent, former partner-in-charge of the KPMG mergers and acquisitions tax practice for the Southeast region, to pay a $125,000 civil penalty without admitting to the allegations against him. And as part of the deal, Avent agreed to testify in Pirrello’s trial.

Avent, who worked at KPMG from 1999 until 2016, was accused of accepting cash from Pirrello in exchange for insider information that Pirrello and his longtime friend, Lawrence Penna, turned into profits.

In a civil complaint filed against the three men in 2016, the SEC accused Avent of having access to material, non-public information regarding three separate acquisitions, which he gave to Pirrello. The SEC said Avent performed tax work on each transaction in his role with KPMG. The three acquisitions were:

  • 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 at least $107,922 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.

The jury found Pirrello liable on all counts, including that he violated sections 10(b) and 14(e) of the Securities Exchange Act of 1934, and rules 10b-5 and 14e-3.

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.

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