A shareholder suit was filed today alleging that a number of short sellers and hedge funds conspired with Alan Abelson, columist for Barron's, a weekly business magazine, to trade shares of Technicare, Corp. with foreknowledge that negative items on the company would be appearing in Abelson's column.
The suit charges the short sellers were advised in advance when a negative item on Technicare would appear in "Up and Down Wall Street" Abelson's widely read investment column and that they use this information to establish a short position in the stock in anticipation that the negative comments would cause the stock price to decline.
To sell short means to sell borrowed stock, expecting the stock price will decline so that shares can later be purchased at a cheaper price to cover the original short position.
Also named as defendents in the complaint filed in U.S. Court for the southern district of New York, were Barron's publisher, Robert Bleiberg and Dow Jones & Co., Inc., which owns the magazine.
In addition the suit names Mayer Berman, Lawrence Bleiberg, Mark Howrad, Walter Mintz and Robert Wilson, all identified as short sellers, and Boxwood Associates, Cumberland Associates, Mark Howard Associates and Robert Wilson Associates, all hedge funds.
A hedge fund is an investment pool - frequently of non-public funds - which takes both long and short positions in stocks to realize capital gains.
Lawrence Bleiberg is the brother of Robert Bleinberg and is the managing partner of Boxwood Associates.
The suit brought by Robert Nemeroff, a dentist, states that it is filed on behalf of all Technicare shareholders. Nemeroff says he purchased more than 7,000 shares of Technicare - on Ohio company that makes X-ray body scanners and other high technology equipments - and sustained losses as a result of the alleged manipulation. And the suit asks compensation for all losses suffered and damages.
Warren H. Phillips, president and chief executive officer of Dow Jones & co., which also publishes the Wall Street Journal, said he had not seen the suit and categorically denied the allegation made in the suit as far as the comapny, Barron's and its employees are concerned.
Phillips said the suit appeared to be "an effort to intimidate" the press from writing unfavorable stores about companies, adding that "the plaintiff appears to be more interested in deterring unfavorable stores than in seeing the truth reported." He said he would welcome an investigation into the matter by the Security and Exchange Commission.
The SEC has already begun an investigation out of its New York City office, it was learned today. The investigation is looking into the activities of hedge funds in general and specifically the trading activity of Technicare. Centronics Inc., Olympia Brewing Co., and a number of other stocks which have had large short positions established and have also been subject to negative comments in Abelson's column.
A suit like the one filed toady is scheduled for filing next week on behalf of Centronics shareholders, involving many of the same defendants and charges, according to a source and Olmpia Brewing shareholders are also considering a silmilar complaint.
The Technicare suit specifically charges that beginning at least as early as Mar, 1976, and continuing to the present, Abelson, Robert Bleiberg and Dow Jones advised theshort sellers "in advance of publication" that certain Anelson columns have contained such negative references in the period in questions, the suit says.
It further charges that short sellers have taken short positions "knowing that the forthcoming publication will cause or tend to cause a decline in the market price in the shares of Technicare" so they can cover themselves at a lower price.
The suit does not charge Abelson, Robert Bleiberg or any other employee of Dow Jones with actually trading for themselves in Technicare but claims they "aided and abetted" the short sellers.
Abelson, who normally finishes his weekly column on Friday, was unavailable for comment today.
Barron's publisher Robert Bleiberg said it was a "coincidence" that Abelson will not write the "Up and Down Wall Street" column when the next issue of Barron's appears on the newsstands on Saturday because he has been at work on a speech he is scheduled to deliver tonight.
Bleiberg called the allegations "irresponsible and false" and said they echoed equally groundless charges made in the past." His brother, Lawrence, said the charges were "absolutely without foundation." Other defendants were unreachable for comment.
In the currant issue of the Wall Street Letter, a periodical that covers the securities industry, defendant Robert Wilson is quoted in connection with items that appeared in Abelson's column as saying that "in the past I have urged him to recommend - and to disrecommend - stocks and he's done it. My participation in the stock was always before any article, although sometimes I have added to it after."
The next issue of the Wall Street Letter, which usually reaches subscribers on Monday, however, contains a statement by Wilson saying he does not think he was quoted accurately.
An even if he did say it, Wilson states, "that's not what I meant. While I do discuss many ideas with (Abelson) and urge upon him the merits of these, I would never presume to recommend them. Then prices of stock have a way of taking care of themselves, no matter what Mr. Abelson writes about them."