U.S. Sugar employees sue for better deal

Jane Bussey

Jul. 23, 2008 (McClatchy-Tribune Regional News delivered by Newstex) -- After Butch Wilson sold his 700 shares in United States Sugar Corp. at the time of his October layoff, the computer specialist counted himself lucky to have exited before the stock sank 20 percent lower.

But the recent news that U. S. Sugar plans to sell its assets to Florida water managers at a price that would have given him a $150 premium on each share or $350 per share, left him wanting to turn back time. "If we had all known, we would have left the stock in the company," Wilson said.

On the heels of the June 24 announcement of U. S. Sugar's potential sale for $1.75 billion, three new class-action lawsuits have been filed in U. S. District Court in Miami claiming the sugar and citrus producer cheated its employee shareholders out of millions of dollars in retirement savings tied to company stock.

The latest lawsuits, which could potentially include former U. S. Sugar employees such as Wilson in the class of petitioners, were filed June 30, July 15 and July 16 and are similar to a complaint filed in federal court in Miami in January.

FOUR SUITS

All three new complaints and the January suit hinge on the fair price for U. S. Sugar shares and whether the company and its directors breached their duty to shareholders by rebuffing a 2005 offer from the Lawrence Group of Sikeston, Mo., to buy U. S. Sugar for a sum that would have paid $293 a share.

From 2005 to the present, shares have been redeemed at $213 to $195.40 per share, according to the suits.

STOCK PLAN

Under the company's Employee Stock Ownership Plan, shares cannot be traded, only redeemed after an employee retires. There are an estimated two million shares in the company, which is controlled by descendants of the founder, Charles Stewart Mott, and two foundations.

Wilson, who was let go last October in a group of some 40 employees as U. S. Sugar tried to cut costs, said he sold his shares because he expected the stock to sink and it did.

Before the June announcement, Wilson said he considered himself lucky because the shares fell as low at $152.50. Now he regrets selling. "Unfortunately, I did," said Wilson, currently the director of the Clewiston Museum.

The sale, which still is being negotiated and calls for U. S. Sugar to continue operating the company for another six years before exiting the business, had an immediate impact on the January litigation.

It halted all proceedings in that lawsuit until Aug. 13 to allow the law firm of Colson Hicks Eidson time to file a revised suit, addressing the proposed purchase by the state.

BOLSTERS CLAIMS

Colson Hicks attorney Curtis B. Miner said the higher share price of $350 bolsters the claims against U. S. Sugar. "For all the poor people who sold their shares, it accentuates the unfairness," Miner said.

But the $350 share price also boosts the company's argument that the offer from the Lawrence Group was too low.

Attorneys for the defendants did not respond to requests for comment, but in a motion to dismiss the suit, the company claimed the Lawrence Group never presented a formal offer.

The motion also said that shares have different prices when a company is an ongoing concern and when the assets are being liquidated, which is what will happen if the U. S. Sugar sale is completed.

HIGHER OFFER

Those familiar with the sale and the lawsuits also point out that the $1.75 billion price is much higher than the $575 million Lawrence Group offer because it includes at least $700 million to repay debt as well as allowances for capital gains taxes on the land, the funding of the company's pension plan and other obligations.

Kenneth J. Vianale, a Boca Raton attorney who filed the three latest lawsuits, said that it is up to the courts to decide if all the lawsuits are consolidated.

The new suits offer additional insight into some of the financial problems of the closely held U. S. Sugar. Some six months before the planned sale was announced, one of the new lawsuits said, U. S. Sugar sent a memo to employees that shares would be redeemed at $180 per share -- "obviously a decrease in value."

SUSPENDED DIVIDENDS

Early in 2008, the company ended all retiree healthcare benefits, and on April 15, announced it had "no other choice than to temporarily cease paying dividends," the June 30 lawsuit said.

Ellen Simms, a former corporate controller at U. S. Sugar, said she is now happy that she and her husband cannot sell their U. S. Sugar shares until next year under company requirements.

But Simms, who now runs a frame shop and art gallery in Lakeland, said the lawsuits address the issue of retirees who sold their shares.

"Some of the best people you would ever want to meet worked for that company, and they should get their fair share," Simms said.

Newstex ID: KRTB-0123-26869393