Jury Finds Insider Trading in Alpha Beta-Lucky Case

A federal jury in Utah has found that the father of a former Alpha Beta Co. official in Orange County engaged in insider trading when he used confidential information from his son about a possible merger with Lucky Stores Inc. to reap a $328,000 profit in the stock market.

In the civil suit decided last Friday, the jury found that Gerald Hellberg had improperly purchased $15,000 in stock options in Lucky just days before the public learned in 1988 of a proposed merger with Alpha Beta, a unit of American Stores.

The stock options--rights to purchase a stock at a set price prior to a specific date--soared more than 2,000% the day the pending merger was announced.

Hellberg’s son, David, was a financial analyst at an Alpha Beta division in Irvine, where he was assigned to work on Project Cloverleaf--the code name for the proposed merger of the Alpha Beta and Lucky grocery chains.

The Securities and Exchange Commission had alleged in a civil lawsuit that David Hellberg leaked word of the merger to his father, who purchased 280 stock options in Lucky between March 16 and March 18 of 1988 for 18.75 cents to 50 cents. Some of the options climbed as high as $12.50 on March 22, when the deal became public.

Because of the jury’s findings, the SEC is seeking the return of Gerald Hellberg’s $328,844 in profit. It said it will also seek a penalty of up to three times that much.

David Hellberg, a former El Toro resident, resigned from Alpha Beta in May, 1988, and signed a consent decree. Without admitting any liability, he agreed to pay $5,000 to the SEC to settle the matter. David Hellberg, who now works for a small Salt Lake City firm, has steadfastly denied that he leaked information to his father.

The SEC has contended that David Hellberg informed his father of the merger, but said that it couldn’t prove that he intended to use the inside information for personal profit.

Gerald Hellberg has said that his purchase of the options days before the disclosure of a possible merger between Lucky and Alpha Beta was coincidence.

“My client did not get, nor did he act on, inside information,” said Hellberg’s attorney, David R. King. “He had independently learned and researched and determined on his own to buy the Lucky options.”

The SEC said its case was based primarily on the timing and extent of Hellberg’s purchases.

“The importance of this case is that it shows that juries are willing in an appropriate situation to find liability based on circumstantial evidence,” said SEC lawyer James A. Kidney. “Hellberg’s trading was highly speculative during a week when his son knew Lucky was the (merger) target, and there was no sound economic reason for the father having made the trade.”

The Alpha Beta-Lucky merger was never completed because California Atty. Gen. John K. Van de Kamp ruled that it would have reduced competition in Southern California, costing the state’s consumers $200 million a year in higher prices.