9~ < * " 0 UNITED STATES DISTRICT COURT
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NORTHERN DISTRICT OF ILLINOIS
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SECURITIES AND EXCHANGE COMMISSION,
Plaintiff,
VS. Case No:
RICARDO CAVALLERO,
ELENA H. DE CAVALLERO,
JUAN CARLOS PERALTA,
SEBASTIAN KOHAN MILLER, and
SILVINA GARCIA TOBAR DE MILLER,
Defendants.
COMPLAINT
Plaintiff, the United States Securities and Exchange Commission (the
"Commission"), for its Complaint against Ricardo Cavallero, Elena H. Cavallero, Juan
Carlos Peralta (collectively, "Cavallero defendants") and Sebastian Kohan Miller and
Silvia Garcia Tobar De Miller (collectively, "Miller defendants") alleges as follows:
INTRODUCTION
1. This is an insider trading case involving highly profitable and highly
suspicious purchases of call option contracts' and common stock of Maverick Tube Corp.
("Maverick Tube") that were placed through two overseas accounts from at least May 12,
2006 through June 13,2006. These purchases were made in advance of a public
announcement (the "Announcement"), on June 12,2006, that Maverick Tube was to be
1 Each call option gives the holder the right, but not the obligation, to purchase 100 shares, at a
set exercise price, by the expiration date. Thus, a holder of 10,000 call options has the right to
purchase 17000,000shares.
acquired by Tenaris SA ("Tenaris") for approximately $2.6 billion. According to the
Announcement, under the proposed acquisition offer, Maverick Tube shareholders would
receive $65.00 a share, which represents a 36% premium over the ten-day average
closing price of Maverick Tube stock prior to the offer. As a result of the
Announcement, Maverick Tube common stock jumped 37% over its previous day's .
closing price, placing the defendants in a position to gain substantial profits.
2. Upon information and belief, while in possession ogmaterial, nonpublic
information concerning the Announcement, fiom at least May 12 through June 13,2006,
the defendants purchased a total of at least 1120 call options for Maverick Tube's stock.
Moreover, the defendants also purchased at least 7,100 shares of Maverick Tube common
stock shortly before the Announcement. In advance of the Announcement, the
defendants engaged in widespread unlawful activity and are in a position to reap over
$1.1 million dollars in profits.
JURISDICTION AND VENUE
3. The Commission brings this action pursuant to the authority conferred
upon it by Section 21(d)(l) of the Exchange Act, 15 U.S.C. $78u(d)(l), seeking to
restrain and enjoin permanently the defendant fiom engaging in the acts, practices and
courses of business alleged herein.
4. Venue lies in this Court pursuant to Section 27 of the Exchange Act, 15
U.S.C. $ 78aa. Certain of the acts, practices, transactions and courses of business
alleged herein occurred within the jurisdiction of the United States District Court for the
Northern District of Illinois. All of the subject options transactions took place at the
Chicago Options Exchange, located in Chicago, Illinois.
5. Defendants, directly or indirectly, have made, and are making, use of the
means or instrumentalities of interstate commerce, or of the mails, or the facilities of a
national securities exchange in connection with the transactions, acts, practices and
courses of business alleged herein in the Northern District of Illinois.
6. Defendants, directly or indirectly, engaged in and, unless enjoined, will
continue to engage in transactions, acts, practices, and courses of business that violate
Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act"), 15 U.S.C. $
78j(b), and Rule 10b-5 promulgated thereunder, 17 C.F.R. $ 240.10b-5.
DEFENDANTS
7. Defendants Ricardo Cavallero, Elena H De Cavallero, and Juan Carlos
Peralta reside in Buenos Aires, Argentina. The Cavallero defendants maintain a
brokerage account at a branch office of Merrill Lynch in Buenos Ares. The Cavallero
defendants purchased, or caused to be purchased, call option contracts and common stock
of Maverick Tubes through its brokerage account at Merrill Lynch.
8. Defendants Sebastian Kohan Miller and Silvina Garcia Tobar De Miller
list their permanent address in Buenos Aires, Argentina and their mailing address in
Estes, Uruguay. The Miller defendants maintain a brokerage account at a branch office
of Wachovia Securities, LLC in Buenos Aires.. The Miller defendants purchased, or
caused to be purchased, call option contracts and common stock of Maverick Tube
through its brokerage account at Wachovia Securities.
RELEVANT ENTITIES
9. Maverick Tube is headquartered in Chesterfield, Missouri. Maverick
Tube is a maker of welded steel tube for oil-drilling companies. Maverick Tube's stock
trades on the New York Stock Exchange and its options trade on the Chicago Board of
Options Exchange, the International Securities Exchange, the American Stock and Option
Exchange, the Boston Options Exchange, and the Philadelphia Stock and Options
Exchange.
