A Connecticut businessman heard a rumor last March that a British firm wanted to buy an American company, then he attempted to sell his information for "several hundred thousand dollars" to the U.S. firm, the Securities and Exchange Commission charged in a lawsuit yesterday.
In its suit filed in U.S. District Court here, the SEC alleged that Clark J. Winslow told a vice president of Fairchild Camera and Instrument Corp. that Winslow "knew who it was that was seeking to acquire Fairchild."
In fact, the SEC suit said, the purported takeover plan by the unnamed British company was never more than a rumor, which never materialized.
At the same time he was offering to sell his information, Winslow, an investment adviser, also made a sizable personal investment in Fairchild stock, the SEC said.
In its suit, the SEC charged Winslow with making "untrue statements of material fact" to Fairchild, a civil violation under federal securities laws. While neither admitting nor denying the allegations by the SEC, Winslow settled the suit by agreeing not to make such alleged untrue statements.
The SEC complaint says that on or about March 17, 1979, Winslow noted unusual trading activity in Fairchild stock. A stock analyst told Winslow that he "heard a rumor that a major British electrical products manufacturer, which he identified, might be interested in acquiring Fairchild," the SEC said.
Winslow then passed the rumor to another analyst, the suit alleged.
On March 29, Winslow called a Fairchild vice president in California, where the firm is based, reaching him at 6 a.m. Pacific Standard Time, the SEC noted. Winslow allegedly asked the vice president to tell the president of Fairchild that "he had some information which would be useful to Fairchild."
Winslow said he thought the information would prove sufficiently important that it would be worth several hundred thousand dollars to Fairchild, the SEC said. Winslow also reportedly said the money could be paid as a consulting fee to be returned intact if the information proved incorrect.
Winslow told the vice president in a later phone call that the information was important to the current management of Fairchild because the British firm "had a history of acquiring other firms, purging management and operating the company in a way that would result in dismemberment of the structure of organization," according to the suit.
Fairchild made no payments to Winslow, the SEC said.