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[letterhead]
Lime Capital Management LLC
377 Broadway, 11th Floor
New York, NY 10013
via e-mail: cutlers@sec.gov
and Airborne Express
January 12, 2004
Mr. Stephen M. Cutler
Division of Enforcement
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Re: Farmer Bros. Co. corporate governance
Dear Mr. Cutler:
My firm, Lime Capital Management LLC, is an outside shareholder of Farmer
Bros., and I am writing to urge the SEC to investigate on an expedited basis
the question of whether Farmer Bros. should be regulated as an investment
company under the Investment Company Act of 1940 (the "'40 Act"). As
detailed in Gary Lutin's letter to you of January 8, 2004, Farmer Bros. has
approximately 70% of it assets invested in securities, but has never
registered as an investment company under the '40 Act and is not operated in
compliance with the provisions of the '40 Act.
Farmer Bros., in what I believe to be a gross violation of the '40 Act, has
lent significant corporate funds to an ESOP which now controls the "swing"
vote between management and outside shareholders. Unless the SEC acts
promptly to enforce its regulations, this ESOP stock will likely be
dispositive of the outcome of a shareholder vote on management's proposed
reorganization plan at the annual meeting scheduled for January 21, 2004.
Management's reorganization proposal, if passed, will significantly
circumscribe public shareholders' already limited rights and ability to
influence the affairs of Farmer Bros. The ESOP's shares were bought using
corporate money that rightfully belongs to shareholders, and those shares
should not be used to entrench management.
Shareholders had brought suit to, inter alia, enjoin the voting of the ESOP
shares on the ground that the loans to the ESOP violated the '40 Act.
However, a federal court ruled in that case that there is no private right
of action under the '40 Act to enforce the relevant securities laws.
Therefore, public shareholders have nowhere to turn except to the SEC.
Given the short time frame before the shareholder vote, I urge you to
quickly investigate and to take action to enjoin Farmer Bros.' ESOP from
being used to silence outside shareholders. SEC action is the only means by
which the company can be made to comply with the law.
Sincerely,
Gregory E. Bylinsky
Managing Director
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