The Securities and Exchange Commission today accused a proofreader at a financial printing firm of illegally investing about $100,000 in a tool making company after learning that Easco Corp. of Baltimore was trying to buy it.
The SEC said Anthony Materia, 57, bought 8,000 shares of Evans-Aristocrat Industries Inc., based on inside information obtained from an offer his employer was printing for Easco Corp. planned a tender offer for shares of the Newark firm.
The SEC said the proofreader has a $32,000 profit on his stock. Materia works for Bowne of New York City Inc., a firm that specializes in printing corporate documents, according to the SEC complaint filed at U.S. District Court here.
The SEC alleges that Materia bought the Evans-Aristocrat stock on Sept. 9 and 13 at prices ranging from 11 7/8 to 12 3/4 a share. On Sept. 14, Easco announced an offer to buy 51 percent of the stock of Evans-Aristocrat at $16 a share.
The civil complaint charges Materia with fraud and violating the federal securities laws by investing on the basis of non-public information.
Easco manufactures hand tools, mostly for Sears, Roebuck and Co. and last year had net income of $11.8 million on sales of $414.6 million. Evans-Aristocrat makes tape measures, rulers and similar products and also is a big supplier to Sears. It's net income for the fiscal year ending April 30 was $3.4 million on sales of $24.l million.
Edmund Flick, Easco's senior vice president and financial officer, said his company acquired 99,000 shares of Evans-Aristocrat in late 1980. After selling 46,500 of those shares, Easco learned that the two top executives of Evans-Aristocrat, who together own 24 percent of the stock, were looking to sell their shares at $12.50 a share.
Some of the Evans-Aristocrat stockholders resisted the plan, and Easco decided to make an offer for the stock. When officials of Evans-Aristocrat indicated they did not want to discuss an offer until Sept. 15, Flick said Easco moved ahead with the tender dated Sept 14. The offer expires Oct. 12.
The Materia case is reminiscent of another celebrated "insider" case brought by the SEC in 1977 that also involved a printing firm. The defendant, a printer named Vincent F. Chiarella, allegedly cracked a code used by his employer, Pandick Press, to block employes from trading on non-public financial information.
Chiarella, who later was found guilty of criminal fraud, had his conviction reversed by the Supreme Court.
But the high court's decision did not answer the long-puzzling question about what is privileged information and who should be accountable for keeping it that way. In the Chiarella case, the court ruled that the defendant did not owe any special duty to those selling him stock to tell them what he knew.