Settlement Uncertain for Karcher as Trial Date Is Set

Orange County fast-food baron Carl N. Karcher was ordered Friday to stand trial June 6 on charges of insider trading, but lawyers involved with the case said a settlement still might be reached.

The trial date was set by U.S. District Judge Edward Rafeedie in Los Angeles after lawyers were unable to win a pledge from the Justice Department that Karcher, founder of the Carl’s Jr. hamburger chain, and his relatives would not be targets of future criminal prosecution.

Earlier this week, lawyers for Karcher and six family members had reached a tentative agreement with the Securities and Exchange Commission to settle a civil lawsuit accusing them of insider trading in the securities of Carl Karcher Enterprises of Anaheim.

But the proposed settlement--which would have required Karcher and his family to pay $664,000--was contingent on receiving a guarantee from the Justice Department that the seven defendants would not be subject to criminal insider trading charges.

The agency refused to provide that assurance, indicating that it wanted to finish evaluating evidence before deciding whether to file criminal charges.

Karcher and the six family members were part of a group of 16 people sued last year by the SEC for allegedly violating insider trading laws.

Several defendants, including Karcher, were accused of tipping the others to a big decline in earnings at Karcher Enterprises, allowing them to avoid potential losses by selling securities before the news was made public.

Of the original defendants, only Karcher, six immediate family members and Karcher Enterprises accountant Alvin DeShano have not paid fines to the SEC or been dismissed from the case.

During a closed-door session with Rafeedie Friday, attorneys told the judge that the tentative settlement was stalled.

Robert LaFramenta, the SEC’s regional trial counsel, asked for a trial date of May 9. “We wanted the earliest possible date,” LaFramenta said after the meeting. Rafeedie instead set the June trial date, which was the earliest opening on his calendar.

“Our position is that they (the Karchers) can take the settlement that’s on the table or we try the case,” LaFramenta said. “We’re ready to go to trial.”

John Koutsos, another SEC trial counsel, said that “the trouble is on the defendants’ side” and that “nothing on our side” was holding up the settlement.

Karcher’s attorney, Wes Howell of Washington, confirmed that “unfulfilled conditions” had prevented the settlement from becoming final. Asked whether he expected the case to be tried, Howell replied: “Got a coin?”

Any settlement must receive the approval of the SEC and Rafeedie before it becomes final. Koutsos said his office already had received tentative approval of the proposed settlement terms from SEC officials in Washington.