Grove Farm fraud allegations trial set

LIHU’E — Allegations of fraud over the 2000 sale of Grove Farm will be heard by a jury, a Circuit Court judge ruled Monday.

Judge Kathleen Watanabe denied motions by former shareholders and by Grove Farm that she should rule on whether the company’s board of directors engaged in fraud in negotiations leading up to the merger when the company was sold to America Online co-founder Stephen Case.

Grove Farm was sold to ALPS Investment LLC., an entity owned by Stephen Case, in December 2000 via a merger for $26 million.

Watanabe decided that the allegations will be taken up by the jury when the trial starts Oct. 23.

Watanabe heard arguments from several attorneys before making her ruling.

Attorney Corey Park, representing Grove Farm, argued that the plaintiffs — the former shareholders — must show clear and convincing evidence that fraud was committed by the board in the negotiations. Park said the plain-tiffs allege that information was not disclosed to shareholders about attorney Daniel Case’s conflict of interest in representing both his son Stephen Case and Grove Farm during the negotiations.

Park pointed out that the plaintiffs must prove they sold their shares based upon false information. He brought up that former shareholder Guy St. Clair Combs is a descendant of the Grove Farm founder and was on the company’s board of directors. Combs is one of the plaintiffs.

Park also pointed out that a 2000 appraisal of how much the company was worth was done by Aspen Venture Group, and its principal owner, Michael Burns. He said no one knew at the time that Burns was a convicted felon.

After the sale in 2000, ALPS left the merger and Grove Farm became the sole surviving company.

The shareholders contend that they could have received higher offers instead of the $152 that they received per share as a result of the sale in 2000.

Attorney Richard Wilson argued on behalf of the former shareholders that they relied upon information provided by the board. He pointed out that the shareholders were informed by the board that the company needed to be sold by the end of 2000, or go bankrupt.

He said 98.2 percent of the company’s shareholders voted in favor of the merger.

Wilson pointed out that the case is all about getting the best price possible, and that the shareholders were not informed about other offers.

“The shareholders had a right to know,” said Wilson.

Attorney John McDermott alleged the former shareholders were misled that the company was near bankruptcy.

“There was a rush to sell,” said Mc-Dermott.

He said the former shareholders relied upon what the board said, that the company had to be sold.

Attorney Matthew H. Simmons wrote the complaint that was filed in November 2005 alleging that former shareholders sold the company for a fraction of its value.

Simmons argued that not all the information about the sale was out in the open. He claimed there was a lot more going on beneath the surface.

He said the board claimed Grove Farm was in dire financial straits, and that the company was in deep trouble financially. However, he said the reasons it was in trouble were not fully disclosed.


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