Ninety-one investors in Affiliated Foods Southwest’s $34 million savings program will receive only about 10 cents on the dollar on the basis of the distribution of a settlement approved Wednesday by Pulaski County Circuit Judge Jay Moody.
More than 900 employees and members of the grocery cooperative lost $34 million when the firm went bankrupt in 2009. The bankruptcy depleted the savings program - known as certificates of indebtedness - that had been offered for more than 50 years by Affiliated Foods.
Affiliated was a 53-yearold, wholesale cooperative owned by its member grocery stores in Arkansas, Texas, Louisiana, Mississippi, Oklahoma and Tennessee.
Jerry and Bill Kelley filed a lawsuit in 2009, seeking class-action status, against about 20 Affiliated officers and directors, including John Mills, former chief executive officer. The Kelleys claimed that the certificates of indebtedness were unregistered securities and violated the Arkansas Securities Act.
Moody approved the disbursement of $795,000 to the 91 owners in the savings program in regard to their shares in it. The money will be divided on a pro-rata basis, with those who invested the most in the savings program receiving the biggest portion of the settlement.
The payments include about $76,000 to the qualified investor with the largest amount of savings and $59,000 to the next highest qualified investor, said Randall Pulliam, an attorney who represented the class members. The investors should receive their checks in about 30 days, Pulliam said.
The investors had to show that they were included in the plan from July 24, 2006, to May 5, 2009, a range established because of the statute of limitations in the case. They also had to submit a copy of their certificate of indebtedness.
More than 500 investors were sent notices of the settlement earlier this year, but that included everyone who had ever owned a certificate of indebtedness. The 91 who will be paid are those who responded to the notice, owned the certificates during the named period and properly filed proof of claims, Pulliam said.
Four of the 91 investors had lost their proof of ownerships of the certificates, but after some discussion, Moody allowed those four also to be included in the distribution.
The Little Rock firm of Carney Bates & Pulliam will receive $400,000 for fees plus expenses that will be subtracted from the total settlement of $1.2 million.
The $1.2 million will be paid by Travelers Insurance, which had a policy that covered the liability of Affiliated’s directors and officers.
Business, Pages 28 on 12/12/2013