... folks seem to be getting their dander up something awful
Yes, but establishing the basis for a Class Action Suit with calculable damages to the Class isn't all that easy. Frank Murphy would tell you that. Requires real breach of fiduciary duty or criminality. Krispy Kreme has gone a long way earlier this year in correcting past conflicts of interest, not that they may not still be actionable, and in disclosing continuing conflicts and other self-serving nonsense. That $65 million Dallas looting bears looking into, but may be technically OK, Stinks to High Heaven, but technically OK.
... The rascals are home free?
Perhaps not. The Northern California muscle job is likely the place to start -- Livengood's involvement, and the Board of Directors' authorization of $9 million (including legal and court costs) of shareholder cash to settle what was apparently the transgression of a senior officer for personal gain. Quoting from the "Business Journal -- serving San Joaquin Counties," Feb. 2003:
"KRISPY KREME TAKES DUNK ON $7.9 MILLION AWARD
"An arbitration panel has awarded $7.9 million to two wannabe franchisees that sued Krispy Kreme Doughnuts, Inc. when Northern California development rights were granted to Golden Gate Doughnuts, LLC, a franchisee headed by Brad Bruckman that opened its first Stockton store last year.
"The $10 million breach of contract lawsuit was filed in Los Angeles Superior Court in March 2000 by Kevin Boylan and Bruce Newberg. The pair claimed at one point they entered into an agreement with Krispy Kreme where they would be able to open stores in Northern California with a 44 percent share of the business.
"However, they said in the filings that Scott Livengood, Krispy Kreme's CEO, demanded a significant cut for "personal investments."
"According to the court filings by Boylan and Newberg, the original business agreement changed, with Livengood owning 26 percent of the holding company, Boylan and Newberg's stake reduced by half and the corporation owning the remaining portion of the business.
"Krispy Kreme, meanwhile, awarded northern California developmental rights to Golden Gate, which is 67 percent owned by Krispy Kreme.
..."According to Associated Press reports, Livengood, who was originally a partner in the development group, sold his interest in the development group last year, as Krispy Kreme made changes to avoid conflicts of interest. Livengood was dismissed as a defendant in this lawsuit.
"The suit, rather than being tried in Los Angeles Superior Court where it was filed, was eventually moved to the American Arbitration Association for resolution.
"On February 10, Krispy Kreme announced that an arbitration panel awarded $7.9 million to Boylan and Newberg."
(The reporter was James P. King. Phone: 1-209-476-0861.) Substitute "biz" for "xxx" for the full article:
OK. But what can be done about all this?
Why don't YOU do something?
... Hell. I'm not a memeber of the class. You'd have to be long KKD when the Board authorized the $9 million payment, and that's not me. Besides, whether or not a suit is actually filed, its the mere presence of the circumstances and of Milberg Weiss that creates the problem. Its the threat. The damage is done. Secondary offering anyone?
Agreed, nothing new here. Just ghosts in the attic, coming back to haunt.
Possibilities aside, and no matter the probabilities, the No Cal caper, Scott Livengood's involvement, the Board of Directors approval of the $9 million settlement, and Milberg Weiss waiting in the wings are very, very real.
As you suggest, enough said.
"With nothing new under the Sun, I have not taken my short position with any
anticipation of a class action or any other litigation effectively diluting shares. Unless
there is something concrete to discuss, I'd rather not invest time discussing the infinite
Amen to that.
With nothing new under the Sun, I have not taken my short position with any anticipation of a class action or any other litigation effectively diluting shares. Unless there is something concrete to discuss, I'd rather not invest time discussing the infinite possibilities.
Interesting discussion of the various issues covered in our past posts, many of which might better be resolved in a court rather than here.
As we know, the world of Class Action is arcane. Many issues are raised and commonly dismissed or settled before reaching a jury -- usually to the the lawyers' benefit, rarely to the Class's. Beyond the settlement, the damage to the target is in the publicity. Even the mere existance of potential suit raises a problem.
I've seen corporate thinking like this before on acquisitions. Big company buys small company, and first thing to do is get rid of upper management. Corporate will portray this as a cost cutting measure, but in reality, it will be done to shake up the newly acquired company and try and break old habits. Old management is often believed to be lazy and new management will have to work extra hard not to screw up the business and just may come up with some new good ideas.
I was a VP of manufacturing with a company one time who was acquired by a larger company, and I saw 5 different Presidents in a 4 year period. The parent was on a buying binge and bought about 10 complimentary companies in a 6 year period. The whole thing eventually went bankrupt. The whole parent/subsidiaries was about $250M in sales in the years around 84-90. The parent company that I worked for played games with the numbers and got some brains from Wall Street to buy it. These guys came in, looked at the audited books, started drooling, forked over the money, and then
Bottom line is more often than not, this will cause a lot of confusion for a year or two with more management change to follow until the whole middle to upper management team has been rotated. I think this is just standard stupid corporate thinking.
You certainly sound disgruntled and are likely a victim of the terminations, but cut to the chase please . What is the likely effect -bad morale-poisoned lardnuts or greater efficiency and salary saving. Understand you have some moral gripes but how will this effect the company. Was there a lot of fat to be trimmed or cut into the bone. Don't mean to appear callous at your misfortune ,but perhaps paring was overdue?
Rumors about layoffs in NoCal??? It is a fact! Reflected in the Sacramento Business Journal and will be in the Sacramento Bee tomorrow. Bad guys at Krispy Kreme in North Carolina gave half the staff at NoCal pink slips with no severance for a Xmas present. Not just any staff... the key staff. That is no rumor... tell it to the families. the media loved those guys in NoCal... is the television media next???
"If the board colluded with management to conceal an illegal act, they would be lunatics."
... Agreed. Unless they had a reason. Or were uninformed of the specifics? Or asleep? Or ill-advised? Or thought disclosure cleaned the slate? Was action taken to discipline he who caused the $9 million charge to earnings? No small piece of change.
"The company just completed a participating credit facility and that had to entail significant due diligence."
... the reason?