Company Name: Ford Motor Co.
Public Availability Date: March 19, 2007
Document Sections:
INQUIRY LETTER
INQUIRY LETTER
APPENDIX 1
INQUIRY LETTER
INQUIRY LETTER
APPENDIX 2
STAFF REPLY LETTER
[INQUIRY LETTER]
January 12, 2007
Securities and Exchange Commission
Division of Corporation Finance
Office of the Chief Counsel
100 F Street, N.E.
Washington, D.C. 20549
Re: Omission of Shareholder Proposal Submitted by Ms. Linda Joanette
Ladies and Gentlemen:
Pursuant to Rule 14a-8(j) promulgated under the Securities Exchange Act of 1934,
as amended (the "Act"), Ford Motor Company ("Ford" or the "Company")
respectfully requests the concurrence of the staff of the Division of
Corporation Finance (the "Staff") of the Securities and Exchange Commission (the
"Commission") that it will not recommend any enforcement action to the
Commission if the shareholder proposal described below is omitted from Ford's
proxy statement and form of proxy for the Company's 2007 Annual Meeting of
Shareholders (the "Proxy Materials"). The Company's Annual Meeting of
Shareholders is scheduled for May 10, 2007.
Ms. Linda Joanette (the "Proponent") has submitted for inclusion in the 2007
Proxy Materials a proposal that "demands" that the Board of Directors appoint an
independent legal advisory commission to investigate alleged security law
violations (see Exhibit 1; the "Proposal"). The Company proposes to omit the
Proposal from its 2007 Proxy Materials for the following reasons:
The Proposal is excludable under Rule 14a-8(i)(7) because it deals with
matters relating to the Company's ordinary business operations.
The Proposal is excludable under Rule 14a-8(i)(3) because it is contrary to
Rule 14a-9, which prohibits materially false or misleading statements in proxy
soliciting materials.
The Proposal is excludable under Rule 14a-8(i)(1) because it is not a proper
subject for action by shareholders under Delaware law.
The Proposal is excludable under Rule 14a-8(i)(2) because its implementation
would violate Delaware law.
The Proposal Deals with Matters Relating to the Company's Ordinary Business
Operations
Rule 14a-8(i)(7) permits a company to omit a proposal if it deals with a matter
relating to the company's ordinary business operations. In Exchange Act Release
No. 34-40018 (May 21, 1998), the Commission stated:
The policy underlying the ordinary business exclusion rests on two central
considerations. The first relates to the subject matter of the proposal. Certain
tasks are so fundamental to management's ability to run a company on a
day-to-day basis that they could not, as a practical matter, be subject to
direct shareholder oversight.
***
However, proposals relating to such matters but focusing on sufficiently
significant social policy issues (e.g., significant discrimination matters)
generally would not be considered to be excludable, because the proposals would
transcend the day-to-day business matters and raise policy issues so significant
that it would be appropriate for a shareholder to vote.
The second consideration relates to the degree to which the proposal seeks to
"micro-manage" the company by probing too deeply into matters of a complex
nature upon which shareholders, as a group, would not be in a position to make
an informed judgment.
The Proposal demands that the Board appoint an independent legal advisory
commission to investigate potential security law violations relating to the
implementation of the Company's Value Enhancement Plan that was approved by
shareholders in August 2000. Pursuant to a long line of previous No Action
Letters, the Company respectfully requests the Staff's concurrence that the
Proposal may be omitted from Ford's 2007 Proxy Materials as it requests the
Company to investigate matters that could be the subject of litigation. Indeed,
the Proposal's supporting statement makes several claims of fraud and conspiracy
to commit fraud.
Every company's management has a basic responsibility to protect the company's
interests against litigation. A shareholder proposal that interferes with this
obligation is inappropriate. Shareholders do not posses the necessary expertise
to advise management on complex legal issues. For this reason, the Staff has
acknowledged that a shareholder proposal that implicates the conduct of
litigation or litigation strategy is properly excludable under Rule 14a-8(i)(7).
See Johnson & Johnson (February 24, 2006) (exclusion allowed where proposal
requested formation of a Scientific Integrity Committee to assure research
integrity and detect misconduct) and ConocoPhillips (February 23, 2006)
(exclusion allowed where proposal required the board to investigate, independent
of in-house legal counsel, all potential legal liabilities alleged by
proponent).
Additionally, the Proposal may be excluded under Rule 14a-8(i)(7) because it
relates to the Company's legal compliance program. The Company is subject to
numerous laws, rules, and regulations for which it has the responsibility to
ensure compliance. The Company has established various processes and procedures
to detect fraud and has implemented processes by which employees and others may
report suspected fraudulent conduct to appropriate Company officials.
Shareholders do not possess the expertise to advise management on legal
compliance programs. The Staff has consistently concurred in the omission of
similar proposals as being part of a company's ordinary business. See Monsanto
Company (November 3, 2005) (exclusion allowed where proposal requested the board
to establish an ethics oversight committee to insure compliance with federal,
state, and local laws, rules, and regulations); Humana Inc. (February 25, 1998)
(exclusion allowed where proposal requested the board to oversee an "anti-fraud
compliance committee"); Hudson United Bancorp (January 24, 2003) (exclusion
allowed where a proposal requested the board appoint a committee to investigate
possible corporate misconduct); and General Electric Co. (January 4, 2005)
(exclusion allowed where proposal requested a report detailing the company's
television stations' activities to meet public interest obligations as relating
to the company's ordinary business, i.e., compliance with FCC regulations).
Accordingly, the Proposal deals with the ordinary business operations of the
Company and is, therefore, excludable pursuant to Rule 14a-8(i)(7).
The Proposal clearly concerns matters related to the ordinary business of the
Company - Company litigation strategy and compliance programs. Moreover, the
Proposal does not implicate any social or other policy issue that could mandate
its inclusion in the Proxy Materials.
