UNITED STATES OF AMERICA Before the SECURITIES AND EXCHANGE COMMISSION SECURITIES EXCHANGE ACT OF 1934 Release No. 40769 / December 10, 1998 ADMINISTRATIVE PROCEEDING File No. 3-9787 ___________________________________ : ORDER INSTITUTING PUBLIC : PROCEEDINGS PURSUANT In the Matter of : TO SECTION 21C OF THE : SECURITIES EXCHANGE ANTHONY J. BRUNO and : ACT OF 1934, MAKING JAMES A. BRUNO, : FINDINGS AND IMPOSING : CEASE-AND-DESIST Respondents. : ORDER ___________________________________: I. The Securities and Exchange Commission deems it appropriate and in the public interest that public administrative proceedings pursuant to Section 21C of the Securities Exchange Act of 1934 ("Exchange Act") be, and they hereby are, instituted against Anthony J. Bruno ("Anthony Bruno"), the former chairman of the board and chief executive officer of Big B Inc. ("Big B" or "the Company"), and against James A. Bruno ("James Bruno"), the former executive vice president of Big B (collectively "the Brunos"). II. In anticipation of the institution of these administrative proceedings, the Brunos have submitted Offers of Settlement ("Offers"), which the Commission has determined to accept. Solely for the purpose of these proceedings, and any other proceedings brought by or on behalf of the Commission or to which the Commission is a party, the Brunos, without admitting or denying the findings set forth herein, except as to the Commission's jurisdiction over them, and the findings contained in paragraph II.A., which are admitted, consent to the entry of this Order Instituting Public Proceedings Pursuant to Section 21C of the Securities Exchange Act of 1934, Making Findings and Imposing Cease-and-Desist Order. III. Based upon the Offers submitted by the Brunos, the Commission finds that: A. RESPONDENTS Anthony Bruno, of Birmingham, Alabama, was the chairman of the board and chief executive officer of Big B in 1996. James Bruno, of Vestavia Hills, Alabama, was a director, an executive vice president and a designated spokesperson of Big B in 1996. B. ENTITY INVOLVED Until December 1996, Big B was headquartered in Bessemer, Alabama and operated approximately 400 retail drug and home healthcare stores in a five-state area in the southeastern United States. Big B's common stock was registered pursuant to Section 12(g) of the Exchange Act and was listed on the NASDAQ National Market Issues System. In December 1996, Big B was acquired by Revco D.S., Inc. ("Revco"), which prior to the acquisition operated about 2,700 retail drugstores in the midwestern, eastern and southeastern United States. C. FACTS On April 24, 1996, the president of Bruno's Inc., a privately-held retail grocery chain, met Anthony Bruno at Big B's offices and took him to lunch. During lunch, the president indicated that Bruno's was interested in acquiring Big B. Anthony Bruno responded that Big B was not for sale and desired to stay independent. He also expressed the view that Big B's stock was undervalued. James Bruno knew at the time that Anthony Bruno and the president of Bruno's Inc. were meeting for lunch. In mid-May 1996, the chief executive officer of Rite Aid Corporation ("Rite Aid") contacted Anthony Bruno twice by telephone during a one-week period to communicate Rite Aid's interest in acquiring Big B. Anthony Bruno responded that Big B was not for sale. James Bruno knew at the time that Anthony Bruno had spoken with the chief executive officer of Rite Aid. At a regular board meeting on May 28, 1996, attended by the Brunos, Big B adopted a policy entitled, Procedures and Guidelines for Public Disclosures and Communications with Analysts. Among other things, the Company's procedures and guidelines required that Big B's spokespersons be kept informed of all material information about Big B. The policy stated that, "Company information which is normally material includes . . . (iv) potential mergers and acquisitions." In June 1996, the chief financial officer of Bruno's Inc. met Big B's president for lunch and told him that Bruno's Inc. remained interested in acquiring Big B. Then, on July 29, 1996 Revco's president and chief executive officer called Anthony Bruno and requested a meeting in Birmingham, Alabama. Anthony Bruno, surmising that Revco's president intended to express an interest in acquiring Big B, stated that Big B was not for sale. Nevertheless, on Thursday, August 1, 1996, Revco's president met with Anthony Bruno at the headquarters of Big B and indicated that Revco was interested in acquiring all of Big B, and that the Revco board had already met and approved an offer to buy Big B. Anthony Bruno responded that Big B was not currently interested in selling itself and mentioned that Big B's stock was undervalued by the market. Undeterred, Revco's president responded that he would send Anthony Bruno Revco's written proposal to buy Big B. Previously, during an early July 1996 telephone call with a managing director of Big B's investment banking firm, Anthony Bruno had authorized the investment banking firm to develop various strategic alternatives for Big B, including a leveraged buyout. On August 1, 1996, the same day as Anthony Bruno's meeting with the president of Revco, a senior official with Big B's investment banking firm sent Big B's president two preliminary financial analyses for a leveraged buyout of Big B. The analyses assumed both a 100% and an 80% leveraged buyout of Big B and assumed a maximum buyout price of approximately $12 per share. Subsequently, on August 5, 1996, Anthony Bruno received a letter from Revco which included, among other things, a proposal to purchase all of Big B's outstanding shares at $14 per share. On August 7, 1996, Anthony Bruno told Revco's president in a telephone conversation that Revco's proposed offer was inadequate, that Big B's stock was