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SEC Files Big Insider Trading Suit


NEW YORK — The Securities and Exchange Commission, in what officials termed one of the most significant insider trading cases ever, filed suit seeking more than $13 million in allegedly illegal profit from a group of investors that included Revlon Inc. co-founder Martin Revson.

In a related development, Edward R. Downe Jr., a key member of the alleged trading ring, pleaded guilty to criminal tax and conspiracy charges and agreed to cooperate with federal prosecutors.

Downe, 62, a former director of Kidde Inc. and Bear Stearns Cos., told U.S. District Judge Shirley Wohl Kram that he set up a corporation in Bermuda to conceal trading in companies in which he was a director and to hide profits from the Internal Revenue Service.

Downe, who apparently masterminded the scheme, allegedly earned at least $3.3 million from it. But the SEC is seeking $8.05 million from him in disgorgements, which include the illegal profits of the people he is said to have tipped. The agency is also seeking civil penalties of up to triple the profit generated by each defendant and those who were tipped. Thus, it wants up to $24 million from Downe.

Downe, married to socialite Charlotte Ford, was chairman of Downe Communications, which owned, among other things, Ladies Home Journal magazine.

The SEC lawsuit charges that, besides Kidde and Bear Stearns, members of the alleged ring traded in securities of Bally Manufacturing, Tyler Corp. and Edgcomb Corp. Other defendants in the action, and the amounts the SEC wants back from them, are:

* Steven A. Greenberg, a New York financial public relations executive, at least $6.1 million.

* David Salamone, a London-based business partner of Downe, at least $3.8 million.

* Milton Weinger, a New York-based broker with Oppenheimer & Co., at least $1.3 million.

* Thomas Warde, a Los Angeles-based real estate executive, about $1 million.

* Fred R. Sullivan, former chairman and chief executive of Kidde, at least $85,000.

"This is a very significant case," said William McLucas, head of the SEC's enforcement division. "The conduct, the number of instances, and the dollar amounts--all are significant." The trading in question allegedly took place from 1987 to as late as 1989, long after the government's crackdown on insider trading became public.

Illegal insider trading involves the purchase or sale of company securities based on material non-public information.

Revson, who according to the SEC reaped at least $1.7 million in the scheme, "emphatically" denies the government's charges, said Frederick P. Hafetz, his attorney.

"It is distressing that on the eve of the statute of limitations expiring, the government has decided to file totally unfounded charges," Hafetz added.

None of the other defendants could be reached for comment.

Greenberg, who once provided public relations for ZZZZ Best Co., the Reseda-based carpet cleaning company that collapsed after defrauding investors, was on vacation, his office said. His lawyer, Harvey Pitt, said Greenberg cooperated in the SEC's probe and that the leveling of charges against him was "singularly unwarranted."

Weinger "can't be reached," his wife said.

Downe, Greenberg and Weinger were the principal figures in the ring, according to SEC officials. "Greenberg provided the information with respect to two of the securities: Edgcomb and Bally," said Richard Walker, regional administrator for the SEC in New York. "Weinger set up at least 53 (brokerage) accounts for Downe's friends and neighbors and earned over $1 million in commissions."

Walker added: "As a broker, he should have known better."

The SEC suit charged that "during at least 1987 through 1989, Downe and Greenberg engaged in a fraudulent scheme to exploit their access to material, non-public corporate information to reap easy profits for themselves, to enrich their family and friends, and for other direct or indirect benefits."

Downe, the only one of the group charged criminally, pleaded guilty to two charges, each of which carries a potential sentence of five years in prison and a $250,000 fine. The charges are conspiracy to commit wire fraud and file false tax returns, and failure to disclose securities purchases by a director.

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