Jury Orders Southern Farm To Pay Shareholders $32M

Jury Orders Southern Farm To Pay Shareholders $32M - 3/23/2009

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2009 News and Press Releases

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News	News 2009
HEADLINES \| SETTLEMENTS AND DISMISSALS \| COURT FILINGS LINKS TO OTHER NEWS \| NEWS ARCHIVE	HEADLINES ARCHIVED SETTLEMENTS AND DISMISSALS ARCHIVED

SETTLEMENT NEWS:

Jury Orders Southern Farm To Pay Shareholders $32M
Brendan Pierson

Securities Law 360. March 23, 2009
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EXCERPT: A jury has awarded $31.7 million to a group of former investors in Southern Farm Bureau Life Insurance Co. after finding that the insurance company defrauded the investors out of money they should have received from an earlier settlement. Following a weeklong trial in the U.S. District Court for the Middle District of Florida, the jury found on Friday that Southern Farm willfully committed fraud under both the Securities Exchange Act of 1934 and Florida common law. “These laws are made to protect people who don’t have all the information that companies have,” said Jerry Linscott, an attorney for the plaintiffs. “That’s why these rules are in place. They were in place in 1934 when Congress said we need to protect the investing public, otherwise we can’t have a system such as we have in the United States.” The plaintiff in the suit, which was filed in 2006, is a corporation created on behalf of plaintiffs in an earlier shareholder lawsuit against Southern Farm, which was settled in 1987. Under that settlement, the so-called Plaintiffs' Shareholders Corp. was granted a debenture entitling it to the benefits of 2.77 percent equity interest in Southern Farm, although it could not actually buy shares. Because of a special trust agreement between Southern Farm and its earliest policyholders, PSC could not actually buy shares. However, PSC was to receive dividends as though it held a 2.77 percent share. Southern Farm pays dividends to 10 holding companies that hold 10 percent of its stock each, which in turn pay their shareholders. However, the company's trust agreement requires that any dividends beyond $5,700 for each holding company be diverted to pay returns to the original policyholders, leaving very little for shareholders.

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