undervalued in the market, and that he preferred that Big B remain independent. Anthony Bruno and James Bruno spoke several times from April 1996 through early August 1996. On or about August 7, 1996, James Bruno was interviewed by a Wall Street Journal ("WSJ") reporter. James Bruno made no inquiries within Big B before speaking to the WSJ reporter. Then, on August 14, the WSJ published an article about Big B stating, among other things, that the investment community believed Big B had received and rejected acquisition offers from Eckerd Corporation ("Eckerd") and Rite Aid. The article stated that both Eckerd and Rite Aid would not comment on this information. However, the WSJ attributed the following statement to James Bruno: "He insists that neither Eckerd nor Rite Aid nor any other company has even approached Big B, much less made an offer to buy it." Anthony Bruno read the WSJ article on or about August 14, 1996 and realized that the statement attributed to James Bruno was incorrect in so far as it related to the reference to "Rite Aid nor any other company . . ." The Brunos discussed that there were factual inaccuracies in the WSJ article on or about August 14, 1996. Neither Anthony Bruno nor James Bruno did anything to correct the statement attributed to James Bruno in the WSJ. On or about August 20, 1996, James Bruno was interviewed by a Birmingham Business Journal ("BBJ") reporter. James Bruno indicated that Big B wanted to remain an independent company, and that no competitors had approached with offers. Three days later, on August 23, Big B's president met with representatives of Big B's investment banking firm. The investment bankers were asked to provide strategic advice to Big B in connection with the letter received from Revco on August 5. Then, on August 26, 1996, the BBJ published an article about Big B's second quarter earnings and speculation regarding mergers and acquisitions of Big B. In the article, the BBJ published the following statement which it attributed to James Bruno: "[James] Bruno said Big B wants to remain an independent company, and that no competitors have approached with an offer." Revco sent a second letter to Bruno and Big B's directors on September 3, 1996. The letter stated, among other things, that Revco was prepared and determined to acquire Big B, and that Revco would consider taking its acquisition proposal directly to Big B's shareholders if Big B did not commence negotiations. On or about September 5, 1996, Bruno responded by telling Revco's president that he believed Big B would benefit by remaining independent. On September 9, 1996 Revco issued a press release announcing that Revco was commencing a cash tender offer to buy all Big B shares for $15 per share. Ultimately, on October 27, 1996 Revco and Big B signed a definitive merger agreement for Revco to acquire Big B at $17.25 per share. D. THE BRUNOS CAUSED VIOLATIONS OF SECTION 1O(b) OF THE EXCHANGE ACT AND RULE 10b-5 THEREUNDER Section 10(b) of the Exchange Act and Rule 10b-5 thereunder require issuers that make public statements to speak truthfully and to include all material facts necessary to make the statements made, in light of the circumstances under which they were made, not materially misleading. See SEC v. Texas Gulf Sulphur, 401 F.2d 833 (2d. Cir. 1968), cert denied, sub nom., Coates v. SEC, 394 U.S. 976 (1969). In addition, an issuer has a duty to correct material, inaccurate statements made by its corporate representatives. See In re Carnation Co., Securities Exchange Act Release No. 22214, 33 S.E.C. Docket 1025 (July 8, 1985); In re Time Warner, Inc. Securities Litigation, 9 F.3d 259, 264-67 (2d Cir. 1993). See also In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410 (3d Cir. 1997); Stranksy v. Cummins Engine Co., 51 F.3d 1329 (7th Cir. 1995); Backman v. Polaroid Corp., 910 F.2d 10 (1st Cir. 1990). In view of the facts set forth above, Anthony Bruno and James Bruno caused violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. In August 1996, James Bruno spoke to reporters from the WSJ and BBJ in his capacity as an official spokesperson of Big B. At the time, Anthony Bruno knew that several competitors had expressed interest in acquiring Big B and that one had made an offer at a specific price. James Bruno, who had spoken with Anthony Bruno several times during the months in question and who knew that Anthony Bruno had had conversations with senior officials of two competitors, made no inquires within Big B before the first interview. He indicated to both reporters that rumors concerning the possible acquisition of Big B were not true. Moreover, after they read the August 14, 1996 WSJ article and discussed the inaccuracies in the article with each other, neither Anthony Bruno nor James Bruno acted to correct those inaccuracies. Through this conduct, the Brunos caused Big B to violate Section 10(b) of the Exchange Act and Rule 10b-5 thereunder by making materially inaccurate statements to reporters and by failing to correct those statements when they were published. Pursuant to Section 21C of the Exchange Act, the Commission may enter an order against any person who "causes" a violation of, among other things, the antifraud provisions. A person is a cause of a violation if it occurred "due to an act or omission the person knew or should have known would contribute to such violation." IV. Based on the foregoing, the Commission deems it appropriate and in the public interest to accept the Offers submitted by the Brunos and accordingly, IT IS HEREBY ORDERED, pursuant to Section 21C of the Exchange Act that Anthony J. Bruno and James A. Bruno cease and desist from committing or causing any violation and any future violation of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. By the Commission Jonathan G. Katz Secretary