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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. *)
Kaiser Ventures Inc.
(Name of Issuer)
Common Stock
(Title of Class of Securities)
483088100
(CUSIP Number)
Ellyn Roberts
Shartsis Friese & Ginsburg LLP
One Maritime Plaza, 18th Floor
San Francisco, CA 94111
(415) 421-6500
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
November 29, 1999
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check
the following box / /.
Note: Schedules filed in paper format shall include a signed original and
five copies of the schedule, including all exhibits. See Rule 13d-7(b) for
other parties to whom copies are to be sent.
* The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which
would alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities
Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of
that section of the Act but shall be subject to all other provisions of the
Act (however, see the Notes).
Potential persons who are to respond to the collection of information
contained in this form are not required to respond unless the form displays
a currently valid OMB control number.
SEC 1746 (10-97)
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CUSIP No. 483088100 13D Page 2 of 21 Pages
- ---------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
IRS IDENTIFICATION NO. OF ABOVE PERSON
Willow Creek Capital Management
- ---------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) /X /
(b) / /
- ---------------------------------------------------------------------------
3 SEC USE ONLY
- ---------------------------------------------------------------------------
4 SOURCE OF FUNDS*
AF
- ---------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) / /
- ---------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
California
- ---------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES *
BENEFICIALLY --------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH 542,900
REPORTING --------------------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH *
--------------------------------------------------
10 SHARED DISPOSITIVE POWER
542,900
- ---------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
542,900
- ---------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
/ /
- ---------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
5.1
- ---------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IA
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CUSIP No. 483088100 13D Page 3 of 21 Pages
- ---------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
IRS IDENTIFICATION NO. OF ABOVE PERSON
Aaron H. Braun
- ---------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) /X/
(b) / /
- ---------------------------------------------------------------------------
3 SEC USE ONLY
- ---------------------------------------------------------------------------
4 SOURCE OF FUNDS*
AF
- ---------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) / /
- ---------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
U.S.A.
- ---------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES *
BENEFICIALLY --------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH 542,900
REPORTING --------------------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH *
--------------------------------------------------
10 SHARED DISPOSITIVE POWER
542,900
- ---------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
542,900
- ---------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
/ /
- ---------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
5.1
- ---------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
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CUSIP No. 483088100 13D Page 4 of 21 Pages
ITEM 1. SECURITY AND ISSUER.
This statement relates to shares of Common Stock (the "Stock") of Kaiser
Ventures Inc. (the "Issuer"). The principal executive office of the Issuer
is located at 3633 E. Inland Empire Blvd., Suite 850, Ontario, CA 91764-
4922.
ITEM 2. IDENTITY AND BACKGROUND.
The persons filing this statement and the persons enumerated in Instruction
C of Schedule 13D and, where applicable, their respective places of
organization, general partners, directors, executive officers and
controlling persons, and the information regarding them, are as follows:
(a) Willow Creek Capital Management, a California corporation
("Willow Creek") and Aaron H. Braun (collectively, the "Filers").
(b) The business address of the Filers is 17 E. Sir Francis Drake
Blvd., Suite 100, Larkspur, CA 94939.
(c) Mr. Braun is the President and sole shareholder of Willow Creek,
which is an investment adviser.
(d) During the last five years, none of the Filers has been convicted
in a criminal proceeding (excluding traffic violations or similar
misdemeanors).
(e) During the last five years, none of the Filers was a party to a
civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to, federal or state securities
laws or finding any violation with respect to such laws.
(f) Mr. Braun is a citizen of the United States of America.
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CUSIP No. 483088100 13D Page 5 of 21 Pages
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
The source and amount of funds used in purchasing the Stock were as
follows:
Purchaser Source of Funds Amount
Willow Creek AF $6,146,975
ITEM 4. PURPOSE OF TRANSACTION.
In its report on Form 8-K filed on November 22, 1999, the Issuer reported
that it purchased 2,730,950 and 1,693,551 shares of the Stock from The New
Kaiser Voluntary Employees' Beneficiary Association (VEBA) and The Pension
Benefit Guaranty Corporation (PBGC), respectively, for $13.00 per share in
cash. In addition, the Issuer reported that if there is a bulk sale of the
Issuer's real estate generally before December 31, 2000, VEBA and PBGC have
the right in certain circumstances to receive a contingent real estate
payment. The Issuer also reported that Warrants for 460,000 and 285,260
shares of the Stock were issued to VEBA and PBGC, respectively. The Issuer
reported that the warrants have a term of five years and an exercise price
of $17.00 per share and that VEBA and PBGC have demand registration rights
for the shares issued upon exercise of the warrants under certain
circumstances. The Issuer also reported that if all currently contemplated
real estate transactions are closed on their current terms, VEBA and PBGC
would receive an additional cash payment of approximately $1.10 per share.
