Co-op’s investors divvy up $787,000

Payout proceeds are from insurer

About 500 investors in Affiliated Foods Southwest’s $34 million savings program will split only about $787,000, according to a settlement approved Monday by Pulaski County Circuit Judge Jay Moody.

In 2009, cousins Jerry and Bill Kelley sued about 20 Affiliated officers and directors, including John Mills, former chief executive officer. The Kelleys claimed that the firm’s “certificates of indebtedness” were unregistered securities and violated the Arkansas Securities Act.

There were more than 900 employees or members of the grocery cooperative who lost $34 million when the business went bankrupt in 2009, depleting the savings program run by Affiliated Foods for more than 50 years. Affiliated Foods was a 53-year-old wholesale cooperative owned by its member grocery stores in Arkansas,Texas, Louisiana, Mississippi, Oklahoma and Tennessee.

More than 500 of the investors qualified to be members of the class-action lawsuit, which was limited to those who invested in the plan from July 24, 2006, to May 5, 2009, because of the statute of limitations in the case.

The settlement was “bittersweet,” said an investor in Affiliated’s certificates at Monday’s hearing who was unable to regain her total investment. She declined to disclose her name.

The Little Rock firm of Carney Bates & Pulliam will receive $400,000 for fees that will be subtracted from the total settlement of $1.2 million. The $400,000 is about $175,000 less than the firm calculated it incurred in hours worked over the past four years. Another $12,595 was added for expenses generated by the firm. The Kelleys will be paid $2,500 each, in addition to their portion of the settlement, for work they did in filing the lawsuit.

The $787,000 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, said attorney Randall Pulliam, who represented the class members.

The $1.2 million will be paid by Travelers Insurance, which had a policy that covered the liability of Affiliated’s directors and officers. The preliminary settlement was reached in December, but the attorneys’ portion and expenses were not determined.

For years, Affiliated Foods paid rates of interest on the certificates of up to 9 percent in the 1980s and about 4 percent weeks before the 2009 bankruptcy, still much higher than a typical certificate of deposit paid at the time.

Amounts in the certificates ranged from $8 to more than $2.2 million held by Shirley Davis, widow of Jerry Davis, Affiliated Foods’ former chief executive officer. Jerry Davis died in 2004. More than 60 investors lost at least $100,000 in the certificates, according to filings in the firm’s bankruptcy.

Business, Pages 25 on 04/16/2013

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