10. Tenaris is headquartered in Luxembourg. Tenaris is owned by an
international conglomerate located in Argentina and has operations in Buenos Aires,
Argentina. Tenaris is a supplier of seamless oil and gas pipelines. Tenaris' stock trades
on the New York Stock Exchange and its options trade on the Chicago Board Options
Exchange, the International Securities Exchange, the Philadelphia Stock and Options
Exchange and the American Stock and Options Exchange.
FACTS
A. The Cavallero Defendants
1 1. In a joint account, the Cavallero defendants purchased approximately 820
call options between June 1 and June 9,2006. The Cavallero defendants also purchased
6000 shares of Maverick Tube stock on May 12 and June 1,2006.
12. The Cavallero defendants were not authorized to trade options in their
Merrill Lynch account until May 31,2006 and the very next day they began
accumulating Maverick call .options. Indeed, between June 1 and the time of the
Announcement, the Cavallero defendants did not purchase any other options.
4
13. The specific trading activity in this account is as follows:
14. The Cavallero defendants' purchases of Maverick Tube call options
represented a significant portion of the trading in Maverick Tube call options on those
days. For example, on June 1,2006, the Cavallero defendants' purchase of Maverick
Tube call options represented 61.35% of the activity in one series of call options ("Jun
55" call options). On June 2,2006, the Cavallero defendants' purchase constituted
60.60% in another series of call options ("Jul50" call options).
15. Furthermore, the Callavero defendants had purchased on May 2,2006
approximately 5000 shares of ~enariisn their Merrill Lynch account. Thus, the
Cavallero defendants owned a position in Tenaris several weeks in advance of the
Announcement in addition to accumulating positions in Maverick Tubes options within a
week of the Announcement.
16. These call options had June and July expiration dates. These options were
purchased "out of the money" with an exercise price of $50.00 and $55.00, meaning that
at the time of purchase, the market price of Maverick Tube stock was below the exercise
price.
17. The Cavallero defendants bought over 700 out-of-the-money call option
contracts with June '06 expiration dates. For example, on June 6 and 7, they bought 300
Jun-06 55 call options due to expire ten days later. This strike price was $7.00 above the
current market price on that day. Accordingly, the price of Maverick Tube stock would
have to rise significantly by June 17,2006, the date when the options would expire, for
the options to have value. Thus, the Cavallero defendants purchase of call options with
June expiration dates represented a substantial bet that the price of Maverick Tube stock
would appreciate within a matter of days.
18. The total cost of the 820 call options was $55,844.90. As a result of the
Announcement and the resulting increase in the price of Maverick Tube stock, the
Cavallero defendants sold their options and realized a profit of $853,413.01. The
Cavallero defendants' equity positions, which have not been sold, have unrealized gain of
$44,860 as of June 14,2006.
19. On information and belief, at the time the Cavallero defendants purchased
the Maverick Tube call options and stock as set forth above, they were in possession of
material, nonpublic information about Tenaris' proposed acquisition of Maverick Tube.
The Cavallero defendants knew, or were reckless in not knowing, the fact that (a) their
trading was in breach of fiduciary or other duties of trust and confidence that they owed
to the shareholders of Maverick Tube or to the source from which they received the
material nonpublic information; or (b) material nonpublic information about the
acquisition had been communicated to them in.breach of fiduciary or similar duties of
trust and confidence. In the alternative, the Cavellero defendants knew or had reason to
know that the source from which the Cavellero defendants received the material
information breached fiduciary or other duties of trust and confidence by providing the
material information to the Miller defendants.
20. By reason of the foregoing, the Cavallero defendants, directly and
indirectly, violated Section 10(b) of the Exchange Act [15 U.S.C. 5 78j(b)] and Rule lob-
5 thereunder [17 C.F.R. § 240.10b-51, and are likely to commit such violations in the
hture unless enjoined from doing so.
B. The Miller Defendants
21. In a confidential numbered account at Wachovia Securities, the Miller
defendants purchased both call options and equity positions in Maverick Tube within a
few days of the Announcement. Specifically, the Miller defendants purchased
approximately 300 call options of Maverick Tube on June 9,2006. Furthermore, the
7
Miller defendants also purchased equity positions in both Tenaris and Maverick Tube on
June 7 and June 8,2006.
22. The specific trading activity in this account is as follows:
Maverick
6/9/2006 Buy Tube Option June-06 55C 250 0.25
Maverick
611 312006 Sell Tube Equity 600 62.96
Maverick
611 312006 Sell Tube quit^ 500 62.95
Maverick
- 611 312006 Sell Tube Option June-06 55C 80 7.80
Maverick
611 312006 Sell Tube Option July-06 55C 50 8.10
Maverick
611 312006 Sell Tube Option June-06 55C 18 7.80
Maverick
611 312006 Sell Tube Option June-06 55C 15 7.80
Maverick
611 312006 Sell Tube Option June-06 55C 17 7.80
Maverick
611 312006 Sell Tube Option June-06 55C 30 7.80
Maverick
611 312006 Sell Tube Option June-06 55C 90 7.80
23. As indicated above, the Miller defendants purchased both Tenaris and
Maverick Tube stock and call options within four days of the announcement of a merger
between these two companies.
