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Steve and Tim Forbes searching for non-family COO

Forbes magazine CEO Steve Forbes and his brother, COO Tim Forbes, who have run the magazine for 19 years, are working with a headhunter to find a new COO, Fortune reported.

"Tim is staying with the company, he's just going to go to a higher level, says Forbes spokesperson Monie Begley. "The new person coming in will report to Steve and Tim."

 

The company, which recently hired a consultant to address its web strategy, may be seeking someone who can help revamp its digital presence, Fortune reported.

It's notable that the company is looking for new blood of the non-Forbes variety. That's a tremendous change for Forbes, which has had little genetic variation in its management since B.C. Forbes founded the magazine in 1917. In 1954, B.C.'s son Malcolm took over. When he died, Steve gained control and had been the face of the company until now.

 

Tim Forbes, who unlike his brother has avoided the spotlight, has "been actively running the magazine and website," the Fortune article said.

Tim might move up to become CEO of the company. If that happens, Steve would relinquish that role but remain as chairman, and the new person would enter as COO. In that case Tim would takeover as the face of Forbes, and the new hire would take over Tim's role in the company's day to day operation. A source speculated to Fortune that new leadership is needed to help make the company profitable again.

 

(Source: Fortune, April 28, 2010.)



Activist investor fails to win seat on Lagardere board

Activist investor Guy Wyser-Pratte has failed to win a seat on Lagardère's supervisory board, the Financial Times reported. Wyser-Pratte's bid for a board seat, which was opposed by the company's management, was rejected bu 78% of the votes cast at the company's annual meeting, the FT article said. According to the report, Wyser-Pratte

said he would continue to press for a rapid shake-up of strategy and changes to the company's limited partnership in shares structure that allows [CEO Arnaud] Lagardère to maintain tight control over the group while owning less than 10 per cent of its stock.

 

Wyser-Pratte's criticisms are "credited by some analysts and investors with crystallizing discontent with Mr. Lagardère's management and forcing him to respond," the report noted.

At the very least, Mr. Lagardère has been obliged to account more fully for his management record directly to shareholders and in media interviews.

 

(Source: Financial Times, April 28, 2010.)



Schulz heirs partner with Iconix to acquire Peanuts brand

Brand manager Iconix Brand Group Inc., in partnership with the heirs of comic strip creator Charles Schulz, has acquired the Peanuts brand from E.W. Scripps Co., the Wall Street Journal reported.

Iconix and the Schulz family will pay about $175 million for the brand, with Iconix controlling an 80% share.

 

The deal also includes the broader licensing business of United Features Syndicate, a unit of Scripps, the report noted.

Iconix expects Peanuts to generate roughly $75 million in annual royalties. The Schulz heirs will receive a portion of the revenue in addition to their minority stake in the new partnership.

 

(Source: Wall Street Journal, April 27, 2010.)



Mittelstand companies continue trading with Iran

Germany's large industrial companies, including Siemens, Munich Re and ThyssenKrupp, have stopped doing business with Iran, but the country's Mittelstand companies -- small and medium-sized, primarily family-run businesses -- are continuing and even expanding their relationships with Iranian businesses, the Financial Times reported.

Michael Tockus, managing director of Hamburg's German-Iranian trading association, told the FT:

"There are companies that have been doing business with Iran for 40 years -- sometimes over two generations. This often goes beyond mere business ties, one could even call it friendships."

 

Germany is Iran's largest European trading partner, the FT article said. Mittelstand companies, the report noted,

have been particularly hard hit by the global economic crsis -- much more so than sprawling conglomerates such as Siemens, which could easily outbalance a drop in some business areas.

 

(Source: Financial Times, April 27, 2010.)



Brown-Forman encourages greater family involvement

Louisville, Ky., liquor company Brown-Forman Corp. is taking measures "to get family shareholders more involved in the company," the Wall Street Journal reported.

Last year, Brown-Forman hired its first director of family-shareholder relations to assume responsibilities usually handled part time by other executives. He travels to meet with family members, helps recruit family interns and coordinates educational seminars. Earlier, Brown-Forman created a family-shareholders panel with 11 relatives and hired a consultant to advise it on relations with the Browns, who hold roughly two-thirds of the voting stock.