The Issuer reported that it has reserved the right to distribute to its
shareholders the same amount of cash that would be received by VEBA and
PBGC pursuant to the contingent payment agreement without adjustment of the
warrant price.
In addition, the Issuer reported that the size of the board of directors
was reduced from eleven members to seven.
The Filers object to the foregoing series of transactions (collectively,
the Transaction) as not in the best interest of minority shareholders.
Accordingly, on December 7, 1999, affiliates of the Filers filed an action
in the United States District Court for the Northern District of California
against the Issuer, VEBA and others. A copy of the complaint is attached
as Exhibit B. In addition, the Filers may do some or all of the following:
1. Solicit proxies or written consents from other shareholders to elect
individuals to the Issuer's board who have the goal of maximizing value for
all shareholders, and to establish compensation for board members, either
through stock ownership or cash, as an incentive to achieve that goal;
2. Engage investment bankers or other investment professionals to
investigate the possible liquidation of the Issuer's remaining assets;
3. Enter into discussions with other shareholders, financial institutions
or investors who may be interested in commencing a tender offer for the
Stock; or
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CUSIP No. 483088100 13D Page 6 of 21 Pages
4. Contact and consult with other shareholders of the Issuer about any or
all of the foregoing matters.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
The beneficial ownership of the Stock by each Filer at the date hereof is
reflected on that Filer's cover page.
The Filers effected the following transactions in the Stock in open market
transactions on the dates indicated, and such transactions are the only
transactions in the Stock by the Filers since 60 days before the date on
the cover page:
Purchase Number Price
Name or Sale Date of Shares Per Share
Willow Creek Purchase 11/19/99 400 14.72
Willow Creek Purchase 11/18/99 700 14.32
Willow Creek Purchase 11/17/99 2,500 14.01
Willow Creek Purchase 11/15/99 700 14.52
Willow Creek Purchase 11/12/99 1,200 14.42
Willow Creek Purchase 11/11/99 2,100 14.15
Willow Creek Purchase 11/10/99 2,800 13.73
Willow Creek Purchase 11/03/99 900 13.10
Willow Creek Purchase 11/02/99 900 13.22
Willow Creek Purchase 11/01/99 200 13.63
Willow Creek Purchase 10/29/99 1,000 13.64
Willow Creek Purchase 10/28/99 500 13.43
Willow Creek Purchase 10/27/99 1,900 13.05
Willow Creek Purchase 10/26/99 200 13.00
Willow Creek Purchase 10/25/99 200 13.00
Willow Creek Purchase 10/22/99 1,300 12.97
Willow Creek Purchase 10/11/99 400 12.94
Willow Creek Purchase 10/08/99 200 12.91
Willow Creek Purchase 10/07/99 200 13.00
Willow Creek Purchase 10/06/99 300 12.94
Willow Creek Purchase 10/05/99 200 13.00
Willow Creek Purchase 10/04/99 400 13.06
Willow Creek Purchase 9/30/99 400 13.03
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER.
Willow Creek is a registered investment adviser whose clients have the
right to receive or the power to direct the receipt of dividends from, or
the proceeds from the sale of, the various securities in which their assets
are invested, including the Stock. Depending on Willow Creek's agreement
with each advisory client, the client may have no right or a shared right
to direct the voting of the Stock.
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CUSIP No. 483088100 13D Page 7 of 21 Pages
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
A. Agreement Regarding Joint Filing of Statement on Schedule 13D or 13G
(including power of attorney).
B. Complaint filed in the U.S. District Court for the Northern District of
California against the Issuer, VEBA and others.
SIGNATURES
After reasonable inquiry and to the best of my knowledge, I certify
that the information set forth in this statement is true, complete and
correct.
