Accused of Inflating Stock : Compact Video Settles in $7-Million Investors’ Suit

A federal judge Monday approved a settlement that could approach $7 million in a class-action lawsuit filed on behalf of 4,000 investors alleging that Burbank-based Compact Video overstated earnings and inflated its stock price from June, 1980, to January, 1982.

Under the settlement, Compact will contribute 200,000 shares of its stock plus as much as $3 million to a fund that will also contain $2.5 million provided by the insurers of Compact’s management during the period covered by the suit. Trading over the counter, Compact stock closed Monday at $6.63.

Wesley G. Howell, Compact’s lawyer, said any part of the fund not disbursed to the plaintiffs will revert to the company, including any unspent portion of the $2.5 million put up by the insurance company. He said Compact will probably end up paying far less than its $3-million limit.

Athough agreeing to the settlement, the company admits no wrongdoing, Howell said.

Compact Video is a supplier of post-production videotape services for major television and film producers. For the year ended April 30, Compact lost $4.2 million on sales of $41.4 million, mostly because of the cost of closing and consolidating operations.

In the fall of 1982, three investor groups charged in U.S. District Court in Los Angeles that the company and former top executives Robert E. Seidenglanz, Gregory L. Biller and Gary P. Biller overstated Compact Video’s earnings, assets, net worth, inventory and accounts receivable.

The suits said the company’s misrepresentation falsely inflated the price investors paid for Compact’s stock. At times the stock sold for more than $25 a share.

The three cases were eventually consolidated before Judge Wallace Tashima, who rejected an earlier settlement but approved a more comprehensive arrangement Monday.

Seidenglanz and the Billers could not be reached for comment. Nor could current officials of Compact.

Although the settlement has been approved by all parties to the suit, it will not become final until fees for Ernest T. Kaufmann, the investors’ lawyer, have been set. Those will come out of the settlement fund.

Kaufmann said investors covered by the settlement have until May 5 to apply for payments.