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[letterhead]
LUTIN & COMPANY
575 Madison Avenue
New York, New York 10022
Telephone (212) 605-0335
Facsimile (212) 605-0325
September 24, 2004
Grace K. Lee,
Esquire
Division of
Corporation Finance
Securities and
Exchange Commission
450
Fifth Street, N.W.
Washington,
D.C.
20549
Email:
leeg@sec.gov
Re: Farmer
Bros. Co.
Dear Ms. Lee:
The
August 25, 2004 letter from Skadden Arps Slate Meagher & Flom on behalf of
the management of Farmer Bros. Co. ("Company"), seeking SEC Staff
concurrence with their arguments to exclude from the Company proxy statement
the shareholder proposal (“Proposal”) submitted by Lime Fund LLC, raises
troubling questions.
The
Company’s representative bases all his arguments on an assertion that
control of the ESOP “relates to matters of employee compensation.” In fact,
the Proposal provides for participating employee elections of members of the
ESOP governing committee – a conventional practice presented in the “Model
ESOP” published by the
National
Center for Employee Ownership (NCEO) – for an ESOP which, according to the
Company’s representations, had been established in January 2000. The
committee, whether elected by employees or appointed by the Company’s
management, would not control the establishment of the ESOP, or its
termination.
What the committee and employees would control is only the administration of
a trust, subject to its established conditions that cannot be modified
without both grantor and beneficiary approval. And that administration of a
pension trust would clearly have nothing to do with management decisions
relating to employee compensation.
The
statements made by the Company’s attorney in support of his argument suggest
a need to examine the Company’s past representations of the ESOP and its
transactions. The Company’s management seems to view the ESOP pension
assets as being under their control, rather than as assets which have been
conveyed to a trust for the benefit of others. Especially in the context of
concerns that have been expressed by the Company’s shareholders, about
violations of the Investment Company Act and about the use of the ESOP to
secure votes for management’s entrenchment, we must ask whether the reported
ESOP transactions were genuine.
Under
these circumstances, it is suggested that the Company be asked to clarify
its position. If they confirm the August 25, 2004 letter’s apparent
position that management effectively controls the assets which the Company
had reported as having been transferred to an ESOP trust, we would ask the
SEC to take appropriate actions to protect the interests of the Company’s
public shareholders as well as the employees who had been misled to believe
they were shareholders. If, alternatively, they state that the Company has
genuinely conveyed assets to the ESOP trust as reported, we would ask the
SEC to require inclusion of the Proposal in the Company’s proxy statement
for voting at the annual meeting of shareholders.
Please
let me know by email (gl@shareholderforum.com)
or telephone (212-605-0335) what additional information you may find useful.
Sincerely,
Gary
Lutin
cc: Mr.
Gregory E. Bylinsky (greg.bylinsky@limecapital.com)
Joseph
J. Giunta, Esquire (jgiunta@skadden.com)
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