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U.S. Sugar Retirees Say They Were Cheated Out Of Stock Returns

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The New York Times

Published: May 29, 2008

CLEWISTON - Thousands of workers at U.S. Sugar thought they were getting a good deal when the company shelved their pension plan and gave them stock for their retirement instead. They had a heady sense of controlling their own destiny as they became the company's biggest shareholders, Vic McCorvey, a former farm manager there, said.

"It was always stressed to me, as manager of that 20,000-acre farm, that the better you do, the higher your stock will be and the more retirement you could get," McCorvey said. "That's why I worked six and seven days a week, 14 hours a day," slogging through wet and buggy cane fields, doing whatever it took.

Now that many U.S. Sugar workers are reaching retirement age, though, the company has been cashing them out of the retirement plan at a much lower price than they could have received. Unknown to them, an outside investor was offering to buy the company - and their shares - for far more. Longtime employees say they have lost out on tens of thousands of dollars each and millions of dollars as a group, while insiders of the company came out ahead.

Some former U.S. Sugar employees have since filed a lawsuit accusing company insiders of cheating them out of money that was rightfully theirs. Throughout, the worker-owners have been shut out of information about the company's finances and unable to challenge management's moves or vote because their shares were held through a retirement plan, not directly.

What has happened at U.S. Sugar could happen at many other companies because of a type of retirement plan that proliferated in the 1980s, after powerful members of Congress took an interest in "worker ownership" as a way to improve productivity.

Thousands of companies, large and small, embraced the ensuing tax benefits by creating employee stock ownership plans, known as ESOPs. U.S. Sugar, the largest American producer of cane sugar, took its stock off the public market in the transaction that created its ESOP, in 1983.

Nearly 95 percent of the country's 10,000 ESOPs are now at privately held companies, like U.S. Sugar. Because their shares are not publicly traded, there is no market price. So workers cash out shares without knowing what the price would be on an open market.

The former employees accuse U.S. Sugar insiders - descendants of the industrialist Charles Stewart Mott - of scheming to enrich themselves by buying back workers' shares on the cheap.

They say "the principal actor" is William S. White, the company's longtime chairman, who is married to Mott's granddaughter. They also say he improperly exerted his influence as chairman of the Charles Stewart Mott Foundation, whose mission is to advance human rights and fight poverty and which holds a big stake in U.S. Sugar.

"They robbed us," said Loretta Weeks, who worked in U.S. Sugar's lab, testing sucrose levels in cane juice. "It's like the last 15 years we were working for nothing."

U.S. Sugar said in a statement that the lawsuit had no merit and that the company would vigorously contest it, but it did not respond to any specific accusations.

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