Chairman’s Illness Adds Twist To Insider Battle at Farmer Bros.
Roy F. Farmer, the 86-year-old chairman of embattled coffee importer Farmer Bros., is incapacitated, suffering from cancer and emphysema, according to his attorney, Marshall Oldman.
The revelation came after a June 11 Los Angeles Superior Court hearing at which Farmer’s nephew, Steven Crowe, sought to remove his uncle as trustee of four trusts holding a 9.8 percent stake in the company for the benefit of Crowe and his sister.
Oldman’s statement was revealed a few days later via an online forum for Farmer Bros. shareholders. He later confirmed it in an interview with the Business Journal.
Dissident shareholders, including 9.8 percent holder Franklin Resources Inc., have long demanded more disclosure of Farmer Brothers’ finances. The elder Farmer, who recently ceded the chief executive title to his son, Roy E. Farmer, has used his control of the company’s employee stock ownership plan, as well as his and other family members’ holdings, to resist such changes.
It is not clear how the revelations about Farmer’s illness will affect the outcome of Crowe’s attempt to wrest control of his trust. Crowe’s attorney, Adam Streisand, refused to speculate on how the news may affect his case.
Crowe filed the petition to remove Farmer in April, accusing his uncle of “cold-hearted” attempts to “misuse” the trusts “to freeze out” his sister and mother, as well as himself. Last week, the judge ordered both sides to mediate the dispute and scheduled another hearing for Sept. 30.
Oldman said his client “steadfastly opposes” Crowe’s petition, and said he will file a response to it within the next month.
According to the petition, if Roy E. Farmer dies, control would likely revert to City National Bank, which has volunteered to become the successor trustee over Crowe’s inheritance.
Meanwhile, dissident shareholders are wondering why the company didn’t reveal Farmer’s condition when he stepped down as chief executive in March. While there have been reports that the elder Farmer hadn’t been at the Torrance headquarters in months, the company did not disclose the elder Farmer’s illness in any of its filings with the Securities and Exchange Commission.
“It surely raises the questions of why didn’t they report this and when they knew,” said Gary Lutin, who runs the shareholder’s forum. A Farmer Bros. spokesman said the company has “nothing to say about the gossip.”
Mossimo Inc. was dealt another blow last week in its attempt to nullify a contract that requires it to pay Cherokee Inc. millions of dollars a year in finders fees when a Los Angeles Superior Court judge upheld the contract’s terms.
The ruling confirms an earlier arbitration award that found the Santa Monica-based designer owed Van Nuys-based Cherokee a finder’s fee for helping it broker a lucrative deal three years ago with nationwide discount retailer Target Corp.
Both Cherokee and Mossimo license their names to Target, which owns exclusive U.S. rights to manufacture and sell clothes and accessories under the brands.
Under its agreement with Target, which expires Jan. 31, 2006, Mossimo is paid a minimum of $9.6 million annually, according to regulatory filings. The Target agreement comprised 92 percent of the company’s revenue in 2002 and 2001, according to those filings.
Mossimo originally agreed to pay Cherokee 15 percent of its Target licensing revenue. However, Mossimo signed an amended deal in April 2002 with Target under which company owner Mossimo Giannulli’s design services make up 45 percent of the revenues. Under that new deal, Cherokee’s 15 percent cut came out of the remaining 55 percent of revenues.
Cherokee objected, and so far courts have ruled Mossimo must include the total sum when calculating Cherokee’s cut.
After it appealed the arbitration award, Mossimo posted a $3 million bond to cover the amount owed to Cherokee plus interest and legal fees, according to the company’s SEC filings.
Mossimo officials, who didn’t return calls for comment, can still appeal the court’s decision upholding the arbitration award. A protracted court battle has Cherokee officials nervous about the state of funds.
“Since we are not clear when we will be receiving payment, we are exploring alternatives such as the selling or insuring of this asset which could provide us with greater liquidity,” said Cherokee Chief Financial Officer Kyle Wescoat in a press release.
The Anderson School at UCLA is jumping into Orange County’s economic forecasting fray.
The 50-year-running Anderson Forecast plans to make its own Orange County presentation in November. The school is wedging its event between the 9-year-running California State University, Fullerton forecast in October and Chapman University’s 25-year-old event in December.
UCLA also is breaking into other regions, including San Bernardino and Sacramento. “We’re going to bring a unique perspective,” said Sherif Hanna, director of business development for the UCLA Anderson Forecast.
The Anderson Forecast already provides a quarterly economic update on the nation, the state and Los Angeles County.
The school also holds quarterly closed-door seminars where business leaders gather to talk candidly about the economy.
The Anderson Forecast doesn’t rely on economic models to drive its forecast, said UCLA Senior Economist Christopher Thornberg. Many economists take the data and look at how the economy responds to shocks, an unexpected event, he said.
“We don’t do that,” he said. “That makes the assumption that the economy is always the same,” he said. Rather, he said, UCLA economists look at what mode the economy is in stagnation, recession, growth or recovery.
Anil Puri, dean of the College of Business and Economics at Cal State Fullerton, said he isn’t so sure the Anderson economists have intimate knowledge of Orange County.
“How much new information can they contribute?” he said. “We pay very close attention to ongoing changes in the local economy. Our focus is Orange County and Southern California. That’s where our advantage lies.”
Jim Doti, president of Chapman University, was more diplomatic about the Anderson Forecast’s arrival. “Imitation is the sincerest form of flattery,” he said.
How different can economic perspectives be? Take the $330 billion tax cut President Bush just signed.
Thornberg: “The federal tax cut is a disaster.”
Puri: “It’s going to give a boost to the economy. No doubt about that.”
Doti: The cuts will stimulate the economy in the short term.
Orange County Business Journal