Green Mountain founder feeling burned by stock flap
WATERBURY, Vermont (Reuters) - The founder of embattled Green Mountain Coffee Roasters Inc said he felt the company treated him unfairly by ousting him as chairman after a share sale that broke company rules but defended its commitment to doing the right thing.
Robert Stiller vowed to repay the margin loans that prompted his demotion and to comply with a new company policy prohibiting directors and officers from taking out loans that use shares of the Waterbury, Vermont-based coffee roaster as collateral.
The maker of Keurig-brand single-serve coffee makers took away Stiller's title and suspended his salary and that of fellow director William Davis after learning that the pair made emergency share sales to cover margin calls prompted by a plunge in Green Mountain's stock price after weak quarterly results.
The company said the share sales took place at a time when it prohibited insiders from making trades. Stiller, 68, said he had not expected a sale days after the Wednesday earnings report to run afoul of company policies.
"I guess I feel I've been treated unfairly. But I understand what they did and why they did it," said Stiller, who founded the company in 1981 as a coffee shop in the town of Waitsfield, Vermont, near a popular ski area.
Green Mountain is one of a handful of Vermont companies, along with Ben & Jerry's ice cream - now owned by Unilever - and privately held organic dairy Stonyfield Farm that have made social responsibility a point of pride, even as they have grown far beyond their hippie roots.
But its financial woes threaten to tarnish that image, overshadowing the company's practice of contributing 5 percent of pretax earnings to social and environmental causes and installing solar panels atop its Waterbury factory to power the operation.
Despite that hit, Stiller would not rule out trying to return to the chairmanship, once the stock issue is settled.
He added he did not blame the board for stripping him of his office, given the scrutiny the company is currently facing, which includes an SEC probe that has been running since 2010.
"I understand what they did and why they did it," Stiller said. "Our company lives and breathes doing the right thing and everybody is attacking us because they think we're defrauding them. It is totally frustrating."
He said his brokerage, Deutsche Bank, forced the sale of 5 million shares, worth $125.5 million, on Monday.
"The window was supposed to open," Stiller said. "We announced our earnings and the window for us opens two days after - and two days after they kept the window closed but I had no alternative but to sell."
Green Mountain lowered its full-year profit forecast by about 6 percent last Wednesday, spooking investors and spurring a 50 percent drop in its share price, which triggered margin calls on Stiller's and Davis' loans.
"I have no other source of income than selling stock," Stiller said. On Wednesday, Krispy Kreme Doughnuts Inc said Stiller had sold his stake in that company for $49.6 million.
Stiller, who retired from day-to-day work at the company in 2007, saw his wealth soar last year as Green Mountain shares more than tripled in value. The rally earned him a spot on Forbes magazine's annual ranking of billionaires in 2011.
He bought a sprawling condominium apartment in Manhattan's Time Warner Center last year from NFL football star Tom Brady. According to New York City records, Stiller paid $17.5 million for the 74th floor apartment in a building overlooking Central Park and Columbus Circle.
Around the same time, Stiller bought a property in Palm Beach, Florida, for $9.958 million equipped with an in-ground swimming pool, elevator and dock, according to county records.
Stiller also owns Heritage Flight, a six-airplane charter company that Green Mountain has paid $1.3 million over the past three years.
"I don't feel I live that lavishly but I've developed this company over the 30 years," said Stiller, who prior to Green Mountain founded the E-Z Wider brand of cigarette rolling paper.
BILLIONAIRE FOR A BLINK
Stiller said the decline in Green Mountain shares took a toll on his finances, adding that his director pay "doesn't go very far." The company last year paid him $101,000 for his service on the board, in addition to an option award then worth $74,296, according to filings with the Securities and Exchange Commission.
Following his most recent sale, Stiller controls about 7 percent of Green Mountain stock.
Daniel Cox, owner of advisory firm Coffee Enterprises who used to work at Green Mountain and considers himself a friend of Stiller's, said the company's founder was enjoying the fruits of his labor and there was nothing wrong with that.
"Does he have some toys? You betcha," Cox said. "He's got airplanes, he owns a few houses. He does a lot of philanthropy work. He's earned the money legally and if he wants to give it away or spend it on a boat or invest in other companies - what's wrong with that? That's his business.
"Unfortunately, he was highly leveraged and got a big margin call. So he had to sell his shares - there's nothing illegal."
Margin accounts allow investors to borrow cash against their stock holdings, and can serve as a tool for corporate insiders to raise money without spooking Wall Street by selling shares.
But a former top U.S. securities regulator questioned whether publicly traded companies should allow their top officials to borrow against their shares.
"The perception of management borrowing against their own holdings is so bad," said Arthur Levitt, a former chairman of the Securities and Exchange Commission. "I would encourage shareholders to push companies to implement such protections where they don't currently exist.
Green Mountain has lost more than three-quarters of its value in the last seven months, following criticism from hedge fund investor David Einhorn, who has questioned the company's accounting and growth forecasts as rivals including Starbucks Corp look to get into the single-serve coffee business.
The shares closed at $26.67 on Wednesday, compared with a life high of $115.98 last September.
Green Mountain employs roughly 1,700 people in northern Vermont, which represents about 30 percent of its workforce.
NO OTHER MARGIN EXPOSURE
Green Mountain, with a current market value of about $4.1 billion, said it told Stiller and Davis last year that it would be forbidding directors from taking new loans against its stock. It told them to add no more shares to those accounts and to close them out by the end of 2012.
It found that no other executives or directors had borrowed against their shares, said Suzanne DuLong, a vice president of investor relations and corporate communications.
"Mr. Stiller and Mr. Davis were the only ones that had pledge situations, so they were grandfathered in, in that they were allowed to continue those situations. They were not ... permitted to add to them," DuLong said at the company's offices in Waterbury.
She noted that the board allowed both men to continue to serve the three-year director terms they had been elected to in March, albeit without their salaries or committee seats. Green Mountain named Michael Mardy, chief financial officer of Tumi Holdings Inc, as interim chairman.
Stiller said he plans to close out his margin account on Green Mountain stock by the year's end as the company has requested, but declined to say if he hoped to get the chairmanship back.
"I'm totally committed to Green Mountain Coffee and making them a success and whether I'm in the chairman's role or not I'm there to be a sounding board or a questioner and an advocate for doing the right thing," Stiller said.
(Additional reporting by Martinne Geller, Michael Erman, Emily Flitter, Jonathan Stempel and Himanshu Ojha in New York, Mihir Dalal and Arpita Mukherjee in Bangalore and Tom Hals in Delaware; Editing by Tiffany Wu and Edmund Klamann)
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