Father of Store Official Guilty of Insider Trading : Courts: The jury finds the man had improperly purchased stock options days before a merger proposal became known.

A U.S. District Court jury in Utah has ruled that the father of a former Alpha Beta official in Orange County engaged in insider trading when he used confidential information from his son about a possible merger with Lucky stores to reap a $328,000 profit in the stock market.

In the civil suit decided in Salt Lake City last Friday, the jury found that Gerald Hellberg 60, of Salt Lake City had improperly purchased $15,000 in stock options in Lucky in 1988 just days before a proposal to merge with Alpha Beta, a unit of American Stores, became public knowledge.

The stock options--rights to purchase a stock at a set price before 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 claimed in its civil lawsuit that David Hellberg had leaked word of the merger to his father, who then purchased 280 stock options in Lucky between March 16 and March 18, 1988, for 50 cents to 18.75 cents. Some of those options had climbed as high as $12.50 by March 22, when word of the deal proposal became public.

Because of the jury’s findings, the SEC is now seeking to have Gerald Hellberg return $328,844 in profits, and the commission said it will seek a penalty of up to three times that much in a later hearing.

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 any information to his father.

The SEC, however, claimed David Hellberg had told his father of the merger, although it could not prove that he did so with the intent of using inside information as a means to make extra money.

‘We had no evidence that he profited from his father’s trading, “ SEC attorney James A. Kidney said.

For his part, Gerald Hellberg has said that his buying the stock options just days before the merger possibility was disclosed was pure coincidence.

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

The SEC said that it had based its case 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,” Kidney said. “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.”

Kidney said that conflicting testimony from David Hellberg about what he knew about the merger and when he knew about it and also a phone call between the two men were two elements of the case that persuaded the jury that the Hellbergs were involved in some kind of scheme.

On the day that Alpha Beta announced its intention to acquire Lucky, a call from a pay phone near Gerald Hellberg’s home in Salt Lake City was made to a pay phone close to David Hellberg’s home in El Toro.

The SEC claimed the two men had made similar calls in the past but that the commission happened to be able to trace this one because Gerald Hellberg had billed the 17-minute call to a credit card.

“This at a minimum showed there were pre-arrangements with the families,” Kidney said. “Not too many wrong numbers last 17 minutes.”

Both men denied ever participating in the call.

Somewhat surprising is the fact that phone company records show the call was received inside a grocery store--although not a Lucky or Alpha Beta. The pay phone was at a Vons.

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