The Proposal Violates the Proxy Rules (Rule
14a-8(i)(3) and Rule 14a-9)
Rule 14a-8(i)(3) permits an issuer to omit a shareholder proposal from its proxy
materials if the proposal is contrary to the Commission's proxy rules, including
Rule 14a-9, which prohibits false or misleading statements in proxy soliciting
materials. The Proposal is susceptible to differing interpretations and likely
to confuse the Company's shareholders. The Staff has regularly permitted
companies to omit proposals from their proxy materials on the grounds that any
action ultimately taken upon implementation of the proposal could be different
from the actions envisioned by the shareholders voting on the proposal at the
time their votes were cast. See, e.g., Bank of America Corporation (February 17,
2006) (concurring in exclusion of a proposal limiting the compensation of
directors as vague and ambiguous); Organogenesis, Inc. (April 2, 1999)
(concurring in exclusion of a proposal that recommended procedures for the
nomination and election of directors because the proposal was vague and
ambiguous) and AnnTaylor Stores Corporation (January 12, 2001) (concurring in
exclusion of proposal that would have committed the company to full
implementation of human rights standards and a program to monitor compliance).
The Proposal is vague, ambiguous and susceptible of various interpretations. The
Proposal demands that the Board appoint an "independent" legal advisory
commission to investigate alleged security law violations related to the
Company's Value Enhancement Plan approved by shareholders in August 2000. The
Proposal is ambiguous because it does not describe what is meant by the phrase
"independent legal advisory commission." Does this mean that the Board should
appoint certain independent directors to conduct a legal review of the VEP? Does
it mean that the Board should appoint a legal commission made up of outside
counsel? Does it mean that the legal commission should operate independent of
Board oversight? If so, to whom would the independent legal commission provide
advice? Furthermore, what advice would the independent commission be giving? If
the independent commission would operate independent of Board oversight, who
would pay the legal fees of such an investigation and how would a budget for the
investigation be established? Would the independent legal advisory commission
provide advice only on whether or not security law violations occurred? The list
of open questions related to the implementation of the Proposal is endless.
It is evident that the Proposal is so vague and ambiguous that the Board would
not know with reasonable certainty how to implement the Proposal if adopted.
Additionally, shareholders would not know with reasonable certainty what action
they are demanding the Board take. These ambiguities render the Proposal so
confusing and uncertain that neither shareholders nor the Board can be expected
to have a common understanding of its mechanics or implications. For these
reasons, the Proposal is the kind of "inherently vague and indefinite" proposal
the Staff has found properly excludable under Rule 14a-8(i)(3).
The Proposal Is Not A Proper Subject For Action By
Shareholders Under Delaware Law
Rule 14a-8(i)(1) authorizes the omission of a proposal if it is not a proper
subject for action by shareholders under the law of the jurisdiction of the
company's organization. Under the laws of the state of Delaware, Ford's state of
incorporation, the Proposal is not a proper subject for action by shareholders
because the Proposal is phrased as a demand to the Board rather than as a
precatory proposal recommending Board action. Specifically, the Proposal states
that "[a]doption demands the Board of Directors appoint an independent legal
advisory commission to investigate Security Law violations associated with VEP"
(emphasis added).
Section 141(a) of the Delaware General Corporation Law (the "DGCL") provides
that the "business and affairs of every corporation ... shall be managed by or
under the direction of the board of directors, except as may be otherwise
provided in this chapter or in its certificate of incorporation." 8 Del. C.
141(a). Because the Proposal would demand, rather than request, the Board to
take certain action if it were approved by the shareholders of the Company, it
appears to represent an effort to regulate directly the manner in which the
company conducts its business and affairs. The Proposal, therefore, is
impermissible under Section 141(a) of the DGCL. We have attached an opinion from
the Delaware law firm of Morris, Nichols, Arsht & Tunnell LLP that supports our
position.
The Staff has consistently granted no-action relief to Delaware corporations
under Rule 14a-8(i)(1) where a shareholder proposal mandates action that, under
state law, falls within the powers of the board of directors. See American
International Group, Inc. (Publicly Available March 12, 1999) (exclusion allowed
where the shareholder proposal was "phrased as a demand on the Company and its
Board of Directors [making it] mandatory rather than precatory"); CVS
Corporation (Publicly Available December 15, 1998) (exclusion allowed because
shareholder proposal "[sought] to mandate action on matters that, under state
law, fall within the management powers of a company's board of directors"); The
Boeing Company (Publicly Available February 25, 1997) (exclusion allowed because
a shareholder proposal "mandating or directing board action is inconsistent with
the discretionary authority granted to a board of directors [under state law]");
see also Triple-S Management Corporation (Publicly Available March 10, 2006)
(exclusion allowed by a Puerto Rico corporation because the shareholder proposal
"as a demand and not a precatory proposal, by-passes the function of the
Corporation's Board of Directors"); General Electric Company (Publicly Available
January 27, 2004) (exclusion allowed by a New York corporation where the
shareholder proposal was "cast as a demand to the Board rather than as a
precatory proposal").
The Proposal Violates Delaware Law
Rule 14a-8(i)(2) permits a company to omit a proposal if the proposal, if
implemented, would cause the company to violate state law. Implementation of the
Proposal would violate Delaware law by creating an independent legal advisory
commission (the "Advisory Commission"). Although the details of the Proposal are
unclear, the Advisory Commission, as an independent body, apparently would act
without the direction or supervision of the Board. The establishment and
operation of the Advisory Commission, therefore, would violate Section 141(a) of
the DGCL, which authorizes only the board of directors to manage or direct the
management of the business and affairs of the corporation, including deciding
whether to pursue litigation on behalf of the company. Because implementation of
the Proposal would violate Delaware law, the Proposal may be excluded under Rule
14a-8(i)(2). We have attached an opinion from the Delaware law firm of Morris,
Nichols, Arsht & Tunnell LLP that supports our position.
