Members of Congress tried to prevent disputes over the fair market value of shares in employee stock plans by requiring private companies to get independent appraisals each year. But workers at US Sugar say the chairman and his allies withheld key information from the appraiser and artificially depressed the stock price, something the chairman denies. The employees do not accuse the appraiser of any wrongdoing.
To document their allegations, the former workers cite two offers to buy US Sugar for US$293 a share — offers that came as the workers were being cashed out of their shares by the company for as little as US$194 a share. The worker-owners were not told about these outside offers and had no chance to tender their shares. They found out only through word of mouth after the board of US Sugar had rejected both offers.
As retiring workers cash out their shares, the company then retires their stock. That leaves fewer shares outstanding over time, the lawsuit says, allowing the insiders’ control of US Sugar to grow without having to spend a penny buying stock. In this way, White’s immediate family increased its stake in US Sugar by 19 percent from 2000 to 2005, the lawsuit says.
The Charles Stewart Mott Foundation issued a statement saying that as a major US Sugar shareholder, it was confident that US Sugar’s board had “acted responsibly and within its duties.” It also said the employees’ lawsuit contained allegations that were inaccurate.
While they wait for their lawsuit to inch through federal court, US Sugar’s former employees say they are struggling to get by on fewer retirement dollars than they should have received. Many are former field workers, machine operators and mechanics, paid by the hour and living in one of Florida’s poorest counties. Some said the disputed stock plan was their sole retirement nest egg.
“I had to go back to work,” said Randy Smith, who retired last year after 25 years as a welder and machinist.
He was only 55, but said US Sugar forced him to retire after declaring him no longer qualified to do his job. The company has been cutting staff aggressively for several years.
Smith said he cashed out of the retirement plan for about US$90,000, but could have received about US$53,000 more had the company accepted the outside offers.
The extra money would help a lot, he said, because his wife, Sandra, has rheumatoid arthritis, and after he retired US Sugar canceled its retiree health plan.
Smith has since found a new job, with health benefits — but it pays just US$10 an hour, compared with the US$23 an hour he earned at US Sugar.
“My wife, she’s having to work two jobs just to make ends meet,” he said.
McCorvey said that he and his wife Marilyn, also a former employee, had calculated that the outside offers would have been worth US$137,000 more to them. He was laid off in 2004; an executive assistant, she was laid off in 2002.
But even though they no longer work at the company, they cannot cash out their stock because of plan vesting rules, they said.
Meanwhile, the stock price has been falling, based on the appraisals and cash-out values supplied by the company.
“I’m scared I’m going to lose it all,” McCorvey said.
To make matters worse, US Sugar announced last month that it was eliminating its dividend. The McCorveys had been receiving dividends worth about US$7,000 a year on their shares.