Broker Sued by SEC Over Fake Bid for Dayton
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CINCINNATI — The Securities and Exchange Commission has sued Cincinnati stockbroker P. David Herrlinger on charges that he violated federal laws in his fraudulent $6.8-billion takeover bid last month of the Dayton Hudson Corp.
The SEC lawsuit, filed Wednesday in U.S. District Court in Cincinnati, also says Herrlinger profited by trading Dayton Hudson options before and after the bid. The June 23 bid sent the price of the Minneapolis-based retailing corporation’s stock to $63 from $54 per share.
The lawsuit asks that Herrlinger, 46, be stopped from making further fraudulent bids and be restrained from destroying documents detailing the incident. It also asks that he surrender any profit.
The suit alleges Herrlinger placed an order through his brother, Thomas Herrlinger, a stockbroker with E. F. Hutton & Co. in Albuquerque, N.M., to buy Dayton Hudson shares on June 22. The following morning, the suit alleges, P. David Herrlinger called the Dow Jones New Service in Cincinnati, identified himself as an associate of Capital Management and announced his $70-per-share offer.
Supervisor Questioned Move
His former superior at the Cincinnati investment counseling firm overheard him and asked what he was doing. According to the suit, Herrlinger replied, “We can make a lot of money.” His superior, Richard T. Miller, then ordered him to retract the statement.
Herrlinger did not retract the statement so Miller did. But Herrlinger later called the Dow Jones bureau in Pittsburgh and said that an investor group headed by Stone, Inc., was making the tender offer, the suit alleges.
Following the bid, Herrlinger told his brother to sell his Dayton Hudson shares, which he did at a gain of $17,500, the suit says. Herrlinger’s brother was unable to complete part of the transaction, which resulted in Herrlinger losing $3,250, the suit alleges.
Although the lawsuit alleges Herrlinger attempted to profit from the activity, his attorney, Anthony Covatta, said, “It doesn’t change the fact that Mr. Herrlinger was not himself.”
Several hours after the bid was made, Herrlinger was admitted to Good Samaritan Hospital for psychological treatment.
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