With 70% of its assets in cash and securities, Farmer Bros. might fall
under purview of law for investment firms.
By Jerry Hirsch
Times Staff Writer
December 16, 2003
Farmer Bros. Co. management for the first time acknowledged
that the Securities and Exchange Commission had raised questions about
whether the cash-rich coffee roaster should be complying with the more
stringent disclosure rules that govern investment firms.
Whether Farmer Bros., which lists about $298 million in cash and securities
— an amount equal to about 70% of its assets — should comply with the
Investment Company Act of 1940 has been one of the key issues in a bitter
fight between institutional and dissident shareholders and the
Torrance-based company's board of directors.
A proposal by mutual fund Franklin Mutual Advisors to force
Farmer Bros. to adhere to the Investment Company Act failed at the company's
annual shareholder meeting a year ago. Unlike operating companies such as
manufacturers and retailers, investment companies must adhere to strict
disclo- sure and corporate governance rules designed to protect investors.
In an SEC filing Monday, Farmer Bros. said the agency had raised "concerns"
that the business might be acting as "an unregistered securities company."
Other than to say that it disagrees, Farmer Bros. did not elaborate on the
extent of the SEC's concerns.
A spokesman for the SEC also declined to comment except to say that the
wording used by the company could cover everything from a formal
investigation to a review by the division that examines corporate regulatory
filings.
Still, critics of Farmer Bros. seized on the disclosure as evidence that the
company may have violated federal law.
Gary Lutin, a New York investment banker who manages an Internet forum for
Farmer Bros. shareholders, said, "They have had two years to come up with
some reason why they shouldn't be considered an investment company and they
haven't."
Farmer Bros. is under fire from certain shareholders about loans to its
Employee Stock Ownership Plan, which they say is being used as a tool to
increase management's control over the company.
If the SEC deems that Farmer Bros. is an investment company, those loans may
have violated federal securities law.
Copyright 2003 Los Angeles Times
The
Forum is open to all Farmer Bros. shareholders, whether institutional or
individual, and to professionals concerned with their investment decisions.
Its purpose is to provide shareholders with access to information and a free
exchange of views on issues relating to their evaluations of alternatives.
As stated in the Forum's
Conditions of Participation, participants are expected to make independent use
of information obtained through the Forum, subject to the privacy rights of
other participants. It is a Forum rule that participants will not be
identified or quoted without their explicit permission.
There is no charge for
participation. Franklin Mutual Advisers, LLC, the manager of funds
owning approximately 12.6% of Farmer Bros. shares, provided initial
sponsorship for the Forum and arranged for it to be chaired by
Gary
Lutin. Continuing support and guidance of the Forum is provided by an
Advisory Panel of actively interested shareholders.
For additional information or to be included in an email
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farm@shareholderforum.com.
