Today, sugar contributes $3.1 billion and an estimated 25,000 jobs to Florida's economy. U.S. Sugar is the biggest company in the state. The second-largest is Flo-Sun, or Florida Crystals, owned by the Fanjul brothers Alfonso and Pepe, wildly caricatured as the murderous Rojo brothers in Carl Hiaasen's book and movie, Strip Tease. Other small, independent sugarcane farms dot the Everglades Agricultural Area (EAA), as the farmlands south of the lake are known.
U.S. Sugar is controlled by the descendants of Charles Stewart Mott, a Michigan industrialist who made a fortune in the automobile business. Mott bought U.S. Sugar out of bankruptcy in the 1920s, the Great Depression, and oversaw its rapid expansion, first after the 1960 embargo against Cuban sugar and then again in 1974, when federal limits on sugar acreage planting were lifted.
The company is privately owned, so valuing it is tough, as there is not a public market in the company's shares. The company is controlled by the Charles Stewart Mott Foundation and its benefactors, including the longtime chairman of the company, William S. White, who is married to Mott's granddaughter. Even though the Foundation owns just 19 percent of the shares, it controls the complicated process of picking the board of directors and therefore keeps control within the Mott family. Employees own 38 percent of U.S. Sugar, through an Employee Stock Ownership Plan (ESOP) started in the 1980s.
One indication of a value for the company, then, is what it has paid employees who retire and cash out their ESOP shares. And that value is at the heart of a federal lawsuit now being contested in West Palm Beach.
Some former employees maintain they were low-balled by the company when they were paid $180-$204 a share over the past five or six years. Especially since, unknown to them at the time, a suitor was offering U.S. Sugar's board much more. Nashville banker, agriculturalist and investor Gaylon Lawrence twice in the past three years offered to pay $293 a share for the sugar company. And he thought he had a deal; in August 2005, according to the federal lawsuit, Lawrence reached an agreement with U.S. Sugar's then-CEO, Robert Dolson, for the $293-a-share purchase — which the lawsuit calls "an extraordinarily valuable offer" that was 50 percent higher than what employees were being paid for their shares and 91 percent higher than the shares' fair market value that some charity shareholders declared in IRS filings.
U.S. Sugar's board apparently didn't appreciate the offer, according to the lawsuit. Suddenly, Lawrence found Dolson out of the picture, suddenly retired with an unexpected $10 million payment from the board. White took over negotiations and in 2006, the board voted to reject the offer, which Lawrence repeated in 2007 with the same result.
The employees' lawsuit portrays the company as buying up their shares at rock-bottom prices and then retiring those shares, increasing the size of company insiders' holdings without having to buy a single share personally. As mechanization replaced the need for employees and those workers' shares were retired, the Mott family's holdings became more and more valuable. Just in time for the state's offer of $350 a share.
One expert in ESOPs, however, said the value of employee shares doesn't necessarily reflect the true value.
"If you have a company that regardless of whether it is an ESOP or any kind of company, and you've got a minority interest, you're going to get less per share than you would otherwise," said Corey Rosen, executive director of the National Center for Employee Ownership. "That's just the way the market works."
Rosen said the lawsuit over the value of the ESOP shares is pretty typical for ESOP litigation and that it will be very hard to win for the employees. He also said it is very difficult to tell if, based on the company's own valuation of shares for employees, whether the state is overpaying for U.S. Sugar.
"It's a complicated, detailed process to wade through all the financials," he said. "It's hard to say on its face did the state pay too much, even though there had been other lower offers for the company."
U.S. Sugar has denied any wrongdoing in answering the lawsuit. Attempts to get a comment from the Clewiston-based company about the state purchase's effect on the ESOP lawsuit were unsuccessful. Likewise, repeated telephone calls to the lawyers for the employee plaintiffs were not returned. Plaintiff Diallo Johnson, a former analyst for U.S. Sugar now working in Philadelphia, said, "I can't comment at this time."
So here's the upshot of it all: The Mott family controls an increasingly larger share of U.S. Sugar. They will be able to cash out with an offer from the state that is higher than any they have had before and much higher than the company was paying its own employees for their shares. The owners are getting this premium from taxpayers not as a reward for good behavior but as recognition that the deck is so stacked against Everglades restoration because of U.S. Sugar's political clout that the only way to move forward is to pay them off.