 

Non-family CEO Paul Varga told the Journal that the initiative "provides a long horizon and the ability to get through the bumpy rides."

When Varga became chairman in 2005, the board named Garvin Brown IV, a senior vice president at the company, "presiding chairman," with responsibility for leading board meetings, the Journal reported. Varga and Brown

said they realized many younger family members had little exposure to the company and agreed Brown-Forman needed to take a proactive approach.

 

Lloyd E. Shefsky, a consultant to the company and co-founder of the Center for Family Enterprises at Northwestern University's Kellogg School of Management, told the Journal that although Brown-Forman had been led primarily by family members for 140 years, none of the six fifth-generation members who worked for the company held a senior role or was considered a CEO candidate.

Complicating matters, Brown-Forman had grown in a few decades from a relatively small U.S.-focused company to a big global player, led by the Jack Daniel's brand. The family, too, had expanded. Today, there are 117 living descendants of the founder and 38 widows or spouses, the company says.

 

An analyst told the Journal that Brown-Forman "may be stepping up its family outreach to lessen the chance that another company could make a successful takeover bid." (Source: Wall Street Journal, April 26, 2010.)

 



After sale of auto dealership, widows sue over company assets

Widows of two of the four brothers who owned Clair Auto Group, one of New England's largest auto dealership chains until the company was sold three years ago, have sued their brothers-in-law, alleging that the brothers tried to "bully" the widows out of the company's remaining assets, the Boston Globe reported. The women accuse their brothers-in-law of "using the money to fund an extravagant lifestyle," the article said.

According to the report, Claire M. Clair, the widow of James Clair Jr., and Jane M. Clair, the widow of Mark Clair, allege that Joseph Clair and Michael Clair

"conducted a campaign of coercion against" them "in an effort to bully them into abandoning the valuable ownership interests" in Clair Auto Group ... which still held land and proceeds from the sale of nine major dealerships.

 

Michael and Joseph Clair deny the allegations, an attorney for the business told the Globe.

Before Mark Clair's death, the family had agreed to sell most of the dealerships to Prime Motor Group for $80 million, the article said.

Most of the sale proceeds were distributed to the [brothers] or their families and are not in dispute. But other assets valued at about $20 million, including real estate and cash, remained in Clair Auto Group. The brothers were supposed to wind down the remaining business and distribute the rest of the money to the shareholders when possible, according to the widows' lawsuit.

 

The lawsuit alleges that Joseph and Michael Clair tried to get their sisters-in-law to sign over their ownership interest because the women had collected proceeds from their husbands' life insurance policies, the Globe reported. The brothers also "allegedly pressured the widows to turn over their stock because of tax concerns, and argued the women had not been shareholders or partners in the business since the deaths of their husbands."

An attorney for Claire Clair said the widows had not received detailed financial reports from the company, the Globe article said. (Source: Boston Globe, April 23, 2010.)



Agnelli heir Elkann to chair Fiat’s board

John Elkann, the 34-year-old great-great-grandson of founder Giovanni Agnelli, is the new chairman of the board of Italian automaker Fiat SpA, the Wall Street Journal reported. He succeeds Luca Cordero di Montezemolo, who will remain on Fiat's board and continue as chairman of Ferrari, which Fiat owns.

Fiat also planned to unveil a five-year business plan that includes a spinoff of passenger-car unit Fiat Group Automobiles.

The Journal report noted that Elkann "until now has mainly played a background role at Fiat." The Journal article said:

Mr. Elkann's decision to remain on the sidelines was in part an acknowledgment of the pain the family inflicted on Fiat in recent decades by trying to run the car maker itself.... [Elkann's grandfather, Gianni Agnelli] often resisted closing even money-losing factories in Italy to preserve jobs and avoid tarnishing the family's reputation. Fiat's management ranks, meanwhile, swelled with underperforming managers who kept their jobs thanks to strong ties to the family. By the time Mr. Agnelli died in 2003, Fiat was facing financial ruin and was saddled with an empty product pipeline and billions in debt.