The Staff has previously granted no-action relief to a Delaware corporation
where the shareholder proposal demanded the corporation establish a shareholder
committee to investigate possible breaches of fiduciary duty by the board of
directors and to review the management of the corporation's business and affairs
by the directors and officers of the corporation. See Radiation Care, Inc.
(Publicly Available December 22, 1994).
Conclusion
For the foregoing reasons, it is respectfully submitted that the Proposal may be
excluded from Ford's 2007 Proxy Materials. Your confirmation that the Staff will
not recommend enforcement action if the Proposal is omitted from the 2007 Proxy
Materials is respectfully requested.
In accordance with Rule 14a-8(j), the Proponent is being informed of the
Company's intention to omit the Proposal from its 2007 Proxy Materials by
sending her a copy of this letter and its exhibits. Seven copies of this letter
are enclosed. Please acknowledge receipt by stamping and returning one copy in
the enclosed self-addressed stamped envelop.
If you have any questions, require further information, or wish to discuss this
matter, please call Jerome Zaremba (313-337-3913) of my office or me
(313-323-2130).
Very truly yours,
/s/
Peter J. Sherry, Jr.
Enclosure
Exhibits
cc: Ms. Linda Joanette (via Federal Express)
[INQUIRY LETTER]
December 1, 2006
To: Chairman Bill Ford
From: Linda Joanette
Subject: Shareholder Proposal for the 2007 Annual Shareholder's Meeting
Ms. Linda Joanette of 6523 Ridgeview Drive, Clarkston, Michigan 48346, who is
the owner of more than $2,000.00 of shares of Ford Common stock informs the
Company that she and/or her designee will present the attached proposal at the
2007 Annual Shareholder's Meeting.
This proposal is contained on Page 1 and 2 attached to this cover letter. The
proposal contains a total of 499 words (under the 500 word limit).
Also enclosed, is proof of share ownership of more than one year.
Please forward my proposal to the Company's Secretary.
/s/
[APPENDIX 1]
Resolved:
Did Chairman Bill Ford and his Board of Directors act in the best interests of
Common stock shareholders and the Company when they devised, endorsed and
recommended that shareholders approve the so-called Value Enhancement
Recapitalization Program? Or did they conspire to fraudulently deceive and
swindle their shareholders? Did Chairman Ford and the Board conspire to not
disclose that the true intention of VEP was to "unlock" $20 per share from Class
"B" shares paying the Ford family $1.4 billion of Company cash? Did Chairman
Ford and his Board deceive unsuspecting shareholders by false pretenses,
publicly promising Common stock shareholders that VEP would "reward our
shareholders?"
On April 14, 2000, the Board issued a press release announcing they had approved
a so-called Value Enhancement Program that would "reward" shareholders. VEP was
designed to distribute $20 cash or new share equivalent for each outstanding
share. Old Common and Class "B" shares would be tendered and new shares and/or
cash would be issued. To repeat, the Board promised (misled) shareholders that
their Recapitalization Plan would "reward" them if approved.
A prominent investment weekly published an article warning investors that VEP
was designed to benefit the Ford family by "unlocking" $20 cash from their Class
"B" shares. The article stated the Ford family faced huge future Estate Tax
liabilities which could force them to sell their Class "B" shares to pay their
tax liabilities. If the Ford family was forced to sell their Class "B" shares,
they would lose their 40% majority control of the Company. Therefore, VEP was
designed to funnel $1.4 billion cash from the Company's Treasury directly into
the pockets of the Ford family. VEP accomplished what its planners designed it
to do - pay the Ford family $1.4 billion of the Company's valuable cash. The
Ford family now has the cash to pay their future tax liabilities, therefore,
avoiding selling their Class "B" shares, and maintaining control of the Company.
Three years later, at the urging of an angry knowledgeable shareholder, the
Detroit News investigated VEP, concluding it was designed to benefit the Ford
family and was an Estate Tax scheme, calling it a "maneuver." See Mark Truby's
June 2, 2003 front page article.
The Ford family's Estate Tax planning aspirations were not disclosed by Chairman
Ford nor his Board. The Company is publicly traded and subject to Federal
Securities laws. Those laws prohibit misrepresentation, bad faith, swindle,
conspiracy to commit fraud, fraud in the inducement, concealment, breach of
contract, failing legal duty, false pretenses and failure to fully discloseall
violations that may have been committed by Chairman Ford and his Board.
For Common stock shareholders, there was no "reward" as Chairman Ford promised.
The stock is $8, and the Company faces insolvencyhardly the promised "reward."
Did Chairman Ford violate Federal Securities laws? Considering the state of our
Company, an investigation is imperative.
Vote "FOR"
Proposal:
Adoption demands the Board of Directors appoint an independent legal advisory
commission to investigate Security Law violations associated with VEP.
[INQUIRY LETTER]
March 8, 2007
SEC Chairman Christopher Cox
Michigan Attorney General Mike Cox
Florida Attorney General Bill McCollum
The Detroit News, Detroit Free Press and Miami Herald
From: Sam Joanette, Ford Motor Company Shareholder
Subject: Linda Joanette's Shareholder Proposal to the 2007 Ford Motor Company
Proxy
Reference: My February 15, 2007 letter, Re: Shareholder Proposal and Request for
Investigation, similar subject
The purpose of this letter is to request that the SEC approve the attached
shareholder proposal offered by Ford Motor Company shareholder Linda Joanette
and direct the Ford Motor Company (FoMoCo) to include it in its proxy for the
2007 Annual Meeting of Shareholders.
The attached shareholder proposal is being offered by FoMoCo shareholder Linda
Joanette. My name is Sam Joanette. I am also a FoMoCo shareholder and relative
of Ms. Joanette. Ms. Joanette has appointed me as her designee to present her
proposal at FoMoCo's 2007 shareholder meeting. Ms. Joanette has also authorized
me to contact to the SEC and State authorities on her behalf concerning this
proposal and request for investigation.