DATED: December 7, 1999
Willow Creek Capital Management
\s\ Aaron H. Braun
Aaron H. Braun
President
\s\ Aaron H. Braun
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13D
CUSIP No. Page 8 of 21 Pages
EXHIBIT A
AGREEMENT REGARDING JOINT FILING
OF STATEMENT ON SCHEDULE 13D OR 13G
The undersigned agree to file jointly with the Securities and Exchange
Commission (the "SEC") any and all statements on Schedule 13D or Schedule
13G (and any amendments or supplements thereto) required under section 13(d)
of the Securities Exchange Act of 1934, as amended, in connection with
purchases by the undersigned of securities Kaiser Ventures Inc. For that
purpose, the undersigned hereby constitute and appoint Willow Creek Capital
Management, a California corporation, as their true and lawful agent and
attorney-in-fact, with full power and authority for and on behalf of the
undersigned to prepare or cause to be prepared, sign, file with the SEC and
furnish to any other person all certificates, instruments, agreements and
documents necessary to comply with section 13(d) and section 16(a) of the
Securities Exchange Act of 1934, as amended, in connection with said
purchases, and to do and perform every act necessary and proper to be done
incident to the exercise of the foregoing power, as fully as the undersigned
might or could do if personally present.
DATED: December 7, 1999
Willow Creek Capital Management
\s\ Aaron H. Braun
Aaron H. Braun
President
\s\ Aaron H. Braun
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13D
CUSIP No. Page 9 of 21 Pages
EXHIBIT B
GEORGE DONALDSON (S.B. 79971)
DANIEL B. HARRIS (S.B. 117230)
LAW OFFICES OF GEORGE DONALDSON
350 California Street, Suite 1750
San Francisco, California 94104
Telephone: (415) 394-8500
Attorneys for Plaintiffs
Willow Creek Capital Partners, L.P.
and Willow Creek Offshore
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
SAN FRANCISCO DIVISION
WILLOW CREEK CAPITAL PARTNERS, L.P., a Delaware limited partnership; and
WILLOW CREEK OFFSHORE, a Cayman Islands corporation,
Plaintiffs,
vs.
KAISER VENTURES INC., a Delaware corporation; THE NEW KAISER VOLUNTARY
EMPLOYEES' BENEFICIARY ASSOCIATION, a California Trust; THE COLERIDGE
GROUP, an Arizona corporation; PACHOLDER ASSOCIATES, INC., an Ohio
corporation; MERRILL LYNCH, PIERCE, FENNER & SMITH, INC., a Delaware
corporation; RICHARD E. STODDARD, an individual; RONALD E. BITONTI, an
individual; TODD G. COLE, an individual; GERALD A. FAWCETT, an individual;
GARY E. GIBBONS, an individual; REYNOLD C. MACDONALD, an individual;
WILLIAM J. MORGAN, an individual; CHARLES E. PACKARD, an individual; THOMAS
S. RABONE, an individual; LYLE B. STEVENSON, an individual; and MARSHALL F.
WALLACH, an individual,
Defendants.
Case No. C 99 5188 SBA ENE
FEDERAL SECURITIES
COMPLAINT FOR DAMAGES AND EQUITABLE RELIEF ARISING FROM VIOLATIONS OF THE
SECURITIES EXCHANGE ACT OF 1934 AND STATE LAW
JURY TRIAL DEMANDED
Plaintiffs Willow Creek Capital Partners, L.P. and Willow Creek Offshore
(collectively, "plaintiffs" or Willow Creek) allege upon information and
belief, except as to plaintiffs' allegations pertaining to themselves,
which are alleged upon personal knowledge, as follows:
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13D
CUSIP No. Page 10 of 21 Pages
NATURE OF THE ACTION
1. This action concerns the recently announced purchase by Kaiser
Ventures Inc. ("Kaiser" or the "Company") of over 4.4 million shares of its
common stock from The New Kaiser Ventures Employees' Beneficiary
Association ("VEBA") and the Pension Benefit Guaranty Corporation ("PBGC")
(the "Stock Purchase Transactions"). Prior to the Stock Purchase
Transactions, VEBA and PBGC together owned more than fifty percent of
Kaiser's outstanding shares. In causing and effecting the Stock Purchase
Transactions, the defendants have allowed VEBA and PBGC to obtain liquidity
for their interests not available to Kaiser's other shareholders and to
participate, without any risk, in the future success of the Company.
