Trustee Files Stock Option Lawsuits against Tyson, Cisco

February 17, 2005 ( - Institutional investors have filed separate lawsuits against Tyson Foods and Cisco Systems over allegations the firms used stock option grants to illegally funnel corporate assets to individual directors.

A news release from the Grant & Eisenhofer law firm, which represents Amalgamated Bank of New York, charged that the cases challenge a series of allegedly self-dealing transactions undertaken by the companies. In the litigation, Amalgamated is acting as trustee to LongView MidCap 400 Index, an institutional investor in Tyson Foods, Inc. and a trustee of LongView Collective Investment Fund, an institutional investor in Cisco Systems, according to the announcement.

“We are bringing these actions not only out of a sense of responsibility to our fellow shareholders, but because we believe there are important public policy issues at stake in these two suits,” said Ronald Luraschi, vice president of Amalgamated Bank, in the news release. “In addition to seeking justice for the shareholders of Cisco and Tyson, we hope that the suits will have an even broader impact for shareholders of all publicly traded companies.”

According to the news release, the suit brought by Amalgamated as trustee of the LongView Collective Investment Fund against Cisco Systems, Inc. included allegations that:

  • Cisco directors issued stock options with inside information and timed the issuance of options to maximize the value to precede disclosure of favorable news
  • the Cisco board paid billions of dollars to Cisco CEO John Chambers in a quid pro quo for the issuance of billions of dollars of stock option grants to board members
  • Cisco implemented an aggressive share-repurchase plan under which it bought and retired over 800 million of its shares at a cost of $15 billion to Cisco – further enriching board members who held millions of options.

The news release said the class action brought by Amalgamated as trustee of LongView MidCap 400 Index Fund against Tyson Foods, Inc. charged that:

  • certain present and former members of Tyson’s board favored the personal interests of the Tyson family, who held a controlling stock interest in Tyson
  • the defendants timed the granting of stock options so that they deliberately occurred shortly before the board made public announcements that would inflate the price of the stock and hence the strike price, or value, of the stock options
  • defendants entered into “wasteful and excessive” consulting contracts with members of the Tyson family, some of which expressly continue posthumously
  • defendants allowed members of the Tyson family to “run roughshod” over the company’s finances by causing the company to enter into unjustified related-party transactions, some of which continue to be investigated by the SEC.