Connecticut Treasurer, AG Challenge Stanley Works – Again

July 5, 2002 ( - Connecticut's treasurer and attorney general claim that Stanley Works is once again misleading shareholders, as the firm attempts to gain approval for a relocation to a Bermuda tax haven - and have called on SEC Chairman Harvey Pitt to take action.

Richard Blumenthal, the nutmeg state’s attorney general, and Denise L. Nappier, the treasurer, say that a new prospectus sent to shareholders “includes conflicting and confusing statements” on how the rights of shareholders would be affected, according to the New York Times.

The state officials, who filed a lawsuit in state court last month against Stanley Works to halt the Bermuda move, also claim that the new statements amount to an admission that the tool maker misled shareholders in its original prospectus for a vote on the move to Bermuda.

Narrow Margin

New Britain, Connecticut-based Stanley Works claimed to have won the May 9 vote but by the slimmest of margins.  Just 67.2% of all shares voted supported the change, barely more than the two-thirds vote required.  That margin, and controversial instructions provided to 401(k) participants regarding the voting of unreturned proxies, led to challenges from the Connecticut officials and union leaders and an inquiry from the Securities and Exchange Commission (SEC). 

Shortly thereafter, Stanley Works tossed the results of that election and promised another (see Participant Mailings Lead to Stanley Revote ).
Different Takes

According to the Times report, Nappier challenged the consistency of statements contained in the new prospectus.  Page 5 of the new Stanley Works prospectus, states that in Bermuda “despite differences, the corporate legal system, based on English law, is such that your rights as a Stanley Bermuda shareholder will be, in our view, substantially unchanged from your rights as a shareholder in Stanley Connecticut.”

However, Page 21 of that same prospectus reportedly states “because of differences in Bermuda law and Connecticut law and differences in the governing documents of Stanley Bermuda and Stanley Connecticut, your rights as shareholders may be adversely changed if the reorganization is completed.”

Doubt “Less”

Nappier also contrasted the language in the Stanley Works proxy with language used by Accenture, the world’s largest consulting company, which made a comparable change in legal address last year.  Accenture’s SEC filings said “there is some doubt as to whether” Bermuda courts “would recognize or enforce judgments of U.S. courts against us or our officers or directors based on the civil liabilities provisions of the federal or state securities laws of the U.S. or would hear actions against us or those persons based on those laws.”

An SEC deputy director quoted in the Times report suggests that the complaint is premature since the Stanley Works proxy language has not yet been declared effective by the SEC – a move that will not take place until the agency is “comfortable with the disclosure.”

See also Semper Fiduciary :   It doesn’t pay to underestimate-or cross-the Connecticut State Treasurer