SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
Litigation Release No. 17356 / February 7, 2002
SECURITIES AND EXCHANGE COMMISSION v. PABLO ESCANDON CUSI AND LORI
LTD., Civil Action No. 02CV 0971 (S.D.N.Y.)(filed February 7, 2002)
SEC SUES PABLO ESCANDON AND LORI LTD. FOR INSIDER TRADING
DEFENDANTS TO PAY OVER $1.7 MILLION IN
DISGORGEMENT AND PENALTIES
On February 7, 2002, the Securities and Exchange Commission filed a
civil injunctive action in the United States District Court for the
Southern District of New York, alleging that Pablo Escandon Cusi
("Escandon"), a Mexican businessman, and Lori Ltd., a company owned by
the Escandon family, engaged in insider trading prior to the June 28,
1999 public announcement that Nalco Chemical Company would be acquired
by Suez Lyonnaise des Eaux, a French company.
Escandon is the Chairman and CEO of Nadro S.A. de C.V., a Mexican
public company, and that country's second largest pharmaceutical
distributor. None of the alleged conduct involves Nadro S.A. de C.V.
Escandon is also a director of several other prominent Mexican public
companies. Lori Ltd. is a company incorporated in the British Virgin
Islands.
The Commission's Complaint alleges that Escandon was tipped by Jose
Luis Ballesteros, a director of Nalco who has since died. The
Complaint specifically alleges that, in violation of his fiduciary
duties to Nalco, Jose Luis Ballesteros provided Escandon with
material, nonpublic information about the proposed acquisition by
Suez. In response to this tip, Escandon fraudulently directed the
purchase of 50,000 shares of Nalco stock through a brokerage account
in the name of Lori Ltd. On June 21 and 22, 1999, the Lori Ltd.
account purchased those shares at a cost of $1,810,775.
A week later, on June 28, 1999, Nalco and Suez jointly announced that
they had signed a definitive merger agreement, calling for Suez to pay
$53.00 per Nalco share, representing a $10.50 premium over the June 25
closing price of $42.50. The Complaint alleges that on August 18,
1999, at the direction of Escandon, the Lori Ltd. account sold 10,000
Nalco shares at $51.75 per share. Also at Escandon's direction, the
remaining 40,000 shares were tendered to Suez at a price of $53.00 per
share. As a result of these transactions, Escandon and Lori Ltd.
realized illegal profits of $776,725.
Without admitting or denying the allegations of the Commission's
SNIPPETS:
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION v. PABLO ESCANDON CUSI AND LORI LTD., Civil Action No.
SEC SUES PABLO ESCANDON AND LORI LTD.
On February 7, 2002, the Securities and Exchange Commission filed a civil injunctive action
Escandon is the Chairman and CEO of Nadro S.A. de C.V., a Mexican public company, and that
None of the alleged conduct involves Nadro S.A. de C.V. Escandon is also a director of
The Commission's Complaint alleges that Escandon was tipped by Jose Luis Ballesteros, a
The Complaint specifically alleges that, in violation of his fiduciary duties to Nalco, Jose
In response to this tip, Escandon fraudulently directed the purchase of 50,000 shares of
A week later, on June 28, 1999, Nalco and Suez jointly announced that they had signed a
Also at Escandon's direction, the remaining 40,000 shares were tendered to Suez at a price of
In addition, Escandon and Lori Ltd. have consented to the entry of a permanent injunction
In a separate action filed on May 8, 2001, the Commission filed a complaint alleging that
All told, defendants named in that action purchased 263,329 Nalco shares at a cost of over
The Commission wishes to thank the United States Attorney's Office for the Southern District
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