ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Tuesday, July 30, 1996 TAG: 9607300081
SECTION: BUSINESS PAGE: B-7 EDITION: METRO
SOURCE: Bloomberg Business News
New York - Burlington Industries Inc., Morgan Stanley Group Inc. and NationsBank Inc. said Monday they have agreed to pay $8.8 million each to settle a suit filed over the funding of Burlington's Employee Stock Ownership Plan.
The suit alleged that Morgan Stanley officials and Burlington executives manipulated the textile maker's ESOP to profit excessively, causing its value to drop by 74 percent, or $38 million, and the ESOP's ownership of Burlington stock to fall to 3 percent from 49 percent.
A Burlington spokesman, while denying the charges in the suit, said the firm settled the case to reduce its legal costs.
Burlington, a Greensboro, N.C., textile company, operates a carpet plant at Glasgow and is parent of Bacova Guild Ltd., with operations in Alleghany and Bath counties.
The agreement ends more than four years of litigation that began when two Burlington employees sued in 1992, accusing the company's management and Morgan Stanley of trying to improperly profit from the ESOP in a plan that resulted in a dramatic drop in the plan's value.
Morgan Stanley bought Burlington in a $46 million leveraged buyout in 1987. In 1989, the company created an ESOP to replace an existing employee profit-sharing plan. An ESOP lets employees fund company stock purchases, in this case to provide them with a portion of their retirement benefits.
Burlington employees borrowed about $113 million from the company to buy about 36 percent of the company's outstanding stock at $37.80 a share, a price the employees contend was far above the stock's true value. The suit charged that Burlington executives knew the stock price was inflated.
Staff writer Mag Poff contributed to this story.
LENGTH: Short : 39 linesby CNB