Meshulam Riklis is turning into the Freddy Krueger of finance. But instead of killing people in innumerable Nightmares on Elm Street, Riklis slaughters bondholders in innumerable Nightmares on Wall Street.

Why inflict Riklis on you for two weeks in a row? Because I have just come across stuff that's outrageous even by Riklisian standards. And because I have finally figured out how Riklis, in two ugly transactions, stripped McCrory Parent Corp. of stock for which he didn't pay a cent but that produced $1.1 billion in profit for Riklis and one of his companies in less than three years.

That $1.1 billion would have been of great use to McCrory Parent Corp., which owns the McCrory, Newberry, G.C. Murphy, H.L. Green and Kress variety store chains, among others. In a world where too many major retailers are already in trouble, the parent company is now bankruptcy bait, in large part because Riklis played with its subsidiaries for years instead of building them.

Mind you, Riklis didn't keep all that $1.1 billion for himself. And he did put some of it into McCrory. But those deals smell bad -- awful, in fact.

By the time Riklis finished shuffling papers in a series of unbelievably complicated deals, his Riklis Family Corp. owned the common stock of the McCrory subsidiaries that owned the Schenley liquor business and the Faberge-Elizabeth Arden beauty products business.

There are safeguards built into McCrory's bonds to stop Riklis from taking assets out of the company without replacing them with assets of equal or greater value. What Riklis did, in a brilliant piece of financial engineering, was to have valuable assets valued at nothing. Then he took them for himself and, as required, replaced them with something of equal value -- nothing.

To see this in action, let me take you through the Schenley deal. Please bear with me. The details, in this case, are everything.

To grossly oversimplify, McCrory -- which Riklis controls -- set up a subsidiary called SCH Holding Corp. in May 1986. SCH then gave McCrory $375 million of notes and preferred stock -- in other words, a big IOU -- and all its common stock, and got Schenley in return.

Now, watch this. McCrory, on God only knows what basis, valued Schenley at $375 million; SCH, which now owned Schenley, carried debts of $375 million. This meant that SCH's assets and obligations canceled each other out -- the corporation's net value was zero, and thus its common stock was worth nothing. So the Riklis Family Corp. took that stock from McCrory as a dividend.

What is wrong with this, you ask? Simple. If the value of Schenley rose above $375 million, the holder of SCH common stock -- Riklis -- got to keep the gain. If Schenley was worth less than $375 million, Riklis had no obligation to pay SCH's debts. Heads Riklis wins, tails McCrory loses.

And Riklis won big. In October 1987, SCH sold Schenley's assets to Guinness PLC, the big British brewer, for $491.5 million, which gave SCH common stock a value of $116.5 million. Later, Riklis sold his SCH common for $9 million. So SCH's "worthless" common stock produced $125 million for Riklis.

I won't bore you with the details of how Riklis did a similar thing with Faberge. All that matters is that Faberge's common stock was valued at nothing in May 1986 when Riklis got it, was valued at $925 million in July 1988 when he used it to help buy a company called E-II Holdings, and produced $980 million (by my math) in August 1989 when Riklis sold Faberge to Unilever, the Anglo-Dutch conglomerate.

Add it all up, and the "valueless" Schenley and Faberge common stock that Riklis took out of McCrory for free produced $1.1 billion for Riklis and E-II -- mostly for Riklis -- in less than three years. And to think that you don't believe in miracles.

I sent Riklis my analysis of all this. As always, he wouldn't comment.

These deals look especially bad now because they may drag down both McCrory and E-II. McCrory wouldn't be on the verge of bankruptcy if it had the $1.1 billion Riklis made on the stock he took from the company. What's more, E-II is in mortal danger because Riklis has diverted $650 million from it to bail out McCrory.

In fact, Riklis says that unless E-II bondholders give the company a break by reducing the interest paid on their bonds, E-II may go bankrupt.

Riklis says this in a document that Bear, Stearns & Co. was preparing for an offer Riklis planned to make to E-II bondholders, but which has apparently been killed. I won't go into the details of Riklis's planned offer. Suffice it to say that the offer involved turning E-II's Samsonite luggage business and Culligan water business into a new company called Sam-Cul Holdings. E-II bondholders would then be offered bonds and stock in Sam-Cul in exchange for their E-II bonds. For numerous reasons, no one in his right mind would take the Sam-Cul for E-II offer the way Riklis set it up -- which is probably why Riklis decided not to make the offer.

Even though Riklis pulled the Sam-Cul exchange offer off the table, you can bet he will be back with some sort of offer before March 1991, when he's due to fork over $80 million of interest to E-II bondholders.

Is what Riklis did with Schenley and Faberge wrong? Absolutely. Someday, McCrory bondholders -- or maybe even a securities regulator -- may drag Riklis into court to explain these deals. This could turn into Riklis's very own nightmare. Allan Sloan is a columnist for Newsday in New York.