Ms. Joanette's proposal focuses on the following:
On April 14, 2000, the Ford Motor Company Board of Directors announced a
program called the Value Enhancement Plan. The Board encouraged Common stock
shareholders to approve their plan. Their plan also included a share
recapitalization feature. This is a quotation from the Board's announcement:
"Today, we are pleased to announce innovative actions to "reward" our
shareholders. The Board of Directors has approved a Value Enhancement Plan for
shareholders."
The so-called Value Enhancement Plan (VEP) and share recapitalization was not
a "reward" for Common stock shareholders that the Board promised in its
announcement. There was no element of the VEP plan that offered a so-called
"reward" or economic benefit to Common stock shareholders or the Company. I
believe that VEP was designed solely as an estate tax resolution scheme
benefiting the Class `B' shareholder Ford family. As I have described in the
enclosed documents, it was well known at that time, that the Ford family faced
major future estate tax liabilities that would likely effect the ownership of
their "special" Class `B' shares. It is the Ford family's Class `B' shares that
give them their voting majority to control the Company. If the Ford family were
forced to sell their "special" Class `B' shares to pay their estate tax
liabilities, they would risk losing their control of the Company according to
its Articles of Incorporation. I believe that VEP was a scheme devised and
endorsed by the Ford Motor Company Board of Directors to "reward" Class `B'
shareholders to the detriment of Common stock shareholders and the Company.
The members of the 1999 and 2000 FoMoCo Board of Directors were hand-picked
appointees of and beholden to the Ford family. I believe these Directors
conspired with the Ford family to devise and endorse an estate tax resolution
scheme that would benefit the family, whom the Board was beholden to, to the
detriment of Common stock shareholders and the Company. The Board's VEP scheme
paid the Ford family members $1.4 billion cash, tax-free. The Board's scheme
cost Common stock shareholders and the Company's treasury (really shareholder's
cash) $5.8 billion. There was absolutely no aspect of the VEP/Recapitalization
scheme that "rewarded" or yielded an economic benefit to the Company or Common
stock shareholders. The opening post-VEP trade was $26.74. Today, six and
one-half years later, Ford Common stock trades at $8. Common stock shareholders
are still waiting for the FoMoCo Board of Directors to keep its word and deliver
the "reward" they promised on April 14, 2000.
I believe the Board's so-called VEP/Recapitalization scheme was an intentional
deception and swindle of Common stock shareholders to benefit the Class `B'
shareholder Ford family. This deceptive swindle cost Common stock shareholders
and the Company $5.8 billion. Today, FoMoCo stands at the door of bankruptcy.
The Company's new CEO was forced to mortgage every Company asset to raise enough
cash to keep the Company in business for two more years to repair the damage
done by the mismanagement of former CEO Chairman Bill Ford. Today, the $5.8
billion that the Board wasted on VEP is the difference between the Company being
solvent and bankrupt. Due to the greed of the Ford family, one of America's
greatest companies is being destroyed. It is ironic to watch this family destroy
their company. Sadly, the lives of more than 50,000 American Ford workers and
220,000 Common stock shareholders are being destroyed, in part, because of the
Board's VEP scheme that favored the Ford family's interests.
The FoMoCo Board, in effect, allowed the Ford family to use the Company's
treasury as their personal bank to solve their family's estate tax problems. The
issue of the Ford family's estate tax problem was never disclosed to Common
stock shareholders by any member of the Board including Chairman Bill Ford. At
the April 14, 2000 announcement, three Ford family members sat on the Company's
Board of Directors. Bill Ford was Chairman, and his father William Clay Ford and
cousin Edsel Ford were Board members. Their membership on the Board placed them
in the position of control. As Board members controlling the chairmanship and
with a majority of three seats among their appointees, the three Ford family
members had the control to institute a scheme like VEP. I believe that VEP was a
conspiracy to defraud Common stock shareholders and the Company. I also believe
that Chairman Bill Ford, and Board members William Clay Ford and Edsel Ford
failed to disclose relevant information to Common stock shareholders concerning
the true intentions of the VEP/Recapitalization Plan.
Clearly, things have gone badly at Ford Motor Company since Bill Ford became the
Company's Chairman in 1999. Ms. Joanette's shareholder proposal challenges a
questionable Board approved plan that not only failed to deliver as promised, it
has depleted the Company's cash reserves, put the Company at the door of
bankruptcy, destroyed shareholders and employees lives and may be a deliberate
felonious act. This shareholder proposal deserves open debate and consideration
by those who were effected.
If Chairman Bill Ford, his family and their Board of Directors are confident
that they acted fairly and in the best interests of all shareholders and the
Company, then why do they object to appointing an independent legal advisory
commission to investigate their plan? By asking the SEC to omit this shareholder
proposal, Chairman Ford is attempting to prevent shareholders from having the
opportunity to consider this evidence. Does Chairman Ford and his Board have
something to hide? If Chairman Ford and his Board have acted in the best
interests of all shareholders, then an independent investigation will indicate
this.
Considering the level of devastation that the Company has experienced since Bill
Ford became chairman, an open investigation may reveal the cause of what has
destroyed shareholder's wealth and 50,000 employees jobs.
I ask the SEC and State authorities to think back just a few short years ago to
the Enron and Adelphia scandals. Both companies suffered from mismanagement and
violations of Federal Securities laws which eventually destroyed the well-being
of their shareholders and employees. It was only through open, impartial
investigations of these companies, that the felonious activities of their
high-ranking officials were exposed.
Comparing the parallels of Ford Motor Company to Enron and Adelphia are
startling. FoMoCo is very likely headed to bankruptcy. Enron and Adelphia became
bankrupt. Ford shareholders have been devastated losing about $100 billion under
the mismanagement of Chairman Bill Ford. In bankruptcy, Ford Common stock
shareholders stand to lose everything they have invested. Ford employee's
pension/401k plans are heavily invested in Ford Common stock. These employees
would not only lose their jobs, but may also lose their pensions. This is
exactly what happened to the Enron and Adelphia employees and shareholders.
