Skip to comments.Crony Capitalism at the State Capitol
Posted on 05/18/2010 8:04:50 AM PDT by MichCapCon
The people who own a Michigan insurance company have been effectively deprived of their power to sell their own investment under a new law hurriedly introduced and overwhelmingly approved by the Legislature this spring. Fearing that they could not stop the owner-investors of Fremont Insurance from selling it to another company, the politically well-connected board of directors has decided to keep control in their hands by changing state law. Frank Kavanaugh, a stockholder with over $3 million invested in Fremont, says this decision by his own employees is akin to "investing in protection and influence instead of the success and growth of the business."
Another term for it is "crony capitalism" when business and politicians gang up to thwart the marketplace and the rule of law.
Originally Senate Bill 1174 and now Public Act 61 of 2010 the law boosts from a simple majority of more than 50 percent to a supermajority of 66.7 percent the number of shares necessary to approve a merger or sale of a publicly traded Michigan-based insurance company with fewer than 200 employees when the board of that company does not want the deal. Fremont currently has about 70 employees, and the law sunsets in 2012.
The law was requested by Fremont's current leadership and is targeted specifically at one of their largest owners: Sardar Biglari, who owns a $3.8 million share of Fremont that represents 9.9 percent of the company's stock. Biglari wants to own all of Fremont and is willing to pay for it: In December, his Biglari Holdings made a buyout offer to his fellow share-owners more than 10 percent above the most recent closing price of their investment...
(Excerpt) Read more at michigancapitolconfidential.com ...
We’ve got a mess in Lansing to be sure. We really need to get people interested in paying more attention to instate politics which are really worse than the mess in Washington DC.
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