Whoops. Not so quick, Mr. ProBigBusinessTaxCheats. Looks like there's gonna be another shareholder vote because of some shenanigans with the first vote. What a surprise!
ctnow.com.
artmay11.story?coll=hc-headlines-business
Headline: Stanley Will Vote Again
State Challenges Reincorporation Plan
May 11, 2002
By JOHN M. MORAN,
Hartford Courant Staff Writer
Bending under pressure from state officials, The Stanley Works late Friday said that it would hold another shareholder vote on its controversial plan to reincorporate the New Britain company in Bermuda.
No date for the new vote was announced, but a spokesman for the world-famous toolmaker said that it could take several weeks to arrange.
The decision capped a day filled with developments and debate about Stanley's handling of a proposal to change its official address to Bermuda - a move that would save it an estimated $30 million a year in taxes.
Just hours earlier, state Treasurer Denise Nappier and Attorney General Richard Blumenthal filed suit against Stanley in New Britain Superior Court, charging that the company had deliberately misled shareholders before Thursday's original vote on the Bermuda plan.
Shareholders approved that plan by a slim margin. But the balloting was almost immediately criticized by union workers and others who said that they had received conflicting instructions on how shares in the company's 401(k) plan would be voted.
Company officials, while denying that there was anything improper about the original vote, said that they would hold another to remove any doubt.
"Stanley's integrity is the most important asset of our company," said John M. Trani, the company's chairman and chief executive officer, in a press release. "Even the appearance of impropriety is unacceptable."
At the same time, Trani said that the company's management was still convinced that reincorporating in Bermuda was vital to its ability to remain competitive in the global marketplace.
"Enabling our company to better compete by leveling the global playing field is strategically important and highly beneficial for our shareowners, employees, customers and all our other stakeholders," Trani said. "Being competitive is the best way to save jobs."
Executives of the famed maker of hammers, saws, tape measures and screwdrivers have been pushing the Bermuda plan, despite opposition from their workers, retirees and other shareholders upset at the prospect of paying capital gains taxes on shares they have held for years.
Critics were pleased to hear that another vote would be held, although they said the move would not resolve all questions about how the first vote was conducted.
"The revote provides a window of opportunity for shareholders to consider the merits of the company's plan and whether the economic gains expected to be realized will be wiped out by legal risks," Nappier said.
"I welcome what we wanted all along - a fair and honest vote," said Everett Corey, a spokesman for District 26 of the International Association of Machinists.
But Blumenthal said that a second vote would not end his investigation into the company's actions. He said that he was still considering whether to request an investigation by the Securities and Exchange Commission into the vote. He said that he is also considering asking the SEC to review trading patterns in Stanley stock.
"This debacle has decimated the company's credibility," Blumenthal said. "If there is a revote, we will critically scrutinize it to stop management hype about the overseas move and prevent more misleading and deceptive statements."
Friday's events were the latest twist in Stanley's bid to join the growing number of U.S. companies that are listing their corporate headquarters in Bermuda. By so doing, companies avoid having to pay U.S. federal taxes on profits earned by their foreign subsidiaries. It also gives them more flexibility in managing their earnings statements.
The parade of companies listing Bermuda addresses - or thinking about doing so - has alarmed Congress and prompted a flurry of bills that would block the practice.
For the time being, a paper change in official address remains a legal method of avoiding corporate taxes on overseas income. But Stanley's attempt at incorporating in Bermuda has come to be viewed nationally as a test case on whether such techniques will continue to be permitted.
It appeared that the plan would go through when Trani announced at the conclusion of Stanley's annual meeting Thursday that shareholders had approved it by more than the two-thirds vote required.
But almost immediately, some union members complained that the company had issued conflicting instructions on how shares in the 401(k) retirement plan would be voted.
In one letter to shareholders, the company said that unvoted shares would be counted as "no" votes. But in a second letter mailed sometime last week, the company corrected itself and said that shares in the 401(k) plan would instead be voted "in accordance [with] the trust agreement and applicable law."
As a result, hundreds of thousands of unvoted 401(k) plan shares were counted as "yes" votes, providing just enough of a cushion for the Bermuda plan to pass by the required two-thirds vote. The final tally showed the margin of victory was less than 600,000 votes.
Trani said Thursday that the initial letter was an "honest mistake."
But Blumenthal said that he and Nappier were concerned that holders of shares in Stanley's 401(k) plan were intentionally misled about how those votes would be counted on the Bermuda reincorporation.
"The shareholder vote was more than slipshod and incompetent," Blumenthal said. "Stanley purposely created confusion and deliberately misled shareholders - including its own employees, working men and women whose legal right to vote and life savings were at stake."
Speaking on the courthouse steps, Blumenthal wielded a leveling tool that Stanley officials had given him a decade ago as a thank-you gift for helping the company fend off a hostile takeover attempt.
"What we're doing today is using the level of the law to stop an illegal move," he said.
Nappier, who has maintained that shareholders would not enjoy the same legal protections if Stanley becomes a Bermuda company, called for a reconsideration of Thursday's shareholder vote.
"Because so many 401(k) plan participants were given erroneous and conflicting information, fairness now requires that shareholders have an opportunity to reconsider the question of reincorporation," she said.
Nappier is listed as plaintiff on the lawsuit because she is the trustee for 16,600 shares of Stanley stock held in the state's pension funds. Those shares were voted in opposition to the Bermuda plan, Nappier said.
Meanwhile, U.S. Sen. Joseph I. Lieberman joined the chorus of legislators opposing Stanley's reincorporation plan.
"What Stanley Works has done not only hurts the residents of Connecticut, but shakes our national faith in the ethics of enterprise," Lieberman said.
"Unfortunately, Stanley Works only asked themselves `is it legal?' instead of asking `is it right?' If they had asked that question, they would see it is just plain wrong," he said.
Stanley's stock closed Friday at $43.55 a share, down $2.96 or 6.4 percent on the day. |
