In The New York Times yesterday, Mary Williams Walsh wrote about the situation faced by thousands of employees of U.S. Sugar, who participated in an ESOP (employee stock ownership plan) in 1983, which traded their participation in a pension plan for ownership of the company’s stock. But as more employees reach retirement, they have discovered that their shares are not as valuable as they expected.
U.S. Sugar’s shares are not traded publicly, so their value is determined by what the company is willing to pay to redeem them. Then, once an employee cashes in his or her shares, the shares are retired, which critics of the plan allege makes it easier for insider groups to maintain control, because the pool of shares is getting smaller.
According to the article, the company’s board turned down two offers by the Lawrence Group, a large agribusiness concern from Sikeston, Missouri, to buy the shares for $293 each, even though the company was paying employees from $194 to $205 per share at the time. The employees claim that they were not told about the offers or given the chance to sell their shares at the higher price.
To make matters worse, U.S. Sugar hired an outside appraisal firm to evaluate the Lawrence Group’s second offer, which was made in early 2007. The appraiser determined that U.S. Sugar’s break-up value was $2.5 billion, or $1,273 per share. Based on that estimate, U.S. Sugar rejected the Lawrence Group’s bid as inadequate, but did not increase the purchase price offered to employees.
The employees have filed a class action, Johnson v. White, Civil Action No. 08-CV-80101 (M.D. Fla.), which is described on this Website set up by their counsel, Colson Hicks Eidson. The site has most of the court filings from PACER in PDF format.
The most recent filing is an amended complaint filed on May 2, 2008, which alleges claims for breach of fiduciary duty against the company’s directors and officers and for violations of ERISA and equitable relief under ERISA Section 502(a)(3).