Erroneous appraisals made by an alleged con man valuing Grove Farm at $17 million less than what it was allegedly worth were entered into the record yesterday in day three of a civil trial filed by a former shareholder of
Erroneous appraisals made by an alleged con man valuing Grove Farm at $17 million less than what it was allegedly worth were entered into the record yesterday in day three of a civil trial filed by a former shareholder of the company.
The case revolves around the events leading up to the sale of the former sugar plantation’s 22,000 acres to ALPS Investment, an entity owned by AOL co-founder Steve Case.
Several civil suits similar to this one have been filed by former shareholders in federal court and state circuit court.
Richard Wilson, attorney for the former shareholder suing former members of the Grove Farm board, alleged the board used a man suspected of fraud to value the company, something that should have been disclosed to the shareholders before the sale, he said.
William Pratt, one of Grove Farm’s former directors, was cross-examined by Wilson for the second day in a row for the majority of the day in Circuit Judge Kathleen Watanabe’s courtroom. Defense attorneys began their direct examination of him near the day’s end.
Citing an e-mail, Wilson showed jurors that several board members were privy to information that scandalized the merit of the company’s value, something shareholders should have had disclosed to them, he said.
In the e-mail, dated Aug. 11, 2000, Wilson showed that board members were alerted that Michael Burns, who ran Aspen Venture Group, had been accused of fraud and embezzlement from Monster Software, a company for which he had been CEO. Aspen Venture Group was the entity that put a price tag on Grove Farm, a figure Burns calculated with appraiser John Candon and attorney Tom Foley, who authored the e-mail.
Pratt said it was his understanding that Candon was the intermediary. Therefore, Pratt said, it was inaccurate to state that the board was in direct contact with Burns, or that the board was negligent in not giving information to its shareholders.
Another one of the documents Wilson showed jurors was a letter written by Herb Wheatman, a Pacific Century executive, to Grove Farm’s chairman and chief executive, Hugh Klebahn.
In the letter, Wheatman demanded the company reconcile the difference between a $129 million valuation of Grove Farm made by Aspen Venture Group and Grove Farm’s own estimate of $146 million.
Wilson also grilled Pratt about the board’s knowledge of an impending lawsuit from shareholder Michael Sheehan, something included in the board’s minutes. Wilson alleged knowledge of the impending lawsuit could have pushed the board to close with Case, because his offer included indemnity.
Indemnification is a provision protecting one party from financial loss.
According to the board minutes, which Wilson read into the record, “The Chairman reported the information in the newspaper that disclosed that a lawsuit had been filed by Michael Sheehan, who claims the board failed to meet its fiduciary standards and is seeking damages of an unspecified amount.”
The minutes also state the chairman reported meeting with ALPS representatives, who disclosed the lawsuit to them and that ALPS did not have a problem with the fact that the lawsuit had been filed.
“ALPS urged the board to proceed with the shareholders vote and close promptly and stated they would honor the indemnity.”
Trial will resume tomorrow morning at 9:30 a.m. in Courtroom 6.
