Contents | < Browse | Browse >

July 8, 1996
Escom Lays Off Employees
As Stock Investigation Begins

A WALL STREET JOURNAL News Roundup

Escom AG, the giant German computer retailer that filed for protection from
creditors last week, said it plans to lay off 1,900 of its 4,440 European
employees and close an undisclosed number of stores.

Meanwhile, Germany's Securities Trading Supervisory Office confirmed Friday
that it is investigating alleged insider trading in Escom shares.  The
regulator said it had noticed a suspicious surge in the number of Escom
shares traded, and a plunge in the stock's price, in the weeks preceding
the company's announcement last Wednesday.

"The turnover seen was very suspicious in comparison with previous levels,"
Anke Reeh-Schild, a spokeswoman for the office, said in response to an
inquiry from Reuter News Service.

Volume Jumps Ninefold

She said that in the three weeks before Escom's announcement, volume in its
shares had risen eight or ninefold from previous average levels.

"The probe could take a few months," Ms.  Reeh-Schild said.  "At the moment
it is a routine investigation against persons unknown." Escom could not be
reached for comment.

Separately, an Escom spokeswoman told the Associated Press that Chairman
Helmut Jost is planning on a 1997 payroll of 2,500 European employees, 43%
less than current staffing.

In Germany, as many as a dozen of Escom's 130 stores could be closed, said
Marc Ullrich, head of the Escom Computervertriebs-GmbH subsidiary.  Escom
has more than 450 stores across Europe and earlier this month announced it
was closing 65 of its 235 U.K.  branches.

The company, Europe's second-largest computer retailer, with an estimated
2.35 billion marks ($1.55 billion) in sales last year, filed for creditor
protection to save it from bankruptcy after a new estimate put its 1995
losses at 180 million marks, up from a March forecast of 125 million marks.

Ms.  Reeh-Schild said the insider-trading investigation would first center
on electronically analyzing transaction volumes and price movements.  Then
banks would be asked for the names and addresses of customers on whose
behalf the shares had been traded.

Generally Illiquid

Between June 3 and July 2, the day before Escom made its announcement, the
company's share price slumped 49% to 4.63 marks from 9.15 marks.  It ended
trading Friday at 2.85 marks.

A total of 105,128 Escom shares were traded on June 3, and in the following
weeks volumes in the generally illiquid share surged, reaching more than
one million shares on several days.

Insider dealing was outlawed in Germany in 1994 as part of a drive to make
the German financial center more attractive to investors and traders.  The
maximum punishment is five years in jail, but so far prosecutors have
resorted to fines, with four sentences passed to date.

The highest fine was imposed on the son of an owner of beverage machinery
manufacturer Krones, who was ordered to pay 600,000 marks last year and
risk paying an additional 1.8 million marks if he breaks any laws within
the following two years.