 

Elkann was named to the Fiat board at age 22 in 1997 and several years later was named to run the family fortune, the Journal said.

He sold off treasured family assets, such as the legendary French winery Chateau Margaux, paving the way for the family to inject $313 million of its own money into Fiat. The move helped the struggling auto maker stave off bankruptcy.

 

Elkann has "begun to take a more assertive role in the family business" over the past two years, according to the Journal report.

In 2008, he merged two of the Agnelli family's holding companies to create Exor, the holding company that owns a controlling stake in Fiat and myriad other businesses.... That move helped make the Agnelli empire more transparent by streamlining the chain of holding companies between Exor and Giovanni Agnelli & Co., the family's main investment vehicle. Mr. Elkann will become chairman of Giovanni Agnelli & Co. in May, replacing his long-time mentor, Gianluigi Gabetti.

 

Elkann named Sergio Marchionne as Fiat's CEO. Marchionne put the company back into the black, and Fiat took over Chrysler in a U.S.-financed bankruptcy restructuring, the Journal article noted.

The Financial Times called Elkann's appointment "a confirmation of change that could prove to be the making of a new Fiat and also of the Agnelli family's future fortunes." The FT article said:

[W]hile Fiat Auto is likely to remain one of Exor's key investments, Mr. Elkann's logical objective must be to grow Exor's other investments so they are no longer dwarfed in value terms even by a fitter Fiat. So while the naming of this young Agnelli as chairman of Fiat might seem to be a return to the past, it is more likely to be a case of everything staying the same in order that everything else can change.

 

(Sources: Wall Street Journal, April 21, 2010; Financial Times, April 20, 2010.)



Fourth-generation Haitian rum company hampered by earthquake

Distiller Rhum Barbancourt, one of Haiti's oldest businesses, sustained $4 million worth of losses in the Jan. 12 earthquake that devastated the country, according to a Los Angeles Times report. Thirty percent of the vats in the company's aging room suffered damage, and two employees were killed, the article said.

It could take up to four years of production of one of the world's top rums to return to its pre-quake capacity, though the owner is hoping to resume bottling and shipping by early May.

 

General director and fourth-generation family owner Thierry Gardere told the LA Times that Barbancourt, founded in 1862, generates annual revenues of about $12 million. Gardere's daughter, Delphine Nathalie Gardere, 26, has expressed interest in joining the business, the article said. (Source: Los Angeles Times, April 20, 2010.)



Lagardere plans to sell its stake in Canal Plus

Lagardère SCA plans to sell its 20% stake in France's biggest pay-TV operator, Canal Plus France, Bloomberg reported. Vivendi SA, which owns the rest of Canal Plus, has said it would like to buy Lagardère's stake.

Lagardère CEO Arnaud Lagardère told the Wall Street Journal that he won't bend to activist investor Guy Wyser-Pratte's demands to give shareholders a greater say in company management. According to the Journal report:

Under Lagardère's limited partnership structure, the company's managing partners can veto the majority of decisions voted by shareholders. The system enables Mr. Lagardère to control the business with only a 9.62% stake in the company, as the other four managing partners tend to go along with him on major decisions as they are appointed by him. Mr. Wyser-Pratte wants to change this. But Mr. Lagardère must sign off on any change in management structure, something he says he isn't willing to do.

 

The Journal report noted that Wyser-Pratte has called the company "a hodge-podge conglomerate" and believes that Lagardère should focus more on its core media businesses.

Arnaud Lagardère told the Financial Times that the Canal Plus decision was not precipitated by Wyser-Pratte's "campaign of destabilization." The FT reported that Lagardère also plans to sell the company's 7.5% stake in European Aeronautic Defence & Space Co. (EADS), the parent company of Airbus. Lagardère told the FT he was "not in a hurry to sell things to calm everyone down." The FT report noted that Lagardère has

taken a battering in the French media for allegedly neglecting EADS, in which Lagardère is one of the core shareholders with the government.

 

According to the FT article, critics say Arnaud Lagardère "lacked commitment to his role as a chief executive -- which he inherited from his father..... Selling off Lagardère's stake in Canal Plus would help reassure investors he will streamline the group." (Sources: Bloomberg, April 15, 2010; Wall Street Journal, April 16, 2010; Financial Times, April 16, 2010.)



