No Fraud in F&G Stock Sale, Judge SaysMore than two years after its bankruptcy filing, former cataloger Foster & Gallagher is back in the headlines.
The Peoria (IL) Journal Star reported that about 4,000 former workers likely will not collect retirement benefits following a ruling by U.S. District Court judge Michael Mihm on Dec. 30 that no wrongdoing was involved when company executives sold $70 million in stock options to the employees' stock ownership plan in 1995.
Also reported was that U.S. Trust, the trustee of the employee stock ownership plan, was not negligent and did not cause the plan to pay an excessive amount for the stock.
The newspaper said the issue in the three-week bench trial, which stemmed from a suit filed in summer 2001, centered on whether company founder Thomas Foster, chairman Melvyn Regal and president Robert Pellegrino defrauded workers by not informing U.S. Trust regarding concerns of "an impending government crackdown on the direct-mail sweepstakes, a marketing technique used extensively by Foster & Gallagher at the time."
Mihm ruled the accusations to be unfounded, judging sweepstakes as "still highly profitable for F&G in 1995," with the situation continuing for two more years, ending with "negative publicity and a governmental crackdown on sweepstakes in 1998."
In 2001, the 50-year-old, privately held company liquidated its Spring Hill Group, Michigan Bulb Group, Gurney's Group and all of their subsidiaries, and sold the Gift Group, which included Walter Drake and The Home Marketplace catalogs, to Brecon Capital Co., San Francisco.