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May 13, 2002
401(k) Questions Linger Over Stanley's Reincorporation
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But opponents told The Hartford Courant they were considering legal action because of balloting confusion that potentially involves millions of shares in the Stanley 401(k) retirement plan.
"We're reviewing very closely and actively what our options are to determine whether there is action we can take to stop the move," Connecticut Attorney General Richard Blumenthal said. A decision on whether to go forward with a lawsuit could come within 24 hours, he said Thursday.
Union leaders were also examining their legal options.
Everett Corey, directing business representative for District 26 of the International Association of Machinists, said he was concerned about how the 13 million shares in the Stanley 401(k) retirement plan were voted.
An initial letter from Stanley said that shares not voted would be counted as "no" votes.
But in actuality, shares held in the company's 401(k) retirement plan were treated differently. Unless the holder of those shares specified how they were to be voted, the trustee of the 401(k) plan was authorized to vote them instead.
Stanley's chairman and chief executive officer, John Trani, acknowledged before shareholders that an "honest mistake" had been made in communicating with them how 401(k) shares would be voted. But he said that the confusion was remedied by a second letter sent out last week as a clarification.
Corey said that many Stanley workers could have intended to vote against the Bermuda plan by not returning their ballots, only to see those shares actually voted in favor by the 401(k) trustee. If that happened for enough shares, he said, the outcome of the balloting on the Bermuda issue could have been affected.
But Gerard Gould, Stanley's vice president for investor relations, said that roughly half of all 401(k) shares had been voted in accordance with the wishes of shareholders, a figure far higher than the rate for voting 401(k) shares in the past. Those voting their 401(k) shares overwhelmingly favored the Bermuda plan, and the remaining shares were voted in the same proportion, he said.
Thursday's shareholder approval was a victory for the company's management, which had touted the benefits of incorporating in Bermuda - including higher future profits and $30 million in expected annual tax savings.
By incorporating in Bermuda, Stanley will no longer have to bring profits from its foreign subsidiaries into the U.S., where those profits would be subject to taxes. Even after the move, however, the company will continue to pay U.S. taxes on profits made by its U.S. operations.
To view the Hartford Courant article, click here.
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