Judge Says GM Board’s $700 Million Buyout of Perot Seems ‘Unwholesome’
NEW YORK (AP) _ A state judge has refused to dismiss a stockholder suit against General Motors Corp., saying the company’s $700 million buyout of H. Ross Perot ″seems unwholesome enough to constitute a wrong.″
The $1.5 billion lawsuit was filed by Milledge A. Hart III of Dallas on behalf of GM Class E stockholders. Hart contends GM’s buyout of Perot following a series of disagreements between Perot and the company was ″a waste of corporate assets and breach of fiduciary duty ... at a time when GM closed 11 plants and fired 30,000 workers.″
In a decision published Wednesday, State Supreme Court Justice Irma Vidal Santaella said the buyout ″gives Perot a financial preference over other Class E stockholders who will have to wait until 1991 for parity with him....″
She noted the state’s ″paramount public policy against the selling and purchasing of directorships,″ and said Hart’s charges ″create a reasonable doubt as to (the) directors’ self-interest and independence of judgement.″
Perot, founder of Electronic Data Systems, acquired his GM shares when the auto maker bought EDS for $2.55 billion in October 1984.
The buyout agreement paid Perot what his GM shares were guaranteed to be worth in 1991. It also required him to give up his seats on the boards of GM and EDS by Dec. 1, 1986.
The judge also noted, under the agreement, Perot ″can be penalized up to $7.5 million for any public criticism of GM corporation or GM management.″
Hart, who helped Perot found the EDS computer firm in 1962, said the GM board paid Perot $350 million more than his stock was worth as a ″bribe″ to get the Texas billionaire out of the company and shut him up.
Hart, owner of 144,000 shares of GM Class E, said the buyout was motivated by the ″self-interest of the board in entrenching and perpetuating their tenures by silencing Perot’s criticism of their mismanagement...″
Mrs. Santaella noted that Perot criticized the transaction but took the money anyway. He volunteered to put the money in escrow while the board reconsidered the deal. The judge ordered him ″to continue his voluntary deposit of $700 million in escrow within New York State.″
Meanwhile, GM lawyers got a temporary stay of court proceedings until they can ask the Supreme Court’s Appellate Division next week for a full stay. They want the full stay while they appeal Mrs. Santaella’s refusal to dismiss the case.
The judge has been leading attempts to negotiate a settlement, according to lawyers in the case.