The U.S. Securities and Exchange Commission has unveiled a massive case of illegal insider trading involving a major Mexican construction company.

The SEC today sued Jorge Eduardo Ballesteros Franco, the chairman of Grupo Mexicano, a Mexican construction giant. It also sued the estate of his brother Jose Luis Ballesteros Franco, Jose Luis Ballesteros’ four sons, two friends of the Ballesteros family, and eight related trading entities for engaging in massive and highly profitable insider trading in the securities of Nalco Chemical Co.

Back on June 28, 1999 it was announced that Nalco would be acquired by Suez Lyonnaise des Eaux, a French company. Jose Luis Ballesteros was a director of Nalco and vice-chairman of Grupo Mexicano. He was killed in an auto accident in Mexico on May 28, 2000.

The SEC is pursuing him beyond the grave however, alleging that he traded Nalco stock on the basis of non-public information regarding the acquisition. In addition, the SEC alleges that Ballesteros tipped his four sons and brother, Jorge Ballesteros, all of whom traded on the inside information.

All told, the defendants purchased 263,329 Nalco shares for more than $9.8 million and made illegal profits of more than $3.7 million. (All figures in U.S. dollars). To carry out their fraud, the Ballesteros family used multiple offshore trusts in other names, trustees located in the Isle of Jersey, offshore nominee companies, and four different brokerage firms, with accounts located in the United States and Switzerland.

Also today, the U.S. Attorney for the Southern District of New York indicted Jorge Ballesteros and one of the’ sons for nine felony counts and three felony counts, respectively, for conspiracy to violate, and violations of, the federal securities laws.

Richard Walker, director of the SEC’s Division of Enforcement, said ” This case sends a warning that engaging in insider trading from abroad, or using multiple offshore accounts that mask the trader’s identity, will not protect the trader from detection and prosecution.”

The Franco estate has agreed to pay $3,744,870, disgorging all the profits, and prejudgment interest of $364,586. Other parties in the case have agreed to disgorgement, interest charges and monetary civil penalties, totaling $4,730,951.

One of the defendants, Ricardo Ballesteros Gutierrez, was an analyst in the investment banking division at Lehman Brothers Inc. at the time of the trading. He has agreed to be barred from the securities industry for five years.

There remain a couple of unsettled civil suits by the commission, and it is continuing its investigation.