A former consultant to the company that acquired Alexandria-based Drug Fair last year was sentenced today to spend 39 weekends in jail for illegal insider trading in Drug Fair stock.
Accountant Howard L. Davidowitz, 40, also was fined $10,000 on two federal felony charges to which he pleaded guilty last Dec. 22.
Davidowitz was a partner in the accounting firm of Ernst & Whinney in 1981 when he learned that Gray Drug Stores Inc. of Cleveland was interested in acquiring Drug Fair, according to Assistant U.S. Attorney Robert N. Schwartz.
U.S. District Judge John E. Sprizzo, in sentencing Davidowitz, remarked that the offenses, "while serious, were not the most egregious fraud of this type." In addition to the weekends in jail and the fine, Davidowitz was placed on five years' probation, including one year's unspecified community service.
Davidowitz allegedly purchased Drug Fair shares in January 1981, several days before Gray Drug Stores announced it would offer to acquire Drug Fair.
Davidowitz learned of the impending offer while working in Ernst & Whinney's retail consulting service. He was convicted of trading on inside information and making approximately $45,000 in profits, which he subsequently agreed to return to the shareholders from whom he had bought the stock.
In August 1981, Davidowitz entered into a consent judgment in a civil action brought by the Securities and Exchange Commission. He agreed not to violate the antifraud provisions of the securities law and agreed to give up the profits that he realized on his trading. Davidowitz resigned from Ernst & Whinny in February 1981, after the SEC's investigation began.
Davidowitz could have received a maximum of five years in prison on each of the securities fraud and mail fraud charges to which he pleaded guilty. Weekend prison sentences usually begin at 5 p.m. Friday afternoons and the prisoner checks out at about 5 p.m. Sunday, according to a spokesperson for the warden at the Metropolitan Correctional Center.