Securities Regulation Daily Wrap Up, FRAUD AND MANIPULATION—S.D. Fla.: Quartet of relatives, friends charged in insider trading cases, (Sep 17, 2024)
Organizations Mentioned:Infrastructure and Energy Alternatives, Inc. | MasTec, Inc.
The SEC relied on misappropriation theory while federal prosecutors brought related Title 15 and Title 18 criminal insider trading charges.
The SEC has charged Federico Nannini, along with his father, Mauro Nannini, and two of F. Nannini's friends, Alejandro Thermiotis and Francisco Tonarely, with insider trading related to MasTec, Inc.’s acquisition of Infrastructure and Energy Alternatives, Inc. (IEA). The SEC’s case is based on the theory that F. Nannini misappropriated material nonpublic information, for which he had a duty to keep confidential, from his employer who was performing due diligence services for MasTec. According to the SEC, and to federal prosecutors in a parallel criminal case, F. Nannini tipped the other three defendants, who then traded on that information for a gain when MasTec publicly announced the IEA acquisition (SEC v. Nannini, No. 24-cv-23531 (S.D. Fla. Sept. 13, 2024)).
“The first rule of material nonpublic information is: You don’t talk about material nonpublic information,” said Eric I. Bustillo, Director of the SEC’s Miami Regional Office, via an agency press release. “As alleged in our complaint, Federico Nannini broke the rule and federal law when he shared information about MasTec’s probable acquisition of IEA with his dad and high school buddy.”
Parties. Three of the defendants, F. Nannini, Thermiotis, and Tonarely, are all in their mid-twenties and have been close friends, primarily from their high school days. F. Nannini formerly worked as an associate for the unnamed consulting firm that was doing pre-acquisition work for MasTec until he resigned upon failing to cooperate with the firm’s internal insider trading investigation. F. Nannini lived with his parents during the period covered by the SEC’s enforcement action. Thermiotis had prior experience as a broker-dealer.
The fourth defendant, F. Nannini’s father Mauro Nannini, posted a biography on social media that indicated he had 30 years of experience in the financial sector and that he operated an LLC focused on real estate investments.
Jurisdiction. The SEC filed its enforcement action in the U.S. District Court for the Southern District of Florida because all of the defendants reside there and many of the allegedly unlawful acts occurred within the borders of the federal court there.
Facts. The SEC’s complaint alleged that F. Nannini misappropriated material nonpublic information about MasTec’s acquisition of IEA. According to the SEC, F. Nannini learned of the pending acquisition through his job at the consulting firm, which had been hired to provide buy-side advice to MasTec in advance of the deal.
F. Nannini, said the SEC, allegedly tipped his father, M. Nannini and Thermiotis about the MasTec-IEA deal. Thermiotis then allegedly tipped Tonarely. The SEC asserted that, before the acquisition was publicly announced, M. Nannini and Thermiotis purchased IEA common stock and/or options and that Tonarely bought IEA common stock. Once the acquisition was publicly announced, all three of them sold their IEA stock and/or options, reaping a gain of $1.1 million. Thermiotis, said the SEC, offered to buy F. Nannini an expensive wristwatch, allegedly in exchange for the tip.
Claims. According to the SEC, the overarching theory of the case is insider trading based upon misappropriation of material nonpublic information about the Mas Tec-IEA acquisition. As a result, the SEC brought a single claim against all four defendants for violations of Exchange Act Section 10(b) and Exchange Act Rule 10b-5.
In a parallel criminal proceeding, federal prosecutors in the Southern District of Florida charged F. Nannini, M. Nannini, Thermiotis, and Tonarely each with one count of conspiracy to commit securities fraud. The four defendants also were charged collectively with 12 counts of securities fraud under 18 U.S.C. § 1348 and with 12 counts of securities fraud under 15 U.S.C. §§ 78j(b) and 78ff. The Title 18 count has somewhat relaxed requirements versus the more traditional Title 15 securities count. The Title 18 provision was added to the U.S. Code by the Sarbanes-Oxley Act to provide prosecutors with another tool to prosecute fraud at the highest levels of US. companies following the Enron scandal in the early 2000s.
Relief requested. The SEC’s complaint, in addition to seeking a jury trial, said it will seek permanent injunctive relief, disgorgement, and civil monetary penalties against all four defendants.
The case is No. 24-cv-23531.
Attorneys: Russell R. O’Brien for the SEC.
Companies: Infrastructure and Energy Alternatives, Inc.; MasTec, Inc.
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