Simon revises its bid for General Growth

Giant mall developer Simon Property Group revised its offer for rival General Growth Properties Inc. Simon offered to match the terms of a proposal from another bidder, Brookfield Asset Management Inc., to finance General Growth's exit from bankruptcy, the Wall Street Journal reported.

Simon's latest offer, which includes $1 billion from hedge fund Paulson & Co., is a marked departure from its earlier efforts to acquire General Growth in entirety. Those efforts had been stymied by General Growth's concerns about antitrust issues from combining the two largest mall owners in the U.S. But Simon's new tack still could put it in position to eventually make a play for all of General Growth. That's because displacing Brookfield as the cornerstone investor in General Growth's recapitalization plan would leave Simon as one of General Growth's largest shareholders with few, if any, competitors vying for the rest of the company.

 

Simon's offer differs from Brookfield's in that the latter proposal requires that Brookfield and two General Growth investors, Fairholme Capital Management and Pershing Square Capital Management LP, receive 120 million warrants to buy General Growth stock at $15 a share, the Journal report noted.

In essence, Simon's offer is a gamble that Brookfield, and perhaps Fairholme and Pershing, will abandon their offer rather than matching Simon's pledge to forgo the warrants.

 

(Source: Wall Street Journal, April 15, 2010.)



Weinstein brothers close to acquiring Miramax from Disney

Bob and Harvey Weinstein of Weinstein Co. are nearing a deal to acquire Miramax Films from Walt Disney Co., the Wall Street Journal reported. The deal would include access to most of Miramax's film library, the article said.

The brothers founded Miramax in 1979 and named it for their parents, Max and Miriam Weinstein. The brothers sold it to Disney in 1993 and left in 2005 to start their current film studio.... Disney in recent months had shut down virtually all new production under the Miramax label, with just a handful of films left in its release pipeline.

 

The Weinsteins' bid is backed by Los Angeles billionaire Ron Burkle, the article said. They reportedly are offering about $600 million for Miramax.

In a separate report, the Journal noted:

Success has eluded the Weinsteins in their independent venture.... Weinstein Co. released a string of bombs, punctuated by a smattering of hits. The company suffered through round after round of layoffs and strategic restructurings. The brothers initially wanted to expand their company into a media empire, rather than focus on the film business, and they got distracted by investments in a social-networking site as well as a clothing line -- neither of which paid off as initially hoped.
 

Update: In a later report, the Wall Street Journal said that "under the transaction currently being discussed," the Weinsteins' backers, led by Ron Burkle's Yucaipa Cos., would actually own Miramax Films. "The Weinsteins, either as individuals or through their Weinstein Co. studio would manage the library in exchange for fees." Although the brothers would have "a key role in overseeing the company" and could have access to some of their franchises, "that arrangement is a far cry from outright ownership," the Journal report said.   

 

(Sources: Wall Street Journal, April 19, 2010; Wall Street Journal, April 21, 2010.) 



Internal feud at Toyota pits family against managers

A "long-simmering internal feud" at Toyota Corp. has been exacerbated by the company's current quality crisis, with the founding Toyoda family and the company's professional managers casting blame on each other, the Wall Street Journal reported.

President Akio Toyoda, the 53-year-old grandson of the founder, has tried to push out one of the nonfamily executives: his predecessor as president, Katsuaki Watanabe, now vice chairman.

 

Through an intermediary, Toyoda suggested that Watanabe leave Toyota and run an affiliate of the company; Watanabe refused, the Journal report said.

Mr. Toyoda and his allies have been saying openly that when he took the top job last year after a 15-year hiatus for the Toyoda clan, he inherited a company weakened by nonfamily predecessors who sacrificed quality for faster growth and fatter margins.

 

The nonfamily managers, according to the report:

say Toyota's current troubles are less a quality crisis and more a management and public-relations crisis of Mr. Toyoda's making, reflecting their longstanding warnings that he wasn't ready to run a global corporation.

 

(Source: Wall Street Journal, April 14, 2010.)



