Justice Dept. to Crack Down on Antitrust Rules : To Sue Trump, Belzbergs on Takeover Regulations; Wickes Settles Charges
The Justice Department announced Tuesday that it will sue New York real estate magnate Donald J. Trump and Canada’s wealthy Belzberg family for evading antitrust notification rules on corporate takeovers.
At the same time, Wickes Cos. of Santa Monica agreed to pay $300,000 to settle similar charges with the government in a case arising out of Wickes’ unsuccessful $2.1-billion hostile takeover bid in August, 1986, for Owens-Corning Fiberglas Corp.
The three-pronged action is part of an increased effort by the federal government to crack down on the usage of Wall Street maneuvers involving stock options that allow corporate raiders to secretly assemble large blocks of stock without disclosing their holdings or first obtaining the clearances required under federal law.
Wickes, in signing a settlement agreement with the Federal Trade Commission, did not acknowledge that it violated any federal laws but it did agree to avoid certain stock-option agreements in the future, Justice Department officials said.
Will File Civil Suit
Wickes issued a statement defending its actions and contended that the FTC only raised questions about the stock purchases after the fact. “This settlement involves a longstanding technical dispute between the FTC and the investment community over the use of options agreements,” Sanford C. Sigoloff, chairman and chief executive of Wickes, said. “These agreements have been used for a number of years by many companies.
“Wickes had in fact filed under H-S-R (the Hart-Scott-Rodino antitrust law) in connection with this transaction disclosing the option agreement and the FTC cleared the filing. In December, 1986, well after our use of these agreements, the FTC questioned their use,” Sigoloff added. “The company does not believe it violated H-S-R rules and did not admit to any violation in settling. It settled the case in order to avoid the cost of litigation.”
The government said it will file a civil suit against Trump, the flamboyant real estate developer and casino operator, alleging that he violated the law’s pre-merger disclosure requirements twice--once when he bought stock in Holiday Corp. in 1986 and also when he began acquiring stock in Bally Manufacturing Corp. that year.
Ashland Oil Stock Purchase
The Justice Department, in a statement, said Trump is involved in discussions with government officials to determine whether a settlement acceptable to both sides can be reached.
Trump could not be reached for comment late in the day after the action was disclosed.
In the other case, the department said it will accuse firms controlled by Canada’s Belzberg family of violating the same antitrust rules in connection with the purchase in early 1986 of stock in Ashland Oil Inc., based in Russell, Ky. The Belzbergs were unsuccessful in their proposed $1.8-billion takeover attempt.
The lawsuit against Roxboro Investments (1976), Ltd., and a subsidiary, First City Financial Corp., both of Vancouver, Canada, also charges three officers, Samuel Belzberg, president of Roxboro and First City; along with Hyman Belzberg and William Belzberg, vice presidents of the two firms.
The Belzbergs and the firms are seeking to enter negotiations aimed at possible settlement of the lawsuit.
The Securities and Exchange Commission also has alleged that the Belzbergs failed to disclose holdings in Ashland to the SEC. The case was argued in federal court last year, but the court has not yet issued a decision.
Reached at his office in Beverly Hills, a secretary for William Belzberg said he was traveling and could not be reached for comment. The New York office of the Belzbergs was closed.
Under the Hart-Scott-Rodino antitrust law, companies involved in corporate takeovers of a certain size must first notify the federal government of their actions and then wait at least 30 days before completing any major transactions.
The requirement is designed to allow the FTC and the Justice Department sufficient time to review significant mergers and takeovers to ensure that they do not violate antitrust rules aimed at maintaining adequate competition among firms.
In all three cases, stock purchases forming the basis of the charges were made through the brokerage firm of Bear, Stearns & Co., the Justice Department said. The government action focuses on techniques that allow a brokerage firm to assemble a large block of stock under an options agreement with a corporate raider, who does not officially buy the stock until federal clearance is given.
“The antitrust division and the Federal Trade Commission share a strong commitment to ensure that merging companies comply with the Hart-Scott-Rodino notification requirements,” said Charles F. Rule, the Justice Department official in charge of the antitrust division, “and we will continue to bring civil penalty actions against those who fail to comply with the act.”
