Do As I Say ... 

Concord EFS insiders dump stock while urging investors to buy.

With its stock plunging as much as 15 percent a day this month, Memphis-based Concord EFS announced that it was buying back 250 million shares in an effort to restore confidence and boost the stock price.

But selling Concord EFS stock is exactly what the founders and officers of the company themselves have been doing for years, and the pace has accelerated sharply in the last year. If insider trading activity is any indication of a company's prospects, investors were simply obeying what can only be construed as a screaming sell signal from the top.

Concord EFS (CEFT on the Nasdaq 100), an electronic-transactions processor for truck stops, convenience stores, service stations, and other retailers, has one of the most generous options policies for executives and directors of any public company in Memphis. An option is the right -- but not the obligation -- to buy shares of stock at a set price within a certain time. In this case, the price was far below the market price of the stock of Concord EFS, which was the best stock-market performer in Memphis over the last decade.

According to reports filed with the Securities Exchange Commission (SEC), on May 31, 2002, Edward T. Haslam, chief financial officer, sold 102,500 shares at $31.86 a share, netting $3,265,650. Haslam had acquired the stock through options for an average price of $9.06.

The sale left Haslam, who presumably knows more about the company's financial position and prospects than anyone, with zero shares of stock.

But Haslam was far from the only insider dumping Concord EFS. Marcia Heister, secretary of the corporation, bailed out of 30,000 shares, leaving her with zero. Ronald Congemi, director, dumped 100,000 shares he picked up at $5.11 for $29.45. He also zeroed out. Director Richard Kiphart sold 206,300 shares, netting $6,365,096.

But even those sales were small potatoes compared to what founders CEO Dan Palmer and President Edward Labry have been doing.

In November and December of 2001, Palmer and Labry each sold 1.5 million shares of Concord EFS they acquired through options. The sales netted each man $42,720,000. The shares had been acquired for prices ranging from $1.14 to $1.98 a share and sold for $27.22 to $31.20.

Poor Kiphart, the director, sold another 1.5 million shares (this in addition to the 206,300 sold this year) a tad soon last November and got only $27.35 for the lot, netting a mere $41,025,000.

In total, over the last 13 months, Concord EFS insiders sold 28 times, exercising 4,285,142 options and dumping 6,077,722 shares. Total number of buy transactions and shares purchased by insiders during the same period: zero.

Not bad for a low-profile company most Memphians have never heard of. The company publishes the most plain-vanilla annual report of any public company in Memphis, sometimes without so much as a cover picture. Its civic activities tend to be quiet and of the "supporting sponsor" variety. One of the few times Palmer was photographed was in the November 2000 special "Money" issue of Memphis magazine. He wore a plaid short-sleeved shirt with an open collar and no tie.

The story noted that a $100 investment in Concord EFS in 1995 was worth $782 five years later. In a down market, it was up another 65 percent in 2000 and managed a small gain in 2001, another down year for the market. But this year has been a different story. Perhaps taking their cue from the big insider sales at the end of 2001, individual investors and mutual funds have decided Concord's ride is over, at least for a while. The stock traded at $16 this week and hit a low of $12 a week ago when rumors spread that the company was being investigated by the SEC.

Palmer took the unusual step of publicly denying those rumors, and the stock rallied somewhat. But it is still 60 percent off its 52-week high of $35.

As their holdings, or rather lack of holdings, indicate, Palmer and Labry have always been sellers of Concord EFS. According to the 2002 proxy statement, they each had over 10 million shares at one time. The value of their exercisable and unexercisable options at that time: over $365 million each, making them among the wealthiest people in Memphis.

But as soon as they acquire stock through their options, they sell it. According to SEC filings, Palmer owns only 40,000 shares; Labry, 68,234. Little wonder then that the market yawned when Concord EFS announced August 5th that it was buying back 250 million shares.

When it comes to Concord EFS, investors seem to have learned a lesson: Watch what we do, not what we say.

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