In 2002 the SEC filed suit against National Presto Industries (NPK) for not registering as an investment company. National Presto was a successful manufacturer of small kitchen appliances and it had accumulated a lot of cash which it was investing in municipal securities for many years because it could not find any acquisition candidates that it liked at reasonable prices. Some investors got very upset with NPK because it would not pay a large dividend or make any acquisitions and they complained to the SEC. The total municipal bond portfolio was more than half of NPK's assets, if I remember correctly. The SEC said that NPK was operating as an investment company without registering as such. An investment company would be subject to more regulation and more onerous taxation. NPK proceeded to court and won its case and the investment company charge was dropped. Eventually NPK made several acquisitions and was even more successful.
I think this case would support my belief that a lawsuit against NWLI would not be successful. In NWLI's case, the cash is being used to further the insurance business. As far as I know, there is no requirement for management to try to manage the stock price. Management of NWLI has done a good job of increasing the earnings of the company and its book value. The fact that the share price has not kept up with the increase in book value is not management's responsibility. I would call it a failure of "the market". I agree that it would be wise for management to buy back stock when it is materially below book value, but I know of no requirement that it do so.
I was also involved as a plaintiff of a shareholder derivative lawsuit against a publicly held company named Salem Corp. which was controlled by a well known corporate raider and crook by the name of Victor Posner. The lawsuit drug on for about four years with motions, delays, depositions etc. We had hired lawyers on a contingency basis. Eventually the court magistrate in Pennsylvania put the pressure on us to settle. She wanted us to put up a lot of money and she also made demands on the Salem. We elected to settle. The result was that the lawsuit was dropped, the company paid the legal fees and expenses of both sides and the company paid a token amount to each of us three plaintiffs. So it was a very discouraging experience. It takes for ever. The judge probably doesn't know much about business and doesn't want to have to decide the case. In our case, the company, in which we were all shareholders, paid over $2,000,000 in legal fees so the lawyers were the winners. We used a portion of the assets that we owned through the corporation to pay legal fees and we got nowhere. Eventually, Posner lost another lawsuit with the SEC against another public company that he controlled named DWG Corp. The SEC ruled that Posner and is son could no longer be an officer or a director of any public company. Eventually he divested all of his stockholdings and now, thankfully, he is dead. In my case, after I saw that the legal system would not protect our interests in Salem and that Posner was free to loot the company, I felt I had to sell my stock to protect myself because I had a very large portion of my net worth invested in the company. I lost money. After Posner was no longer in control of Salem, the company was sold to another company at a very good price but it did me no good.
Going backwards from what you wrote, I too had my experiences with posner. Only I was luckier. I bought Sharron Steel as a value play. The company split (I think 5 for 1) declared quarterly 20% stock dividends and rose so I made lot’s of money getting out before posner destroyed it and put it into bankruptcy
I remember those days too and am sorry you got caught in his legal s@#t- which hurt thousands of investors. Fortunately I was a bystander watching the rip off of the US legal and financial systems.
I also remember National Presto and agreed with the outcome of that court case as well
BUT let us assume you are moody, the pillar of Society. That you own a major LOCAL bank. That you are active on a philintropic basis. He has a lot to lose not money but reputation and ego.
I do not think he would like being hauled into court for hoarding money for his personal use (to give away) to increase his stature.
I believe the court of opinion would go against him and I also think he realizes this.
So if a major holder would go to him and say either you do something for minority shareholders or a lawsuit might be started – moody sr. would start treating us better.
A lawsuit like this would damage his standing in the community and his ego. And, I think for all the reasons given above and before - it should be tried (lets face it nothing else has worked for 10 odd years.)
Since moody has never done anything for his shareholders - yet has increased his personal income from NWLI for years, moody is ripe for such a come down in the eyes of the public and this is why I believe it would be effective. But the precedence is the Ford case.
It is my belief that since he never made an acquisition, never bought back stock under book never did anything a carefully worded law suit would result in action on nwli’s board if not him and minority and majority shareholders would all profit from it
It is my belief that the suit would never get to court. That moody would start doing something for his minority shareholders to save his reputation before it got that far.
I don't disagree with your post. However, if the threat of a lawsuit against NWLI and Mr. Moody didn't make him change his position, an actual lawsuit could be a LONG, difficult and expensive undertaking. In view of my past experience, I elect not to be involved in any lawsuit. But I would be very interested if someone else would volunteer to do it.