SEC Probing Possible Insider Trading Ahead Of Heinz Deal: Seven And A Half Things To know

FILE - In this March 2, 2011 file photo, Heinz ketchup is seen on the shelf of a market in Barre, Vt. H.J. Heinz Co. says it agreed to be acquired by an investment consortium including billionaire investor Warren Buffett in a deal valued at $28 billion. (AP Photo/Toby Talbot, File)
FILE - In this March 2, 2011 file photo, Heinz ketchup is seen on the shelf of a market in Barre, Vt. H.J. Heinz Co. says it agreed to be acquired by an investment consortium including billionaire investor Warren Buffett in a deal valued at $28 billion. (AP Photo/Toby Talbot, File)

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Mark Gongloff is off the newsletter this week, so today's 7.5 Things are brought to you by Jillian Berman.

Thing One: Ketchup Stain: Some traders may soon have ketchup on their faces. The SEC is investigating the possibility that traders were let in early on the news that Heinz would be bought and used the insider information to profit, the New York Times reports. The review focuses on options trading at Heinz, which jumped in the days leading up to the announcement. Warren Buffett’s Berkshire Hathaway and 3G Capital bought Heinz for $23 billion, the companies said Thursday. Heinz’s stock closed 20 percent up from its price the day before the sale. 3G has been involved in insider trading cases before; a man accused of using insider information to trade on 3G’s takeover of Burger King, was allegedly tipped off by a 3G investor, according to the NYT.

The deal, which marks one of the largest food industry acquisitions ever, is a major move for 3G, which is looking to position itself to make more food industry deals in the future, according to the Wall Street Journal. The company’s CEO courted Buffett to get him to be part of the deal and he's now become the affable public face of the agreement. It probably didn’t take much convincing though, because Heinz is the type of iconic American brand Buffett loves; he has big stakes in the maker of Kraft Macaroni and Cheese, Coca-Cola and See’s Candy, the WSJ notes.

Of course Buffett and 3G aren’t the deal’s only winners. Heinz’s CEO William Johnson could make $100 million from the buyout, according to Bloomberg. And Secretary of State John Kerry is likely to net hundreds of thousands of dollars thanks to the shares he owns in the company through his wife Heinz heiress, Teresa Heinz Kerry.

Thing Two: Bad News For Frequent Fliers: Predictably, creating the world’s largest airline won’t be great for travelers. It’s not a coincidence that nearly every airline charges fees for bags and that their fares are close to the same price, instead it’s the result of a large airlines controlling most of the market, the New York Times writes. Though the American Airlines-US Airways merger is likely to receive approval from regulators, the Justice Department “would not have stomached” a merger of this size 10 years ago, one expert told the NYT. That’s because it could decrease choice and service in mid-size cities and raise fares. And while the merger will ultimately lead to more profitability for the new airline, the companies could face years of work getting American Airlines out of bankruptcy, going through the DOJ review and merging their labor forces and computer systems, according to the Wall Street Journal. But the merger as well as the Heinz buyout are good signs for the economy overall; the NYT writes that deal-making was slow the past five years as companies grew concerned during the financial crisis and now, confidence is rebounding...

Thing Three: The Financial Crisis' Whopping Price Tag: We can finally put a price tag on the financial crisis: a whopping $22 trillion, according to a new study from the Government Accountability Office. That number included the $13 trillion the GAO estimates the U.S. lost in economic output -- an entire year’s worth of GDP -- as well as the 9 billion the agency says homeowners lost in the crisis. The aim of the report is to figure out whether the costs of the Dodd-Frank financial reform law outweigh the potential benefits, The Huffington Post’s Eleazar David Melendez writes. There’s no complete data on how much Dodd-Frank is costing American companies, but government agencies have spent $1.1 billion putting the law in place.

Meanwhile Wall Street regulators were taken to task yesterday over their insistence on letting banks off the hook for their role in the financial crisis. During a hearing yesterday, liberal darling and Massachusetts Senator Elizabeth Warren asked the regulators a fairly simple question: when was the last time you took a Wall Street bank to trial? Embarrassingly, they didn’t have an answer.

Thing Four: Sequestration Looming: Senate Democrats made an offer to avoid the so-called sequester yesterday, but it’s an offer Republicans are likely to refuse. The proposal would avoid the $1.2 trillion across-the-board spending cuts by slashing $110 billion from the deficit through a minimum tax on those making $1 million or more as well as closing some corporate tax loopholes, according to the Financial Times. The plan also includes cuts to farm subsidies and defense spending. The plan will surely get knocked down by Republicans, who have said they won’t raise taxes. Mitch McConnell, the Senate Republican leader, called it a “waste of time,” according to Reuters. Republicans have their own plans to avoid the sequester, including cuts to social welfare programs, which the White House opposes.

Thing Five: Major Trade Deal Tainted By Horsemeat: Horsemeat is now making its way into international trade deals. The discovery that some meat labeled “beef” in lasagna, burgers and other foods in Europe was actually horsemeat, comes at an awkward time for the region, according to the Financial Times. That’s because the EU is currently in the midst of trying to negotiate a free trade deal with the U.S. and food safety standards are key to the pact. The scandal puts the EU’s food safety system in question at a time when it’s trying to streamline it with America’s. The horsemeat scare has had far reaching consequences across Europe. Three were arrested at British facilities that allegedly handled some of the mis-labeled “beef” and Walmart’s British supermarket arm pulled its beef bolognese sauce after finding it was tainted with horse DNA.

Thing Six: Wall Street Pay Crackdown: The latest Wall Street pay trick may soon become trickier to pull off. The Wall Street Journal reports that the Federal Reserve is in the early stages of considering new rules on deferred compensation -- a practice increasingly used on Wall Street that allows banks not to disclose how much they’re paying their workers by giving them their money over a longer period of time. Morgan Stanley, for example, deferred bonuses to thousands of well-paid workers. If the Fed rule comes to fruition, it would require companies to give investors information like how much money they’d promised to employees but not paid out yet, which could make the practice less popular.

Thing Seven: The Benefits Of A Minimum Wage Boost: A boost in the minimum wage could mean more workers quitting their jobs. A wage boost would give workers more confidence about their prospects, making them more likely to quit, Bloomberg writes. That means the wage boost could mean an economic boost as well.

Thing Seven And One Half: Happy Friday! Yes, we did one too. HuffPost and AOL did our own version of the Harlem Shake, jumping on the viral video trend. You can watch the video here.

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Calendar Du Jour:

Economic Data:

9:55 AM ET: University of Michigan/Thomson Reuters Consumer Sentiment Index

Corporate Earnings:

Kraft Foods

Heard On The Tweets:

@ConanObrien: Show her you care by grabbing anything off the CVS shelf with a heart on it.

@realDonaldTrump: I believe in free markets but allowing a merger of US Air & American Airlines is totally ridiculous! Will control most of US market.

@BW: Heinz ketchup now comes in $23 billion varieties |

And you can follow us on Twitter, too, if you want, no pressure: @JillianBerman and @MarkGongloff


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