I respectfully request that the SEC approve Linda Joanette's shareholder
proposal and direct the Ford Motor Company to include it in its proxy vote at
the 2007 Annual Shareholder's meeting.
I realize that the SEC is nearing the deadline date concerning approval or
omission of shareholder proposals for the 2007 FoMoCo proxy. Due to the
importance of this issue, I am asking the SEC to thoroughly consider the
implications of this shareholder proposal. Ford Motor Company could be in
bankruptcy before the 2008 Annual Shareholder's Meeting. An open, impartial
investigation delayed one year may be too late. Please take the appropriate
amount of time to consider the facts of VEP and approve an impartial legal
investigation
Before it becomes too late, as was the case with Enron and Adelphia, with this
letter, I am also asking the Sec and State authorities to open investigations
concerning violations of the Federal Securities Acts by the Ford Motor Company
Board of Directors, the Ford family and the Board endorsed 2000 Value
Enhancement Plan.
Thank you for your consideration.
Linda Joanette.................Sam Joanette
6523 Ridgeview Drive...........360 Collins Ave.
Clarkston, Michigan, 48346.....Suite 202
(248) 342-1053.................Miami Beach, Fl. 33139
...............................(786) 525-3566
[INQUIRY LETTER]
January 12, 2007
Securities and Exchange Commission
Division of Corporation Finance
Office of the Chief Counsel
100 F Street, N.E.
Washington, D.C. 20549
Re: Omission of Shareholder Proposal Submitted by Ms. Linda Joanette
Ladies and Gentlemen:
Pursuant to Rule 14a-8(j) promulgated under the Securities Exchange Act of 1934,
as amended (the "Act"), Ford Motor Company ("Ford" or the "Company")
respectfully requests the concurrence of the staff of the Division of
Corporation Finance (the "Staff") of the Securities and Exchange Commission (the
"Commission") that it will not recommend any enforcement action to the
Commission if the shareholder proposal described below is omitted from Ford's
proxy statement and form of proxy for the Company's 2007 Annual Meeting of
Shareholders (the "Proxy Materials"). The Company's Annual Meeting of
Shareholders is scheduled for May 10, 2007.
Ms. Linda Joanette (the "Proponent") has submitted for inclusion in the 2007
Proxy Materials a proposal that "demands" that the Board of Directors appoint an
independent legal advisory commission to investigate alleged security law
violations (see Exhibit 1; the "Proposal"). The Company proposes to omit the
Proposal from its 2007 Proxy Materials for the following reasons:
The Proposal is excludable under Rule 14a-8(i)(7) because it deals with
matters relating to the Company's ordinary business operations.
The Proposal is excludable under Rule 14a-8(i)(3) because it is contrary to
Rule 14a-9, which prohibits materially false or misleading statements in proxy
soliciting materials.
The Proposal is excludable under Rule 14a-8(i)(1) because it is not a proper
subject for action by shareholders under Delaware law.
The Proposal is excludable under Rule 14a-8(i)(2) because its implementation
would violate Delaware law.
If you have any questions, require further information, or wish to discuss this
matter, please call Jerome Zaremba (313-337-3913) of my office or me
(313-323-2130).
Very truly yours,
/s/
Peter J. Sherry, Jr.
Enclosure
Exhibits
cc: Ms. Linda Joanette (via Federal Express)
[APPENDIX 2]
THE WEIGHT OF EVIDENCE
I believe that Chairman Bill Ford, former CEO Jac Nasser, and the Ford Motor
Company Board of Directors (of 1999 and 2000) violated numerous sections of the
Federal Securities Acts (Rule 14a-9) and its Anti-Fraud provisions. I believe
these violations include making false and misleading statements to Common stock
shareholders (Section 240.14a-9, Act of 1934) , failure to fully disclose
relevant information (the Ford family's estate tax problems and their desire to
maintain control of the Company) to shareholders, and fraud in the inducement
acting to favor and benefit the interests of Class `B' shareholders to the
disadvantage of Common stock shareholders and the Company with regard to the
August 2000 Value Enhancement/Recapitalization Program (VEP).
I believe that the following are some of the illegal actions committed against
Common stock shareholders and the Company by Chairman Bill Ford and his Board of
Directors concerning their so-called Value Enhancement Plan:
- Fraud in the inducement: The use of deceit or trick to cause someone to act to
his disadvantage. The heart of this type of fraud is misleading the other party
as to the facts upon which he will base his decision.
- Fraud: The intentional use of deceit, a trick, or other dishonest means to
deprive another person of his money, property or a legal right. This includes
failing to point out a known mistake in a contract or other writing, or not
revealing a fact which he has the duty to communicate. Since fraud is intended
to employ dishonesty to deprive another of money, property or right, it can also
be a crime for which the fraudulent person(s) can be charged, tried and
convicted.
- Misrepresentation: The crime of misstating facts to obtain money or benefits
of another to which the accused is not entitled.
- Full disclosure: The need in business transactions to tell the "whole truth"
about any matter which the other party should know in deciding to buy.
- Concealment: Fraudulent failure to reveal information which someone knows and
is aware that in good faith he should communicate to another.
- Swindle: To cheat through trick, false statements or other fraudulent methods
with the intent to acquire money or property from another. Swindling is a crime
as one form of theft.
VEP is not the first occurrence of Chairman Ford failing to disclose to Ford
shareholders relevant information concerning his personal financial dealings.
Several years ago, Ford shareholders brought a lawsuit against Chairman Ford for
failing to disclose his purchase of millions of dollars of IPO shares offered by
the Company's lead banker Goldman Sachs. As I recall, Chairman Ford and Goldman
settled the lawsuit out of court. I believe that VEP is another example of
Chairman Ford failing to fully disclose all information to shareholders.
