Forum for Shareholders of Farmer Bros. Co.

Forum Home Page

2007 Conclusion

Forum activities relating to Farmer Bros. Co. were suspended in 2007, following the second year of new management.

Farmer Bros. Home Page

 

Farmer Bros. Reference

 

Request that SEC Investigate Management Control of Assets Reportedly Transferred to Trust for Employees

(September 30, 2004)

The September 30, 2004 letter copied below asks the SEC to investigate possible management control of assets which Farmer Bros. had reportedly transferred to a trust for the benefit of employees, and also asks the SEC to require the company's presentation of the Lime Fund proposal to protect employee pension rights for voting at the annual meeting of shareholders.

The letter is addressed to the SEC Division of Corporation Finance, which is responsible for reviewing the August 25, 2004 arguments of the attorney representing Farmer Bros. to exclude the shareholder proposal from the company's proxy statement, and states that a copy is being sent to the SEC Enforcement official responsible for reviewing matters raised in a January 8, 2004 request for investigation and a February 13, 2004 request to require information disclosures.  It refers to a September 29, 2004 letter from the company's attorney, sent to the SEC in response to the question about asset control raised in a September 24, 2004 letter which addressed the attorney's August 25th letter.

 

[letterhead]

LUTIN & COMPANY

575 Madison Avenue

New York, New York 10022

Telephone (212) 605-0335

Facsimile (212) 605-0325

 

September 30, 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 September 29, 2004 letter from Skadden Arps Slate Meagher & Flom on behalf of the management of Farmer Bros. Co. ("Company") states that it responds to my September 24th letter, but does not directly answer the essential question I had raised: whether the Company’s management continues to exercise effective control of the assets which they had reported as having been transferred to an ESOP trust for the benefit of employees.

 

            In an apparent effort to divert attention from this question, the letter makes unsupported assertions about “false and misleading” implications and presents new arguments which suggest that the author is unfamiliar with both the Company’s ESOP and with the general concept of an ESOP – or that he assumes the reader will be unfamiliar.  These assertions and arguments, even if there were some basis for them, are irrelevant, since it has been established that the Proposal’s provisions for employee elections of an ESOP governing “committee” are actually an accepted practice.

 

            The Company’s representative does, however, provide an indirect indication of management’s position relating to their control of the assets reportedly transferred to the ESOP.  His letter makes it clear that management’s purpose in blocking the Proposal is to retain control of those assets.

 

            This apparent management position reinforces my September 24th letter’s suggestion of a need for SEC investigation of the possible securities law violations.  As you may know, a December 23, 2003 federal court opinion in a Farmer Bros. shareholder action stated that investors do not have standing to enforce the potentially applicable laws themselves and must instead rely on the SEC to protect their rights.  I am therefore sending a copy of this letter to Mr. Petillon, the Branch Chief of Enforcement for the SEC Pacific Regional Office, to inform him of this new development relating to the Farmer Bros. issues with which he is familiar.

 

            Regarding the right of shareholders to vote on the Proposal, it is hoped that you will require its inclusion in the Company’s proxy statement.  Whether a trust has been genuinely established or will be established by corrective action, the promised employee benefits of an ESOP are viewed as important to the Company’s value by many of its shareholders who have expressed support of the Proposal.  There is no real reason why they should not be allowed to vote on conventional provisions to secure those benefits.

 

            Again, I encourage you to let me know by email (gl@shareholderforum.com) or telephone (212-605-0335) if you want any additional information, and I thank you for your continuing attention to the interests of Farmer Bros. shareholders.

 

 

Sincerely,

 

 

 

 

Gary Lutin

 

 

cc:        Mr. Gregory E. Bylinsky (greg.bylinsky@limecapital.com)

            Joseph J. Giunta, Esquire (jgiunta@skadden.com)

            Andrew Petillon, Esquire (petillona@sec.gov)

 

 

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 distribution list, send an inquiry to farm@shareholderforum.com.