MANHATTAN (CN) – The SEC added two defendants to an inside-trading case accusing Mariner Energy board member H. Clayton Peterson of tipping his son to the gas and oil company’s $3.9 billion takeover by Apache Corp. Hedge fund operator Drew “Bo” Brownstein pleaded guilty to a parallel criminal case on Friday, federal prosecutors said.
The amended SEC complaint claims Brownstein got the inside dope from his friend, Drew Peterson, who got it from his father.
Brownstein and his Denver-based hedge fund, Big 5 Asset Management, pleaded guilty Friday to federal charges that they reaped more than $5 million by trading on Peterson’s inside information.
Apache announced its takeover bid in April 2010.
Peterson’s son, Drew Peterson, “repeatedly tipped Brownstein about the impending acquisition of Mariner Energy as he learned the information from his father,” the SEC said in a statement announcing its amended complaint.
“Brownstein caused two Big 5 hedge funds – the Lion Global Fund LLLP and the Lion Global Master Fund Ltd. – to purchase large quantities of Mariner Energy stock and call option contracts on the basis of the inside information. This was the first time that the Big 5 hedge funds had ever traded Mariner Energy stock or options. Brownstein also purchased thousands of shares of Mariner Energy stock and call option contracts for the accounts of his relatives and for his personal brokerage account. In the days following the announcement of the deal, Brownstein liquidated the positions he had accumulated in Mariner Energy securities.”
The SEC seeks disgorgement, penalties and injunctions.