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Brethen Defends Stock Sale in Insider Trading Trial

November 29, 1990

DAYTON, Ohio (AP) _ A former Philips Industries Inc. executive accused of insider trading defended the sale of his stock Thursday, saying he had no inside information and was simply trying to protect himself from financial loss.

Robert H. Brethen, former vice chairman of Philips, testified on the fifth day of his civil trial in U.S. District Court.

The Securities and Exchange Commission alleges he used non-public information to avoid $570,000 in losses by selling about half his Philips stock before a proposed buyout of Philips collapsed for lack of financing.

Brethen said that after his retirement from Philips, he consulted with attorneys on the legality of selling his stock. He said he was advised not to sell it if he thought he possessed inside information.

″I felt that I had no inside information,″ he said.

Brethen said he authorized the sale after reading various financial publications and becoming concerned that the failure of an impending buyout of Philips by Merrill Lynch Capital Partners could send the value of the stock plummeting.

″I decided I would like to protect myself,″ Brethen said. ″I was concerned that there was a possibility the (buyout) might not take place.″

However, he said he didn’t know whether or not the buyout would be successful.

″I had no information either way,″ he said.

Brethen said he expected the stock sale to be investigated by either the SEC or the New York Stock Exchange. He also said he had the stock sold under a ″street name″ to protect the privacy of his personal finances within the local community.

On Wednesday, an investment banker testified that information Brethen had would have been important to an investor trying to decide what to do with Philips stock.

Charles Davis, an investment banker with Whitman, Heffernan, Rhein & Co. in New York, said that the private information included sales forecasts, an internal company memo about a $250,000 expense and a conversation Brethen allegedly had with Philips’ chief executive officer about Merrill Lynch’s disappointment with the company’s November results.