Belzberg, First City Lose Ashland Oil Appeal
WASHINGTON (AP) _ A federal appeals court ruled Friday that First City Financial Corp. Ltd. and businessman Marc Belzberg violated securities law and must turn over $2.7 million in profits from the attempted takeover of Ashland Oil Co.
In a 3-0 decision, the U.S. Court of Appeals upheld a lower court decision that the Canadian company founded by the Belzberg family deliberately evaded federal reporting requirements when First City purchased Ashland stock.
Anyone who buys more than 5 percent of a company’s securities must disclose that fact within 10 days to the Securities and Exchange Commission.
On March 4, 1986, Belzberg, a First City vice president, telephoned Alan Greenberg, chief executive officer of Bear Stearns, a Wall Street brokerage firm, and discussed buying Ashland stock. The SEC contended Belzberg asked Greenberg to make the purchase for First City’s account. Belzberg said he intended for Greenberg to buy Ashland for the brokerage company’s own account.
Greenberg interpreted Belzberg’s call as an order to buy Ashland stock for First City. First City filed the required disclosure statement on March 26, 12 days after the deadline.
″During the period before it unveiled its takeover plan, First City ... took pains to keep its interest in Ashland secret,″ said the appeals court. ″The very last thing Belzberg would do in light of those efforts would be to tout Ashland″ to the Bear Stearns officer.
If Belzberg’s purpose had been to induce others to buy Ashland, ″he presumably would have contacted more than just Bear Stearns; he would have openly disclosed his interest in a possible takeover of Ashland to all of Wall Street,″ said the opinion by appeals court Judge Laurence Silberman.
The appeals court said First City must surrender $2.7 million, representing the company’s profits on the shares of Ashland stock it purchased during the 12 days before it filed the disclosure statement.
The lower court reasoned that First City was able to buy its shares at an artificially low price because the company hadn’t disclosed its stake in Ashland Oil.