Crowley clan comes under investor fire

Crowley is being taken to court by irate shareholders fighting for their rights.

By Bob Rust, Oslo

published: 3 December 2004

Three US institutional investors have sued California's Crowley Maritime Corp and its board members for practices that allegedly discriminate in favour of the controlling Crowley family against the interests of minority stockholders.

At the centre of the suit is a controversial company-paid life-insurance policy worth at least $141m to benefit the family that controls the corporation.

Lawyers for US investment funds run by Franklin Resources, Oppenheimer+Close and Wynnfield Capital filed the class-action and derivative lawsuit in New Castle County, Delaware chancery court this week. The plaintiffs own some 10.5% of outstanding common stock and 35.2% of publicly-held shares.

They charge that the formerly private company is not living up to its fiduciary obligations to minority shareholders.

"Over the years the company's board of directors ... have engaged in a series of transactions designed to perpetuate and/or to enhance the Crowley family's control, to limit the information available to the company's public stockholders and to operate the company in a manner reflective of a closely-held family corporation and not a corporation with unaffiliated public stockholders," allege the plaintiffs.

Singled out as proof is the board's decision to finance a life-insurance policy with a face value of $141m or more to ensure that control resides with majority stockholder, chairman and chief executive officer Thomas Crowley, the grandson of the company's founder.

TradeWinds reported on the insurance policies after the company announced in a US regulatory filing that it was discontinuing the premium payments out of concerns that they may violate the Sarbanes-Oxley corporate governance law.

The lawsuit cites Crowley financial filings to show that the company-funded insurance policies on behalf of the Crowley family that date back at least to 1992 had by November 1998 reached a face value of $141m.

The plaintiffs allege that the policies were not revealed to shareholders until 2002. In that year the company allegedly paid $2.98m in premiums for Thomas Crowley, the equivalent of 2.5% of operating revenue.

"The board under the policy of perpetuating control of the Crowley family has abandoned all pretense of fairness to the public stockholders and has provided millions of dollars of gifts to the Crowley family for the purpose of providing them funds to pay anticipated estate taxes," allege the plaintiffs.

The minority shareholders are asking the court to declare illegal the corporate policy of entrenching Thomas Crowley as controlling stockholder, to award the company damages equivalent to the insurance expenses and to order Crowley family members to disgorge the benefits accrued.

Crowley spokesman Mark Miller tells TradeWinds the company has no comment on the lawsuit at this time.

The three plaintiffs are understood to have participated in the Crowley Shareholder Forum, organised by corporate governance crusader Gary Lutin. New York-based Lutin is best known for forcing Amazon.com to change the way it reported pro forma financial figures. Lutin tells TradeWinds not all disaffected shareholders agree with the three plaintiffs on tactics.

"It's understandable that some shareholders see a need for court intervention, but most of them would really prefer a more constructive resolution," he said.

TradeWinds has previously reported that Crowley dissidents are scouting a publicly-listed suitor that would see a strategic value in acquiring their Crowley Maritime shares in a tax-free swap.