It isn't over until it's over, and at Cerbco Inc., it's still not over. The shareholder lawsuit against brothers George and Robert Erikson is still in progress -- even though the Eriksons were unable to sell their control of the company for $6 million, or $24.24 a share.
In fact, it was the proposed sale -- announced when the stock was trading for $3 a share -- that prompted the filing of the lawsuit in the first place.
When the shareholders began fussing about the proposed sale last spring, the Erikson-controlled board appointed the two independent directors, Robert E. Long, senior vice president of Potomac Asset Management and Thomas J. Schaefer, president of Columbia First Bank, to look into the validity of the sale.
Some weeks later, the Eriksons announced that they could not complete the sale. But the special committee continued to work on its report.
Cerbco told the Securities and Exchange Commission last week that the effort to sell control of the company had ceased. And as a result, the filing said, the Long-Schaefer committee "determined that its mandate and its work as a committee have ended."
Robert W. Erikson, president of Cerbco, acknowledged that the special committee had filed a written report with the board but said it did not arrive at a conclusion on the questions raised about the appropriateness of the proposed sale. He also said the report was confidential.
It was learned elsewhere that the material submitted to the board by the special committee not only discussed the issues involved in the sale but also suggested there were many unanswered questions about the validity of the Eriksons' decision to pursue the sale.
But that's not the end of the story.
Cerbco also told the SEC that Long and Schaefer have resigned from the Cerbco board. Long, who had been on the board for about seven years, resigned Nov. 9. Schaefer, who had been there only a few months, quit on Nov. 30.
When and how they will be replaced is unclear. Robert Erikson said that Cerbco was looking for outside directors.
Long and Schaefer, however, will remain members of the board of Insituform East Inc., which is controlled by Cerbco. Thus, all the players will still be in close touch with one another.
In fact, Erikson said, it was beneficial for Long and Schaefer to leave the Cerbco board because the membership of the Cerbco and Insituform boards had become too similar.
The lawsuit against Cerbco officials was brought by Merle Thorpe Jr. an attorney associated with Hogan & Hartson of Washington. Thorpe and the Foundation for Middle East Peace, which he heads, own about 22,300 shares of Cerbco.
The case is pending in Delaware Chancery Court and the suit charges that the Eriksons used Cerbco resources to get control of Insituform East and then tried to sell control of Insituform for their own benefit rather than for the benefit of shareholders.
A bit of explanation may be in order here.
Cerbco, a small firm in Baileys Crossroads, Va., is a holding company for several businesses. Its largest component is Insituform East Inc. of Landover, which repairs sewer pipes without digging them up.
The Erikson brothers control Cerbco. And Cerbco controls Insituform East. Thus, the Eriksons control Insituform East.
When they tried to sell control of Cerbco, the Eriksons actually were selling control of Insituform East. The prospective buyer, Insituform of North America of Memphis, saw the deal as a good business fit.
But it was derailed. Perhaps because of all the legal action against the Eriksons. Perhaps because Arthur G. Lang III, president of Insituform East, is under indictment on insider trading charges and it may be some time before the matter is concluded.
Stocks of both Cerbco and Insituform East are depressed. Cerbco is selling at $1, down from $3.19 at the beginning of the year, and Insituform East is selling at $2, down from $6.38 at the beginning of the year.
Survival Technology Inc., a small Bethesda-based medical supply company, will hold its annual shareholders meeting on Jan. 8, the first meeting since the death of Dr. Stanley J. Sarnoff, the founder of the company. Sarnoff died last May.
Sarnoff, who owned 70 percent of his company, arranged to have his stock go to the Stanley J. Sarnoff Endowment for Cardiovascular Science Inc., which provides research fellowships for medical students.
Sarnoff had helped set up the Laboratory for Cardiovascular Physiology at the National Heart Institute, part of the National Institutes of Health in Bethesda. He was the director of the laboratory for 10 years.
The Sarnoff shares in Survival Technology will be voted by attorney Robert E. Herzstein, who is now serving as chairman of the company. Herzstein has been associated with the company since 1969.
Survival Technology has seen its business and its stock move higher since the Persian Gulf buildup began: The company makes antidotes for poison gas.
The stock, which had been in the $7-to-$8 range, got as high as $14.50 in August, after the Iraqi invasion of Kuwait. It has since come back to $9.75.
Confused about where the market is going? Got a feeling your crystal ball is a bit cloudy? Looking for some words of wisdom from the pros?
Well, on Wall Street, there's no shortage of opinions. And realizing that free advice is worth what you pay for it, here goes:
George J. Collins, president of T. Rowe Price Associates, Baltimore: "Bear markets and recessions are the most stressful times for investors, but it is impossible to avoid them and easy to miss the opportunities they present ... A dollar-cost averaging program ... represents a sound fundamental approach to investing. Someone who invested $500 every quarter over the past two decades would have had $193,000 at the end of 1989, or about $153,000 more than the total amount invested."
Don R. Hays, director of investment strategy, Wheat, First Securities, Richmond: "Our current recommended allocation for a balanced account -- 72 percent in stocks and 28 percent in bonds -- appears to be very aggressive ... But after two decades ... experience has taught us, over and over again, that the nature of a consistently profitable investment philosophy is to become more aggressive as others become more cautious and vice versa."
Norman G. Fosback, editor, Market Logic newsletter, Fort Lauderdale, Fla. "We expect a recession ... to be short and mild ... Stripped of war worries and recession fears, Wall Street is left with one of the most bullish arrays of market conditions ... in history. It will therefore prove far more rewarding to be fully invested in equities than to sit on the sidelines or hold the now all-too-popular short positions."
Charles I. Clough Jr., chief investment strategist, Merrill Lynch & Co., New York. "For every investment banker, lawyer, Realtor or accountant whose income declines or disappears, there is a barber, hairdresser, dentist or auto repairman who is likely to see demand for his or her services falter as well."
Greg A. Smith, chief investment adviser, Prudential-Bache Securities, New York: "If we are correct and an important drop in interest rates is beginning ... we could see a panic among some folks who are trying to pin down high rates of return by shifting out to long-term financial assets, that is bonds and stocks. This one-time shift in money from short to long-term financial assets could push up the rates of return on stocks and bonds to their historic levels ... "
John P. Dessauer, Dessauer's Journal newsletter, Orleans, Ma. "That which is most feared is least likely to develop. It is the unexpected recession that does the most damage. With central banks, business and investors around the world so well prepared, the odds are that the current down cycle will be one of the mildest since World War II."endquad