Small family wineries are diversifying

Chris Figgins, son of the founders of Leonetti Cellar winery in Walla Walla, Wash., has established a new umbrella management company, Figgins Family Wine Estates, to handle the family's new ventures, which include selling olive oil and launching a line of grass-fed beef, the Puget Sound Business Journal reported.

Leonetti Cellar is pursuing a strategy of growth through diversification, a move that more small wineries seem to be embracing as winemakers grapple with the weak economy, industry observers say.

 

Lewis Purdue of Sonoma, Calif., editor of Wine Industry Insight, told the journal that diversification has worked well for small wineries like Sonoma's Cline Family Vineyards, which launched a lower-price Red Truck label.

Each of the Figgins family's products will have its own brand but will be marketed collaboratively, the report noted. A new wine label, called Figgins, will sell a blended wine. The company also provides custom farming for other winemakers. (Source: Puget Sound Business Journal, April 16, 2010.)



Designer’s mother advising her son on brand expansion

Susan Posen, mother of fashion designer Zac Posen, is advising her son as he develops a collection to be sold in Target and markets a new lower-priced line, called Z Spoke, for Saks, the Wall Street Journal reported. Susan Posen returned to the Zac Posen fashion house as its chairman in October 2009, the article said. A former mergers and acquisitions attorney, she was CEO before an outside chief executive was hired three years ago.

Mrs. Posen has been pressing for more attention to the commercial side -- as opposed to the artistic side -- of fashion. The company has added new lines, shed expenses and employees, and even moved some production from Italy to China to save money.... Mrs. Posen is helping her son retrench in an industry where some storied names, such as Christian Lacroix, failed during the financial crisis.

 

Susan Posen, 64, essentially runs the business while Zac, who is nearly 30, designs and promotes the brand, the Journal article said. She first got involved with her son's business at the start of his career, when a prospective investor offered a contract whose "terms were egregious," she told the Journal. (Source: Wall Street Journal, April 15, 2010.)



Fidelity considering splitting president’s post

In the wake of the departure of its president, Rodger Lawson, Fidelity Investments may fill the position with two executives, Bloomberg reported. One would head asset management and another would oversee the company's brokerage and retirement divisions, according to the report.

Chairman and CEO Edward C. "Ned" Johnson III, who turns 80 in June, "has given no indication that he plans to retire soon, and has left open the question of who would succeed him. His daughter Abigail P. Johnson, 48, leads fund sales to individuals and corporate retirement services," Bloomberg reported.

Fidelity has interviewed at least three external candidates over the past several months to fill the vacancy left by Lawson's departure.... In an interview in January, Lawson said it was possible that Fidelity's new leadership would come out of the firm's nine-member executive committee, which includes Abigail Johnson; Jacques Perold, asset-management chief; and Anthony Ryan, chief administrative officer.

 

(Source: Bloomberg, April 15, 2010.)



Ireland’s Quinn Group placed in administration

The family-owned Quinn Group of Ireland, whose cement business benefited from the country's building boom, invested its profits in a diverse array of holdings, including insurance and luxury hotels. But Ireland's financial regulator has put Quinn Insurance in administration, and founder Sean Quinn "is now set to become one of the biggest casualties of the crash," the Financial Times reported.

According to the FT report, Quinn said last year that he had lost more than 1 billion euros in an investment in Anglo Irish Bank and reflected, "We were too greedy."

His current troubles are arguably more damaging to his business reputation and raise questions about the survival of the Quinn Group.

 

Ireland's financial regulator accuses the company of "not maintaining sufficient cash reserves as required by insurance regulations to cover future claims by policyholders."

In October 2008, Quinn Insurance was fined for making loans of 288 million euros to related family owned companies in breach of insurance regulations. That same month, the Quinn Group disclosed charges of 829 million euros, which are understood to relate to losses incurred on its investment in Anglo Irish.... [T]he last-minute rescue under consideration ... would have seen the state-owned lender refinancing 600 million euros of Quinn Group bond debt, while providing a cash injection to Quinn Insurance of 150 million euros.... It looked like another example of the cosy capitalism Ireland is trying to move away from.