I believe that VEP was an estate tax-planning scheme designed and endorsed by
high-ranking Company officials to deceive and mislead Common stock shareholders
and the Ford Motor Company. I believe that VEP was a scheme devised to resolve
the future estate tax liabilities of Ford family members while allowing them to
maintain their Class `B' shares and control of the Company. The intention of the
conspirators scheme was to "unlock" $20 per share cash from "locked" Class `B'
shares. This conspiracy paid the Ford family members $1.4 billion dollars
(tax-free) of shareholder's cash from the Company's Treasury.
- Conspiracy: When people work together by agreement to commit an illegal act, A
conspiracy may exist when parties use legal means to accomplish an illegal
result giving rise to a civil lawsuit for damages by someone injured by the
conspiracy.
- Conspirator: A person or entity who enters into a plot with one or more people
to commit illegal acts to harm others.
(1) Detroit News business editor Mark Truby in his June 2, 2003 expose' called
VEP a "bold stock maneuver." Using Mr. Truby's term, VEP was a "maneuver" that
unlocked and monetized $20 per share cash from the Ford family's Class `B'
shares converting that cash tax-free into so-called "new" (the recapitalization
element of their scheme) Ford Common shares. These "new" Common shares could
then be sold and converted into cash whenever needed to pay the future estate
tax liabilities that many members of the Ford family faced. This tax planning
scheme would prevent them from being forced to sell their super-voting majority
(Dual-Class) Class `B' shares. It is their Class `B' shares that give the Ford
family their control over the Company. The Ford family never, ever wants to sell
any of these shares. This is what the VEP scheme was all about.
Why was this "scheme" necessary? Because if Ford family members were forced to
sell their special Class `B' shares, they would like lose their control of the
Company. Chairman Ford and his Board "failed to disclose" to Common stock
shareholders that VEP was designed by them as an estae tax planning scheme to
benefit the Ford family's interests. The scheme was designed to "unlock" cash
from their "locked" Class `B' shares. This scheme was designed to resolve the
future estate tax liabilities that faced the Ford family in early 2000 at the
time of the Board's announcement. I believe that VEP was a deliberate conspiracy
by the FoMoCo Board of Directors to mislead, deceive and swindle Common stock
shareholders and the Ford Motor Company. The Board misled Common shareholders by
announcing that VEP would "reward" them if they approved the Board's plan
(scheme, swindle) through a vote.
**** Note: In order to understand the ramifications of the VEP scheme, one first
must understand the intricacies and privileges of the Ford family's "special"
Class `B' shares. Without a thorough understanding of the Company's Articles of
Incorporation (which grants these "special privileges) and the Internal Revenue
Code concerning estate taxes in 1999 and 2000, a reader will simply not be able
to unravel the Board's scheme. Remember, the Ford family has multi-billion
fortunes facing imminent estate tax liabilities. Billionaires can afford experts
in tax planning and the law. It is a daunting task that faces any person who
tries to understand and unravel VEP's scheme. In order to make this easier for
the reader, I have included in this report three attachments that simplify the
intricacies and privileges afforded Class `B' shares and the interested parties
motives in the VEP scheme.
(2) The FoMoCo Board of Directors announced their VEP plan to Common stock
shareholders through an April 14, 2000 Company release. The Board endorsed the
approval of VEP by stating, "Today, we are pleased to announce innovative
actions to "reward" our shareholders. The Board of Directors has approved a
Value Enhancement Plan for shareholders."
There are numerous problems with the Board's statement: To the best of my
knowledge, the Board never specified what their "reward" would be. What was
their "reward?" Clearly, anyone analyzing the results of VEP can see that the
Ford family Class `B' was "rewarded." But what was the "reward" the Board
promised Common stock shareholders? Six and one-half years later, Common
shareholders are still waiting for the Board's promised "reward" to arrive. I
believe that the FoMoCo Board of Directors intentionally conspired to mislead
Common stock shareholders by promising to "reward" them in order to gain
approval of a program that was designed to favor and "reward" Class "B"
shareholders at the expense of Common stock shareholders and the Ford Motor
Company.
The two major area newspapers, the Detroit News and Detroit Free Press wrote
many articles about VEP prior to the shareholder's vote, but neither newspaper
was able to identify what the Board's so-called "reward" would be. One of the
Detroit newspapers called VEP "confusing." Certainly, both newspapers were
confused about VEP. Why confused? Simply, because there was no "reward" or
economic benefit to be realized by either Common stock shareholders or the
Company. VEP was a conspiracy to defraud.
I believe that VEP/ Recapitalization was one of the largest swindles in American
corporate history. Not only did the FoMoCo Board of Directors swindle their
Common stock shareholders, they depleted the Company's valuable cash setting the
Company up for the destruction it now faces. Today, FoMoCo does not have enough
cash to operate through the next three years. The Company's new CEO was forced
to pledge every Company (really, shareholder's) asset to borrow enough cash to
stay in business through 2009. The bet on Wall Street is that Ford Motor Company
will become bankrupt. I believe that the Company faces bankruptcy today due to
the $5.8 billion that was depleted to cover the cost of the Ford family's estate
tax planning swindle known as VEP.
Not every investor was unaware of the true intentions of VEP. In the spring and
summer of 2000, some investors realized it and some journalists wrote that VEP
was a scheme - an estate tax planning scheme designed to favor and benefit the
Ford family that was endorsed by their hand-picked and beholden Board.
Twenty-five percent of shareholders voted against VEP. I believe this was
because they realized that VEP was a scheme and that there would be no "reward"
from what was really a "cash dividend" and share recapitalization (share
exchange). What's my proof?
