8 to Return Profits, Pay Fines to Settle Revco Insider Case

Eight people have agreed to surrender profits and pay fines totaling $1.68 million for alleged insider trading in the stock of drugstore giant Revco D.S. Inc., the Securities and Exchange Commission said Monday.

In a civil complaint filed in U.S. District Court, the SEC said Glenn Golenberg, head of an investment firm that advised Revco management, told outsiders that management was considering a debt-financed takeover of the company before the public announcement of the proposed deal three years ago.

The information spread, with seven people or their clients eventually earning $735,000 by trading in Revco stock, the SEC said.

It is illegal under federal securities laws to trade stocks on the basis of non-public information.

No Admission of Guilt

The SEC said Golenberg and the seven others accused in the case have agreed to repay the illicit profits and nearly $1 million in fines without admitting or denying guilt.

Revco, based in Twinsburg, Ohio, filed for bankruptcy protection last July because it couldn’t pay a $1.5-billion debt stemming from its management-led takeover, a deal known as a leveraged buyout, that was financed mostly with borrowed money. Revco became the first big LBO to run into such serious debt trouble.

Golenberg is a member of Revco’s board because of his stock holdings, amounting to 150,000 Revco shares as of last May 28, said Kathleen Obert, a Revco spokeswoman.

Golenberg agreed to pay a $470,000 penalty and consented to an SEC order barring him from acting as a broker, dealer or investment adviser for at least four years.

‘The Biggest Deal’

“Revco was the biggest deal of my life,” he said in a statement after the SEC filed the complaint. “It was constantly on my mind; something I lived and breathed. Regrettably, I talked about it with a few people who did not have any right to know what was going on. I now realize the seriousness of that lapse of judgment.”

The SEC also accused Golenberg of providing information to Steve S. Saltzman of Cleveland about the proposed merger of two smaller firms, Magnetics International Inc. and H.K. Porter Inc.

The commission said Saltzman made $6,850 buying and selling 2,000 shares of Magnetics common stock and made $27,326 purchasing and selling Revco stock.

“I should have known better,” Golenberg said of the portion of the complaint dealing with Magnetics.

Other Defendants

The other defendants accused of profiting from inside information about the Revco buyout, are:

- Bernard Shavitz of Woodcliff Lake, N.J., a business associate of Golenberg. The SEC said Shavitz made $214,000 buying and selling Revco stock and is asking that Shavitz repay the money and pay a fine of $214,000.

- Van S. Weinberg of Memphis, Tenn., described as a friend of Golenberg. Weinberg is accused of earning $65,000 trading Revco stock and leaking inside information to the remaining defendants. The SEC required him to surrender the profits and pay a $75,000 fine.

- Stephen Lightman of Memphis, accused of earning $215,218 trading Revco stock. He agreed to repay the money and an equal fine.

- Lawrence S. Adler of Memphis, an account executive with the former E.F. Hutton Group Inc., is accused of earning $38,188 for himself and $141,820 for clients. He agreed to pay $180,008 in illicit profits and a $19,992 fine.

- Ray H. Dan of St. Louis is accused of making $31,000 trading Revco stock. He agreed to repay the money and an equal fine.

- Carl D. Reiter of Germantown, Tenn., is accused by the SEC of making $2,625 with the inside information. He agreed to repay the money and an equal fine.

Obert declined to comment on the matter, saying “that’s entirely between the SEC and Mr. Golenberg.” She said the company has prepared a five-year business plan for reorganization but it has not been filed with the federal bankruptcy court.