Crown and Rosenberg accused in class action

Investor says assets were misrepresented in Rosemore deal

January 25, 2002|By Kristine Henry | Kristine Henry,SUN STAFF

A former shareholder of Crown Central Petroleum Corp. filed a class action lawsuit yesterday accusing company officials, including Chairman Henry A. Rosenberg Jr., of misrepresenting the value of Crown's assets and its financial outlook in order to win a vote to buy out stockholders and take the refiner private.

"This class action complaint arises out of a scheme by Crown's controlling shareholders to appropriate for themselves Crown's assets at a fraction of their value," charges the suit, filed in U.S. District Court for the Eastern District of Virginia by former shareholder James J. Hayes of Annandale, Va.

The plaintiffs are seeking at least $100 million.

Rosenberg, who retired as president and chief executive in April, declined to comment. Thomas L. Owsley, Crown's corporate counsel and senior vice president, said the company has not received a copy of the suit and couldn't comment.

Shareholders approved a deal in March allowing the Rosenberg family, through its holding company Rose- more Inc., to buy all the shares they didn't already own for $10.50 each in a deal worth about $80 million. The vote came almost exactly one year after the Rosenbergs first attempted to take Crown private.

Rosemore, which owned enough shares to control about 45 percent of the vote, initially had offered $8.35 a share but eventually increased its offer after a bidding war with Apex Oil Co. of St. Louis.

The bid stipulated that a majority of non-Rosemore shareholders had to vote in favor of the deal for it to be approved.

Crown's shares were trading as high as $34 in the early 1990s and dipped as low as $4.63 in December 1999.

Crown's investment adviser, Credit Suisse First Boston, issued an opinion at the time stating that the Rosemore offer was fair to non-Rosemore shareholders. Credit Suisse's contract with Crown called for it to be paid a fee that was expected to be just over $3 million, most of which was contingent upon the Rosemore merger being consummated.

Credit Suisse is also named as a defendant in the suit. A spokeswoman for the firm said the company had not yet seen the suit and could not comment.

Hayes, who bought 200 Crown shares at $18 each in 1996, and his co-plaintiff, former Crown employee and shareholder Thomas Boots of Texas, allege that Credit Suisse and Crown Central undervalued the company's refining assets by between $200 million and $700 million. The suit also alleges that Crown portrayed the financial outlook for the industry and the refiner as much more bleak than was truly the case.

In its fairness statement, Credit Suisse noted that it was relying on information from Crown.

"We have not been requested to make, and have not made, an independent evaluation or appraisal of the assets or liabilities (contingent or otherwise)of the company, nor have we been furnished with any such evaluations or appraisals" the firm said in its statement.

The shareholder suit charged that the "failure to consider the liquidation value of Crown's assets rendered CSFB's opinion of minimal, if any use in determining whether the proposed merger agreement was in the best interests of the non-[Rosemore] shareholders and rendered the inclusion of the opinion in the proxy statement misleading."

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