In June 2000, Barron's Investment Weekly published an article that discussed
the details of the so-called VEP plan. That article mentioned that the largest
owners of Class `B' shares were family members who in their 80's and that estate
tax planning was their priority. Barron's article was a warning to investors.
The article stated that VEP would allow Ford family members to "monetize" cash
without selling their Class `B' shares. It was Barron's article that alerted me
to the Board's real intention - that was to swindle Common stock shareholders
and the Company.
At that time, there were other business writers who realized that VEP was all
about tax-planning and wrote similar articles stating that the Ford family would
be the real winners from the Board's plan.
In November 2000 at the Hilton Hotel in Novi Michigan, I had the opportunity
to have a one-on-one discussion with auto analyst Steven Girsky at the
conclusion of the annual Morgan Stanley Auto Forum. At that time, Mr. Girsky was
recognized as the foremost auto analyst in the world. I felt confident that Mr.
Girsky knew the truth about VEP and could confirm what I suspected. Before I
could proceed further in my quest to expose the truth about VEP, I felt it was
absolutely necessary to receive confirmation from an expert such as Mr. Girsky.
Standing directly before Mr. Girsky, I asked him if VEP was an estate tax scheme
designed to favor and benefit the Ford family at the expense of Common
shareholders and the Company. Mr. Girsky confirmed to me that VEP was designed
to "unlock" cash from Class `B' shares for the benefit of Class `B`
shareholders. Mr. Girsky concluded his answer by asking me this question: "What
did %iyou%i gain from VEP?" I said, "Nothing." Then Mr. Girsky said, "And now
you have your answer."
In November 2002, I contacted the business writers of the Detroit News and
Detroit Free Press concerning questions I had regarding the mismanagement of
FoMoCo by Chairman Bill Ford, his broken promises, such as misleading
shareholders and investors with predictions as to future market values
(violation of Rule 14a-9 of the Act of 1934) and the VEP/Recapitalization
swindle. Mark Truby of the Detroit News called me and said that he was also
concerned that things were not going right at Ford. He told me he was interested
in reviewing all of my evidence and would investigate my claims. He also told me
that he didn't understand my complaints about VEP (27 months after VEP was
instituted and still confused). For the next three months, I forwarded document
after document to Mr. Truby.
One morning in the spring of 2003, Mr. Truby called me to say that he agreed
with my conclusion that VEP was an estate tax scheme designed to favor and
benefit Class `B' shareholders at the expense of Common stock shareholders and
the Company. He told me that he would write an expose' on VEP. But he also
cautioned me to be realistic as to the depth that he could go with his article.
Mr. Truby warned me that working for a major newspaper in Detroit had
"pressures." One pressure was the influence of the Ford family - that it was
difficult to publish articles that were critical of Detroit's Royal Family. I
had lived in Detroit all of my life. I fully understood what Mr. Truby was
saying. I asked him to write the best article he could, because I felt "an
article" exposing VEP was better than "no article." I didn't consider this to be
a set back. I believe that having an article published by a major Detroit
newspaper from Bill Ford's backyard would give me credibility to take my story
to Federal and State authorities, other newspapers around the country and law
firms handling civil and Class Action lawsuits.
On June 2, 2003, Mark Truby published a front page Detroit News article exposing
VEP. Mr. Truby's headline read, "How Ford family saved dynasty." Also, "Bold
stock maneuver preserves control." Look closely at the word that Mr. Truby chose
to use: he selected the word "maneuver." Remember, Mr. Truby said there were
pressures concerning publishing articles about the Ford family. Go to the
dictionary and look up the definition of maneuver. I believe that Mr. Truby is
implying something very important about VEP to his readers, while tiptoeing
around the pressures of the Royal Family. Mr. Truby is a very experienced,
capable writer who has since been promoted to Business Editor of the News. Mr.
Truby's choice of the word "maneuver' is intentional and purposeful to his
expose'. I believe that Mr. Truby is trying to tell his readers that VEP was a
"bold stock deception (that) preserves control." Publicly traded companies are
prohibited from deceiving their shareholders and is a felony.
It is time for Federal and State authorities to thoroughly investigate the Ford
Motor Company Board of Director's and their so-called Value Enhancement/
Recapitalization Plan. This letter provides you with the names of others
including one expert who can testify as to the purpose and intent of the
FoMoCo's Board of Directors scheme against their Common stock shareholders.
VEP was "sold" to Common stock shareholders by the Ford family's Board of
Directors as a so-called "share recapitalization" program. As a "share
recapitalization" VEP did not offer Common shareholders (or the Company) an
economic benefit or "reward" as the Board promised. Share recapitalization is an
exchange of "old" shares for "new" shares. Ask yourself this revealing question:
"How would exchanging "old" stock certificates for "new" stock certificates add
value or "reward" a shareholder as the Board promised? The answer is that share
recapitalization plans (exchanging "old" shares for "new" shares) do not add
value or "reward." That is, unless you are a Ford Class `B' shareholder.
The intention of the share recapitalization scheme was to create so-called "new"
shares of Common stock. The scheme was designed to allow the Ford family to
reinvest tax-free the $1.4 billion cash they received from VEP in the so-called
"new" shares, - just like common stock shareholders, inferring that both classes
of shareholders were treated equally. And with the exception of a few wise,
experienced investors who knew better, most Ford shareholders were left confused
trying to make sense of the plan the Board endorsed. There was no "reward," and
one month later, the price of the "new" Common stock was trading down near $20
per share.
The Ford family handpicked Board of Director's stabbed their Company, employees
and Common stock shareholders in their backs. It's time for an investigation and
explanation from Chairman Bill Ford and his Board of Directors. Even though this
is 6 1/2 years later, it's time for the Government to carry out its duty to
protect the investing public and expose the truth concerning the destruction of
one of America's greatest companies, the losses of $100 billion of shareholder's
wealth and more than 50,000 American Ford workers jobs.