 

The Quinn Group has 5,500 employees, the FT article said. "The administrator will be looking for buyers to secure the Quinn Group's survival," the report said. (Source: Financial Times, April 16, 2010.)



Wawa celebrates billionth free ATM transaction

During the month of April, Wawa Inc. will mark the billionth surcharge-free automated teller machine withdrawal at one of the family-owned company's convenience stores. The company is marking the occasion with a parade in Center City Philadelphia, the Philadelphia Inquirer reported.

Brand-and-marketing experts said Wawa's maintenance of surcharge-free ATMS even during a down economy burnishes the company's reputation for being focused on consumers' desire for convenience and value.

 

The company "has been strong enough to invest in employees and infrastructure," the Inquirer report said.

For example, while some companies cut health-care benefits during the recession, Wawa offered them to 7,000 additional employees; 1,000 accepted the offer. It also boosted the percentage of profits contributed to the employee stock-ownership plan to 15 percent, from 10 percent.

 

Wawa, which operates in Pennsylvania, New Jersey, Delaware, Maryland and Virginia, has 572 stores, three more than it had at the end of 2007, the Inquirer article said. It plans to open 20 to 25 more stores both this year and next year and eventually plans to expand outside its current five-state market, the report said. (Source: Philadelphia Inquirer, April 13, 2010.)



Bankruptcy court judge: Trump can keep control of A.C. casinos


U.S. Bankruptcy Court Judge Judith Wizmur has ruled that developer Donald J. Trump and Trump Entertainment Resorts Inc. can maintain control of three Atlantic City casinos that bear the Trump name, the Philadelphia Inquirer reported.

The judge ruled that in favor of a plan by bondholders and the company to bring the company out of bankruptcy for a third time, the report noted. Billionaire financier Carl Icahn had battled against Trump for control of the company. The two sides argued in court over "the value of the Trump brand, and whether the three casinos could survive without it," the article said.

Acknowledging the Trump casinos' difficulties in making mortgage-interest payments as revenues have tumbled in the last few years, Wizmur ruled that their continued use of the Trump name -- which an Icahn takeover could not guarantee -- was critical. It was compelling enough, Wizmur reasoned, to override the fact that the Icahn plan would have left the company completely debt-free.

 

The judge wrote:

"... the perpetual, royalty-free license of the continued use of the name and likeness of Donald Trump, the newly established right to use the name and likeness of Ivanka Trump, and the restrictive covenant imposed on the Trump parties to prohibit the use of the Trump brand in connection with casino or gaming activities in New Jersey and six adjacent states all tilt the balance in favor of approving the settlement as being in the paramount interest of the reorganized debtors."

 

Trump Entertainment will now be controlled by a committee of hedge funds, the Inquirer reported. Under a plan approved by the judge, Trump will own 5% of the company, with the right to purchase an additional 5%.

For Donald Trump ... the decision was validation of what he has trumpeted all along: that his name and brand were worth millions.

 

(Source: Philadelphia Inquirer, April 13, 2010.)



Investor in Lagardere petitions shareholders for changes

Guy Wyser-Pratte, a New York-based investor in Lagardère SCA, has submitted two resolutions asking the family-controlled French conglomerate's shareholders to add him to the company's supervisory board and to change the bylaws, the Wall Street Journal reported.

The Journal report noted that the company:

is registered as a "société en commandite par actions," or limited partnership, a structure that gives managing partners veto power on most decisions made by shareholders. As a result, Chief Executive Arnaud Lagardère controls the company even though he and his partners own only a 9.62% stake.

 

Wyser-Pratte, who owns a 0.53% stake, wants the company, which operates in the media and defense sectors, to revamp what he calls a "medieval" corporate structure and narrow the focus of its operations, the Journal article said. In March, Lagardère reported a 77% drop in net profit, to 137 million euros ($184.9 million), the report noted.

Mr. Lagardère inherited control of the company when his father, Jean-Luc, passed away in 2003. Since Mr. Lagardère took over, he has worked on narrowing the conglomerate's focus. Analysts say he could go further by selling Lagardère's 7.5% stake in EADS [European Aeronautic Defence & Space Co., the parent company of Airbus] and the group's 20% stake in French pay-TV business Canal Plus.

