March 3, 2021

DealBook: Former Mariner Director Pleads Guilty to Insider Trading

Preet Bharara, the United States attorney in Manhattan.Ozier Muhammad/The New York TimesThe prosecution of the Petersons was brought by Preet S. Bharara, the United States attorney in Manhattan, as part of the government’s crackdown on insider trading.5:33 p.m. | Updated

The Denver business community was rocked Friday by an insider trading case that touched prominent businessmen in the city.

H. Clayton Peterson, a former director at Denver-based Mariner Energy, pleaded guilty to tipping off his son about a takeover of the oil-and-gas company by the Apache Corporation in April 2010.

The son, Drew Peterson, a money manager, traded on the tip and earned more than $100,000 for himself, his family and his friends. He also passed the news along to his close friend, the chief executive of a Denver-based hedge fund, who bought Mariner shares in advance of the deal, making more than $5 million for his fund and his relatives.

The father and son appeared Friday morning in Federal District Court in Manhattan. Clayton Peterson, 65, admitted that in April 2010 he leaked advance news of Apache Corporation’s $2.7 billion purchase of Mariner to his son. Drew Peterson, 35, acknowledged trading on the information and passing it to others.

“I knew that my actions were wrong, and I deeply regret my conduct,” said Clayton Peterson in a hearing before Judge Robert P. Patterson. “It has ruined my life and my son’s life, and I apologize.”

The criminal complaint does not identify the hedge fund manager, referring to him only as a co-conspirator. But according to people familiar to the case, he is Bo K. Brownstein, head of Denver-based Big 5 Asset Management and a former banker at Credit Suisse in New York.

Mr. Brownstein, 35, is the son of Norman Brownstein, a Denver lawyer and longtime power broker in state and national Democratic politics. Bo Brownstein is said to have traded in his father’s account and earned illegal profits for him, according to these people, who requested anonymity because they were not authorized to speak about the case.

Neither Bo Brownstein nor Norman Brownstein, who have not been charged with wrongdoing, returned telephone calls and emails seeking comment. A spokeswoman for the United States attorney in Manhattan, which is handling the continuing investigation, declined to comment.

The case against the Petersons came at the end of a week in which federal authorities continued their aggressive campaign to ferret out improper stock trading.

On Thursday, Douglas DeCinces, the former professional baseball player, settled civil charges brought by the Securities and Exchange Commission for $2.5 million. The agency accused him and three associates of using confidential information to profit from an Abbott Laboratories acquisition in 2009. On Wednesday, the S.E.C. settled another civil case that charged the son-in-law of Hugh Hefner, the co-founder of Playboy Enterprises, with illegal trading in the magazine publisher’s shares.

The S.E.C. brought related civil proceedings against the Petersons on Friday and described in court papers how Drew Peterson leaked the deal to Mr. Brownstein, telling him that his father “had recently attended Mariner board meetings and something good was going to happen for Mariner.”

In the days leading up to the deal, Mr. Brownstein — referred to as “hedge fund A portfolio manager” in the S.E.C. complaint — loaded up on Mariner shares and options. After the merger announcement, the manager sold his Mariner position for a profit of $4.6 million, the S.E.C. said. He also traded for his relatives and himself, earning $435,000, according to the complaint.

H. Clayton Peterson spent 33 years at Arthur Andersen, the accounting firm that went out of business as a result of its involvement in the Enron scandal. He ran the firm’s Denver office for many years, and in addition to serving on Mariner’s board was also a director at the Re/Max International, Denver-based real estate company, and Lone Pine Resources, a publicly traded oil-and-gas company majority owned by Denver-based Forest Oil. He resigned from Re/Max’s and Lone Pine’s board on Thursday.

Steven Glaser of Skadden, Arps, Slate, Meagher Flom, a lawyer representing Clayton Peterson, said in a statement that his client’s conduct “was an aberration from his otherwise long and distinguished career” and that “he looks forward to putting this chapter in his life behind him.”

A lawyer for Drew Peterson did not return a request for comment. He has agreed to cooperate in the criminal investigation, which is ongoing. Both he and his father, who are free on bail, face up to 25 years in prison.

The Peterson’s prosecution was brought by Preet S. Bharara, the United States attorney in Manhattan, who has played a leading role in the government’s pursuit of illegal stock trading. In his two years in office, Mr. Bharara has charged more than 50 individuals with insider trading, including Raj Rajaratnam, the billionaire hedge fund manager convicted by a jury in May.

The facts of the Peterson case bear some similarity to those involving Rajat K. Gupta, a former director at Goldman Sachs and a key figure in the prosecution of Mr. Rajaratnam. The S.E.C. had brought an administrative proceeding against Mr. Gupta, accusing him of leaking board discussions at Goldman and Procter Gamble, where he also served as a director, to Mr. Rajaratnam. On Thursday, the S.E.C. dropped the proceeding but said it “is fully committed to the case and will proceed as appropriate.”

Mr. Gupta has been named a co-conspirator of Mr. Rajaratnam by federal prosecutors in Manhattan but has not been charged criminally. A lawyer for Mr. Gupta has called the government’s charges “baseless.”

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