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There's not a Safeway supermarket to be found anywhere in Pinellas Park, or in Florida for that matter. Yet Pinellas Park's General Employees Pension Fund, with assets of $25-million, has filed a suit against Safeway Inc., the nation's third largest grocer which Wall Street values at $9.2-billion.
"Our fund lost more than $50,000 in Safeway stock," said Alan Swartz, chairman of the pension fund trustees, which nonetheless reported a 14.4 percent return on its holdings in the fiscal year ended Sept. 30. That helped improve the fund's total return to 4.4 percent over the past five years when it suffered from holdings such as Safeway.
In its suit, the pension fund for about 550 municipal workers and retirees makes sweeping allegations that the California supermarket giant squandered millions of corporate assets while Safeway stock lost more than $15-billion in market value since 1998. The suit alleges Safeway insiders sold $40-million worth of company shares at "inflated prices" while their "misconduct" and bad decisionmaking cost other shareholders big-time.
The Pinellas Park fund didn't pay a penny to figure all this out. It was merely picked as one of the two named plaintiffs by a California law firm that specializes in shareholder class action lawsuits. The other named plaintiff is a firefighters pension fund in Pompano Beach.
Pinellas Park is represented by Milberg Weiss Bershad Haynes Lerach, a San Diego law firm that has won some big awards in other shareholder class action suits, but one of a growing group of firms with a reputation for filing shareholder suits whenever a company's stock drops precipitously. Safeway says the Pinellas Park suit has no merit.
The pension board in Pinellas Park didn't take a vote to sue Safeway. Swartz, who heard an attorney from Milberg Weiss make a presentation on corporate governance at a pension trustee conference, said his board granted him the authority to make the decision a couple of years ago. Then a Milberg Weiss attorney called him about Safeway a couple of weeks ago.
"We have an standing agreement with Milberg Weiss to monitor all of our portfolio holdings for compliance with corporate governance issues," he said, "They don't charge us anything, but we do stand to get some of our investment back if we win the suit."