Family feuds over trusts, control of business

By Muhammed El-Hasan
DAILY BREEZE

As dissident investors lob withering criticism at the Torrance-based coffee roaster and distributor Farmer Bros. Co., a family feud involving the chairman and the family of his sister has added another dimension to the controversy surrounding the firm.

The family infighting apparently has been brewing for decades.

On April 22, chairman Roy F. Farmer’s nephew, Steven D. Crowe, filed a petition in Los Angeles Superior Court to have his uncle removed as trustee of four family trusts. The petition accuses Farmer of using the trusts to “freeze out” the Crowe branch of the family. The four trusts hold a 9.8-percent stake in the company that benefit Steven Crowe and his sister, Janis.

Crowe’s petition claims his uncle, “in a long and sordid tale of treachery . . . took advantage of his mother, then his sister, and finally his niece and nephew” to ensure control of the company remains in the hands of the Farmer side of the family.

Farmer can appoint someone to run the trusts when he dies. When Farmer and his sister, Catherine Crowe, both die, the trusts will terminate and the beneficiaries, including Steven and Janis Crowe, will gain control over the shares — to sell or use in proxy votes, for example.

Crowe doesn’t want to wait that long, asking in his petition that City National Bank replace his uncle as trustee.

In a statement, Farmer Bros. said the petition’s “allegations concerning management of the company are full of misstatements.”

“The company will not respond to allegations concerning trust management, except perhaps to note that the value of Mr. Crowe’s trust has increased in line with the value of Farmer Bros. stock, which has grown from $17 per share in 1980 to more than $300 per share today,” the company statement says.

Crowe has received more than $1,844,000 in distributions from the trusts over the past five years, the statement says. Also, the company gave Crowe a $740,000 loan “during a period of personal financial difficulties.”

The petition claims Farmer, 86, is in “failing health.”

The company said that Farmer has reduced his involvement in the business. It would not disclose Farmer’s illness. Farmer’s lawyer, Marshall Oldman of Encino, did not return a reporter’s call. Steven Crowe could not be reached. Crowe’s lawyer, Adam Streisand of Los Angeles, also did not return calls.

Gary Lutin, a New York investment banker who runs a shareholder forum for Farmer Bros. stock, sent an e-mail to numerous investors and reporters about a June 11 court hearing on the petition. The e-mail reads: “Mr. Crowe’s attorney also reported that Mr. Farmer’s attorney stated that Mr. Farmer is now housebound, suffering from cancer and emphysema.”

In a later interview, Lutin said, “I was told that by the attorney for Crowe.”

A Farmer Bros. spokesman rejected any suggestion that Farmer is incapacitated.

“There is no evidence and there is no credible person who says that,” Farmer Bros. spokesman Jim Lucas said. “Mr. Farmer continues to perform his duties as chairman of the board and as a trustee to the trusts.”

Echoing other dissident investors, Crowe’s petition accuses Farmer and his son, CEO Roy E. Farmer, of conspiring to “keep the stock price below its true economic value. An undervalued stock price will reduce the amount of estate taxes that will be owed at Roy II’s death.”

The petition refers to the elder Farmer as Roy II.

The petition also claims that an undervalued stock price allows the company to buy back more shares through the employee stock ownership plan, or ESOP — thereby giving management even more control over the company. This claim also has been suggested by other dissident investors.

In 1976, the elder Farmer “had petitioner fired” after having worked since 1969 “in various line and management capacities,” the petition says. The petition claims Crowe’s firing came “without explanation.”

Crowe’s petition says that his mother, Catherine Crowe, won a seat on the company’s board through a 1981 proxy fight that pitted her against her brother, the elder Farmer. Catherine Crowe remained on the board until 2001.

“She resigned because she simply could no longer take the pressure and emotional terror that Roy II and the other board members aligned with him visited upon Mrs. Crowe regularly any time she deigned to challenge Roy II’s will or authority,” the petition says.

The elder Farmer’s “hostility toward the Crowes remains acute,” the petition says. “For example, Roy II refuses to take or return petitioner’s calls. For instance, when his sister, Janis Crowe, was recently in the hospital and near death, petitioner left detailed messages that he needed Roy II’s assistance to cash checks made payable from the trusts to Janis to pay her bills. Callously, Roy II never responded.”

Lucas, the Farmer Bros. spokesman, responded, “This is a private matter between family members. And the company can’t comment on private family members, even if those family members may be stockholders.”