Consequently, Kaiser's controlling shareholders have been permitted to
prefer their own interests over those of the Company's minority
shareholders. Moreover, in approving the Stock Purchase Transactions, the
board members of Kaiser not affiliated with VEBA and PBGC acted to entrench
themselves. In doing so and in failing to make timely public disclosure of
the Stock Purchase Transactions, such board members breached their
fiduciary duties to Kaiser's minority shareholders and they and the Company
misled plaintiffs in violation of the federal securities laws.
JURISDICTION AND VENUE
2. This action arises under Sections 10(b) and 20(a) of the Securities
Exchange Act of 1934 (the "Exchange Act") (15 U.S.C. Sections 78j(b) and
78t(a)) and Rule 10b-5 promulgated thereunder (17 C.F.R. Section 240.10b-
5), and state law. This Court has jurisdiction over the subject matter of
this action pursuant to 28 U.S.C. Sections 1331, 1337 and 1367, and Section
27 of the Exchange Act (15 U.S.C. Section 78aa).
3. Venue is proper in this district pursuant to Section 27 of the
Exchange Act (15 U.S.C. Section 78aa) and 28 U.S.C. Section 1391(b) and
(c). Substantial acts in furtherance of the alleged wrongdoing and/or
their effects have occurred within this district.
4. In connection with the acts and omissions alleged in this complaint,
defendants, directly or indirectly, used the means and instrumentalities of
interstate commerce, including, but not limited to, the mails, interstate
telephone communications, and the facilities of the national securities
markets.
INTRADISTRICT ASSIGNMENT
5. This action involves events or omissions occurring within this
district, and plaintiffs reside in this district. Assignment to the San
Francisco Division is therefore appropriate.
THE PARTIES
6. The plaintiffs are as follows:
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13D
CUSIP No. Page 11 of 21 Pages
(a) Willow Creek Capital Partners, L.P. ("Willow Creek Capital") is a
Delaware limited partnership based in Larkspur, California. Willow Creek
owns 210,223 shares, or approximately three percent, of Kaiser's
outstanding common stock. Willow Creek Capital has been a Kaiser
shareholder continuously since April, 1995.
(b) Willow Creek Offshore ("Willow Creek Offshore") is a Cayman Islands
corporation based in Larkspur, California. Willow Creek Offshore owns
127,928 shares, or approximately two percent, of Kaiser's outstanding
common stock. Willow Creek Offshore has been a Kaiser shareholder
continuously since January, 1999.
7. The defendants are as follows:
(a) Kaiser Ventures Inc. (i.e., "Kaiser" or the "Company") is a Delaware
Corporation with principal executive offices in Ontario, California. The
Company is an asset development company and the reorganized successor to
Kaiser Steel Corporation.
(b) The New Kaiser Voluntary Employees' Beneficiary Association (i.e.,
"VEBA") is a tax-exempt California trust. Prior to the Stock Purchase
Transactions, VEBA was the record and beneficial owner of 3,387,937 shares
of the common stock of Kaiser, or approximately 30 percent of the Company's
issued and outstanding shares. Following the Stock Purchase Transactions,
pursuant to which VEBA purported to sell 2,730,950 shares of its Kaiser
common stock to Kaiser, VEBA owns 656,987 shares of Kaiser's common stock.
(c) The Coleridge Group ("Coleridge") is an Arizona corporation based in
Phoenix, Arizona and a registered investment advisor that advises VEBA. At
all relevant times, Coleridge has had investment authority over the Kaiser
stock owned by VEBA, including that purportedly purchased by Kaiser in the
Stock Purchase Transactions.
(d) Pacholder Associates, Inc. ("Pacholder") is an Ohio corporation based
in Cincinnati, Ohio and a registered investment advisor that advises PBGC.
At all relevant times, Pacholder has had investment authority over the
Kaiser stock owned by PBGC, including that purportedly purchased in the
Stock Purchase Transactions. Prior to the Stock Purchase Transactions,
PBGC was the record owner of 2,100,966 shares of the common stock of
Kaiser, or approximately 20 percent of the Company's issued and outstanding
shares. Following the Stock Purchase Transactions, pursuant to which PBGC
purported to sell 1,693,551 shares of its Kaiser common stock to Kaiser,
PBGC is the record owner of 407,415 shares of Kaiser's common stock.
Pursuant to a contract between Pacholder and PBGC, Pacholder beneficially
owns the Kaiser shares held by PBGC.