24. These call options had June '06 and July '06 expiration dates. These
options were purchased "out of the money" with an exercise price of $55.00. For
8
example, on June 9, the Miller defendants purchased 250 June-06 55 call options due to
expire one week later. This strike price was $7.50 over the current market price that day.
Furthermore, the Miller defendants purchased a significant position -250 call options
with a strike date of June 17,2006 -on the last possible trading day before the
Announcement (June 9,2006). These "out of the money" call option purchases
represented a substantial bet that the price of Maverick Tube stock would increase by
more than 20% within a matter of days.
25. In the months prior to the Announcement, the account had purchased stock
in several oil and oil related companies. However, beginning in June, the Miller
defendants engaged in significant sales of their holdings. During the first week of June,
the percentage of the account held in cash went from 19% on May 3 1,2006, to 45% on
June 13,2006, and 51% after the liquidation of Maverick and Tenaris call options. In
addition, the account purchased shares in a contrarian mutual fund that bet on a declining
NASDAQ. These moves reflected a strong indication that the Miller defendants believed
that the market was declining. In contrast, the only equity purchases the account made in
June were in Maverick Tube and Tenaris call options (the account also was buying the
contrarian mutual fund). The Miller defendants had not traded Maverick Tube or Tenaris
securities within the three preceding months
26. On June 13,2006, the Miller defendants liquidated their Maverick Tube
equity and option positions. The Miller defendants' realized profit on their Maverick
Tube call options is approximately $221,122.78. Moreover, their realized profit on their
equity positions in Maverick Tube is approximately $19,435.98.
27. On information and belief, at the time the Miller defendants purchased the
Maverick Tube call options and stock as set forth above, they were in possession of
material, nonpublic information about Tenaris' proposed acquisition of Maverick Tube.
The Miller defendants knew, or were reckless in not knowing, the fact that (a) their
trading was in breach of fiduciary or other duties of trust and confidence that they owed
to the shareholders of Maverick Tube or to the source from which they received the
material nonpublic information; or (b) material nonpublic information about the
acquisition had been communicated to them in breach of fiduciary or similar duties of
trust and confidence. In the alternative, the Miller defendants knew or had reason to
know that the source fkom which the Miller defendants received the material information
breached fiduciary or other duties of trust and confidence by providing the material
information to the Miller defendants.
28. By reason of the foregoing, the Miller defendants, directly and indirectly,
violated Section 10(b) of the Exchange Act [15 U.S.C. tj 78j(b)] and Rule 10b-5
thereunder [17 C.F.R. tj 240.10b-51, and are likely to commit such violations in the future
unless enjoined from doing so.
RELIEF REQUESTED
WHEREFORE, Plaintiff Commission respectfully requests that this Court issue:
I.
Orders temporarily and preliminarily, and Final Judgments permanently,
restraining and enjoining the Defendants, their agents, servants, employees, attorneys infact,
and all persons in active concert or participation with her who receive actual notice
of the injunction by personal service or otherwise, and each of them, from violating
Section 10(b) of the Exchange Act and Rule lob-5 thereunder.
An Order that prevents the Defendants, and each of defendants' financial and
brokerage institutions, agents, servants, employees attorneys-in-fact, and those persons in
active concert or participation with defendants who receive actual notice of such Order
by personal service, facsimile service, service in accordance with such Order, or
otherwise, from withdrawing, transferring, pledging, encumbering, assigning, dissipating,
concealing or otherwise disposing of any common stock or call options for Maverick
Tube Corp. ("Maverick Tube") purchased since May 1,2006, or proceeds from the sale
or exercise of any such call options or common stock since June 1,2006, including, but
not limited to, transactions in (1) an account (Account #168-37376) at Memll Lynch in
the name of Ricardo Cavallero, Elena H De Cavallero, Juan Carlos Peralta and (2) an
account (Account #207-74622; Confidential Account #2424) at Wachovia Securities in
the name of Sebastian Kohan Miller and Silvina Garcia Tobar De Miller
An Order enjoining and restraining the defendants, and any person or entity acting
at their direction or on their behalf, from destroying, altering, concealing, or otherwise
interfering with the access of the Commission to relevant documents, books and records.
IV.
A Final Judgment requiring defendants to disgorge all ill-gotten gains from the
violative conduct alleged in this Complaint, and to pay prejudgment interest thereon.
v.
Ordering defendants to pay civil monetary penalties pursuant to Section 21A of
the Exchange Act [15 U.S.C. 5 78u-11; and
VI.
Granting such other relief as this Court may deem just and appropriate.
Dated: June , 2006. Respectfully submitted,
C
"
Gregory von Schaumburg
Jane E. Jarcho
Sunil R. Harjani
Attorneys for Plaintiff United States
Securities and Exchange Commission
175 W. Jackson Boulevard, Suite 900
Chicago, Illinois 60604
Telephone: (3 12) 353-7390