 

(Source: Wall Street Journal, April 12, 2010.)



Creditors sue Opus Corp. founding family

A lawsuit filed by Opus West, an operating unit of Opus Corp., on behalf of the company's creditors chares that the parent company "siphoned" $150 million from Opus West, the Wall Street Journal reported. Opus West filed for bankruptcy protection last year.

Opus Corp. transferred "tens of millions of dollars to its controlling family [the Rauenhorst family of Minnesota] in the years preceding the collapse of the company's operations," the article said. Dennis Ryan, an attorney for Opus, told the Journal that about $120 million of the $150 million went to family trusts, which used about $80 million of it to pay taxes.

Mr. Ryan says it was done properly and the company couldn't have anticipated the real-estate downturn. Opus and the Rauenhorst family trusts have filed a motion to dismiss the suit in U.S. Bankruptcy Court in Dallas.

 

Opus's former chairman and CEO, Mark Rauenhorst -- son of founder Gerald Rauenhorst -- told the Journal last fall that dividends were paid only out of profits and that the parent company invested tens of millions of dollars into its subsidiaries' projects.

The fight over the movement of the money raises a question that has bedeviled numerous distressed family-run businesses and their creditors: At what point does the family's pocketing of the cash cross a legal line? ... Legal and accounting experts say that, especially with closely held companies, controlling families have the right to reap big profits as long as it is approved by the board of directors.... But if creditors can prove the company should have known it was on the brink of insolvency, it gets trickier. At that point, there are more legal restrictions on moving money, especially if there are loan covenants designed to protect creditors in distressed situations.

 

Opus Corp., founded in 1953, built company headquarters for Best Buy and other firms. Through five regional units, including Opus West, the company "bought land, designed and built projects, leased them and then sold them at a significant profit," the Journal article said.

While the subsidiaries were profitable ... 75% of pretax earnings were distributed as dividends to the Opus parent company, according to the complaint and confirmed by the company.

 

When the economy faltered, three Opus subsidiaries were stuck with "dozens of half-built or half-leased projects that couldn't be sold or refinanced," the Journal reported. Opus South and Opus West are in Chapter 11; Opus East has been liquidated, the article said.

Gerald Rauenhourst had donated tens of millions of dollars to Catholic universities, the report noted.

(Source: Wall Street Journal, April 7, 2010.)



Greenpeace report: Koch Industries funds climate denial

A report published on the website of environmental activist group Greenpeace USA alleges that Koch Industries, brothers Charles G. Koch and David H. Koch, and foundations controlled by the company and the Koch family have "quietly funneled" $50 million to "climate-denial front groups that are working to delay policies and regulations aimed at stopping global warming."

Greenpeace wrote on its website:

Charles G. Koch and David H. Koch have a vested interest in delaying climate action: they've made billions from their ownership and control of Koch Industries, an oil corporation that is the second largest privately held company in America (which also happens to have an especially poor environmental record).... The Koch brothers, their family members, and their employees direct a web of financing that supports conservative special interest groups and think-tanks, with a strong focus on fighting environmental regulation, opposing clean energy legislation, and easing limits on industrial pollution.

 

Koch Industries' official response to the Greenpeace report, cited on the New York Times' "Green Inc." blog, said:

In a consistent, principled effort for more than 50 years -- long before climate change was a key policy issue -- Koch companies and Koch foundations have worked to advance economic freedom and market-based policy solutions to challenges faced by society..... The Greenpeace report mischaracterizes these efforts and distorts the environmental record of our companies. Koch companies have long supported science-based inquiry and dialogue about climate change and proposed responses to it. Koch companies have put tremendous energy into achieving sound environmental stewardship and consistently implemented innovative and cost-effective ways to reduce waste and emissions, including greenhouse gases, associated with our manufacturing and processes.... Both a free society and the scientific method require an open and honest airing of all sides, not demonizing and silencing those with whom you disagree. We've strived to encourage an intellectually honest debate on the scientific basis for claims of harm from greenhouse gases....

 

(Sources: Greenpeace.org; "Green Inc.," nytimes.com, March 30, 2010.)



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