Chairman of Brooke Group Settles Suit
Tobacco conglomerate Brooke Group Ltd. said Thursday that its chairman, Bennett S. LeBow, has repaid the company $16 million in loans and, in settlement of a shareholder suit, waived his right to receive $6.25 million of preferred dividends.
Another company controlled by LeBow, BGLS Inc., controls about half the stock of MAI Systems Corp., an Irvine-based company that creates business software that runs on a variety of computer workstations.
As part of the Brooke Group settlement, LeBow also agreed to a 25% cap on his salary increases over the next four years.
He agreed that his salary will not rise more than 10% a year for the next four years, unless Brooke Group’s common shares rise more than 10%. LeBow owns 56% of Brooke Group’s common shares and 95% of its preferred.
In addition, LeBow has agreed to repay a $3-million lien that Brooke Group has against company securities that he owns.
Brooke Group shareholder Frank Gyetvan sued LeBow and other Brooke officers in May, 1993, in the Chancery Court of Delaware--where Brooke is incorporated--claiming Brooke Group or its subsidiary, BGLS Inc., had improperly lent money to LeBow and other directors of the company.
The suit also claimed LeBow improperly benefited when Brooke Group bought another subsidiary, Brooke Management Inc.
A company statement said LeBow, with approval of the plaintiff’s attorneys, has already repaid more than $16 million in principal and interest obligations owed to Brooke or its BGLS Inc. subsidiary.
Brooke Group said through a spokesman that the $16 million in loan repayment was not a condition of settlement.
As of April 1, 1993, LeBow’s 1993 annual base salary was set at $950,000 with a minimum bonus of $475,000, plus an additional bonus, if he agreed to forgo certain benefits, of about $100,000.
The $16 million in loan repayment and the $3 million to retire the lien came from money that LeBow had coming in preferred dividends. After waiving his right to $6.25 million of dividends, LeBow will keep the remaining $3.75 million of dividends.
Brooke Group Ltd. is primarily a tobacco company, through its Liggett Group Inc. and Liggett-Ducat J.S.C. subsidiaries. It also has a significant real estate development business and holds investments in other businesses, such as New Valley Corp. and MAI Systems.