The offer of $20 cash per share was not the promised "reward" - this $20 cash
was merely a return of shareholder's capital. Proof? The price of Ford Common
stock dropped $20 on the opening trade the morning that VEP was initiated. Why?
Because the $20 per share cash distribution was merely a return of shareholder's
capital. A return of capital and the expected subsequent drop in the shares'
price is not a "reward." Analyze the numbers:
$46.74/share closing price prior to VEP.
$26.74/share opening price at commencement of VEP plus $20/share cash or share
equivalent.
The total value of a share of Ford Common stock equaled $46.74 - before and
after VEP.
So, where's the "reward" the Board promised Common stock shareholders?
If a Common share was worth $46.74 before VEP and $26.74 plus $20 cash after,
there was no "reward." Add up the numbers. The program was a "wash." However, if
a person correctly includes the Company's depleted cash, VEP was a $5.8 billion
loss.
One month after VEP was initiated, Ford Common stock traded near $20/share
reflecting the $5.8 billion loss/cost of the program. Of that $5.8 billion, the
Ford family got $1.4 billion cash.
The depletion of $5.8 billion cash from the Company's Treasury guaranteed one
outcome - that Wall Street would mark-down the price of Ford Common to reflect
that the Company was $5.8 billion dollars less valuable after VEP than before.
The depletion of the cash guaranteed a subsequent mark-down in the price of
Common shares. How could the loss of $5.8 billion of shareholder's cash along
with the lower stock price be a "reward" as the Board of promised?
A share recapitalization, the exchange "old" shares for "new" shares, does not
"reward" nor create one cent of economic value for the Company or its
shareholders. I believe VEP was a conspiracy to defraud, mislead and swindle
Common stock shareholders and the Ford Motor Company by the Company's Board of
Directors.
Common stock shareholders are still waiting for Chairman Bill Ford and his Board
of Directors to deliver the "REWARD" they promised Common stock shareholders on
April 14, 2000. The closing price of Ford Common stock immediately prior to
VEP's commencement was $46.74. Today, the price of Ford Common stock is $8.
Shareholders have waited 6 1/2 years for their "reward." When will Chairman Ford
and his Board deliver the "reward" they promised their shareholders? It is time
for Federal and State authorities to investigate the circumstances of VEP that
destroyed the Company, its employees and shareholders.
For Chairman Ford and his Board to publicly state that VEP would "REWARD"
shareholders was intentionally misleading and deceptive in order to receive
approval from unsuspecting and trusting Common stock shareholders. For the Board
to promise shareholders that VEP would "reward" them would be the equivalent of
believing that a two-for-one stock split would result in the shareholder being
twice as wealthy after the split. Share recapitalization like stock splits offer
no economic value either to the company or its shareholders. Additionally,
knowledgeable investors realize that the depletion of a company's cash only
results in the company being less valuable, not more valuable (and not a
reward).
As I wrote earlier in this letter, in November 2002, I sent my evidence to
Detroit News Business editor Mark Truby. After reviewing and investigating the
evidence, Mr. Truby agreed with my conclusion and wrote a front page Detroit
News expose' on VEP. Mr. Truby's headline read, "How Ford family saved dynasty.
Bold stock maneuver preserves control."
Again, Mr. Truby's headline read: "How Ford family saved dynasty. Bold stock
maneuver preserves control." There is nothing in Mr. Truby's headline about a
"reward" for Common stock shareholders.
What is Mr. Truby telling his readers? Analyze what he wrote: "Bold stock
maneuver preserves control." Bold stock "maneuver?" Think about it: when it
comes to publicly traded companies, the words "bold" and "maneuver" should never
appear in the same sentence with the word "stock."
What is the definition of the word maneuver? maneuver: 1. A clever or crafty
tactic; ploy. 2. Devious act; an action, especially a devious or deceptive one,
done to gain advantage. One of his little maneuvers to try to stay in total
control. 3. Manipulate somebody or something: to manipulate somebody or
something to gain advantage. 4. To behave deviously: to use devious means in
order to gain advantage. 4. To position, or steer skillfully or adroitly.
A synonym means: a word meaning the same as another. What are the synonyms for
the word maneuver? Trick, plot, scheme, tactic, contrive.
What is Detroit News editor Mark Truby saying? Substitute Mr. Truby's choice of
the word "maneuver" with its definitions and synonyms:
"Bold stock tactic preserves control"
"Bold stock ploy preserves control"
"Bold stock manipulation preserves control"
"Bold stock devious act preserves control"
"Bold stock deception preserves control"
"Bold stock advantage preserves control"
"Bold stock trick preserves control"
"Bold stock plot preserves control"
"Bold stock contrivance preserves control"
Should the Board of Directors of a publicly traded company devise and endorse a
stock program that is bold, a tactic, ploy, devious act, deception, advantage,
trick, plot or contrivance? It seems to me that Chairman Bill Ford, former CEO
Jac Nasser and their Board of Directors did just that.
I respectfully request that the SEC approve Linda Joanette's shareholder
proposal and that the Agency and State authorities begin an investigation into
the circumstances of the Ford Motor Company Board of Director's August 2000
Value Enhancement/Recapitalization Plan.
[STAFF REPLY LETTER]
March 19, 2007
Response of the Office of Chief Counsel Division of Corporation Finance
Re: Ford Motor Company
Incoming letter dated January 12, 2007
The proposal requires the board to appoint an independent legal advisory
commission to investigate "Security Law violations associated with VEP."
There appears to be some basis for your view that Ford
may exclude the proposal under rule 14a-8(i)(7), as relating to Ford's ordinary
business operations (i.e., general conduct of a legal compliance program).
Accordingly, we will not recommend enforcement action to the Commission if Ford
omits the proposal from its proxy materials in reliance on rule 14a-8(i)(7). In
reaching this position, we have not found it necessary to address the
alternative bases for omission upon which Ford relies.
Sincerely,
/s/
Ted Yu
Special Counsel
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