(e) Merrill Lynch, Pierce, Fenner & Smith, Inc. ("Merrill Lynch") is a
Delaware corporation, whose parent, Merrill Lynch & Co., Inc., a Delaware
corporation based in New York, is one of the world's largest providers of
investment and financial services. In connection with the Stock Purchase
Transactions, Merrill Lynch issued a fairness opinion.
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13D
CUSIP No. Page 12 of 21 Pages
(f) Richard E. Stoddard ("Stoddard") was appointed Chief Executive Officer
of Kaiser in June 1988 and has held that position and/or the position of
Chairman of the Board ever since. Stoddard also serves or served on the
Board of Directors of Penske Motorsports, Inc. ("PMI"), which recently
merged with International Speedway Corporation ("ISC"), a transaction that
generated a significant amount of the cash consideration which Kaiser paid
to VEBA and PBGC to consummate the Stock Purchase Transactions.
(g) Ronald E. Bitonti is Chairman of the Benefits Committee for VEBA and
has been a director of Kaiser since November 1991.
(h) Todd G. Cole has been a director of Kaiser since November 1989.
(i) Gerald A. Fawcett was President and Chief Operating Officer of Kaiser
from January 1996 until his retirement on January 15, 1998. He was
appointed to Kaiser's board in January 1998 and currently serves as its
Vice Chairman.
(j) Gary E. Gibbons has been the principal and owner of Coleridge since
1987. In that capacity he represents a variety of clients by providing
financial and investment advice, including the management of investment
portfolios. Gibbons was a director of Kaiser from April 1998 until on or
about November 22, 1999, when he resigned from the board in connection with
the Stock Purchase Transactions.
(k) Reynold C. MacDonald has been a director of Kaiser since November
1988.
(l) William J. Morgan is President, a director and a major shareholder of
Pacholder. Morgan was a director of Kaiser from September 1994 until on or
about November 22, 1999, when he resigned from the board in connection with
the Stock Purchase Transactions.
(m) Charles E. Packard has been a director of Kaiser since November 1991.
(n) Thomas S. Rabone is a member of the Benefits Committee of VEBA. He
was a director of Kaiser from November 1988 until on or about November 22,
1999, when he resigned from the board in connection with the Stock Purchase
Transactions.
(o) Lyle B. Stevenson is Co-Chairman of the Benefits Committee for VEBA.
He was a director of Kaiser from November 1991 until on or about November
22, 1999, when he resigned from the board in connection with the Stock
Purchase Transactions.
(p) Marshall F. Wallach has been a director of Kaiser since November 1991.
(q) The defendants named in sub-paragraphs (f) through (p) above are
referred to herein as the "Director Defendants" or the "Individual
Defendants." By reason of their membership on the Board of Directors of
Kaiser, management positions and/or stock ownership, the Individual
Defendants controlled and directed the activities of Kaiser. Each of the
Individual Defendants had the power and influence to cause Kaiser to engage
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13D
CUSIP No. Page 13 of 21 Pages
in the wrongful and illegal practices complained of herein, and each such
defendant exercised such power and influence. In addition, each of the
Individual Defendants acted as the agent for one another and for those of
the other defendants with which he was affiliated, and all of the acts
alleged herein were done in the course and scope of said agency
relationship.
8. All of the defendants identified above, along with PBGC, a wholly-
owned federal government corporation established by Title IV of the
Employee Retirement Income Security Act of 1974, pursued a conspiracy,
common enterprise and common course of conduct to accomplish the wrongs
complained of below. As hereinafter alleged, the purpose and effect of the
conspiracy, common enterprise and common course of conduct was to
accomplish the Stock Purchase Transactions, whereby VEBA and PBGC, Kaiser's
majority and controlling shareholders, preferred their own interests over,
and at the expense and to the detriment of, Kaiser's other shareholders.
9. As alleged more fully below, the defendants identified above
accomplished their conspiracy, common enterprise and common course of
conduct by breaching or aiding and abetting breaches of fiduciary duties
owed to plaintiffs, and by concealing and making misrepresentations of
material facts.
10. Each such defendant reached an agreement to perform the acts
complained of herein, each was a direct, necessary and substantial
participant in the conspiracy, common enterprise and common course of
conduct complained of herein, and each was aware of its or his overall
contribution to and furtherance of the conspiracy, common enterprise and
common course of conduct. The defendants' acts of conspiracy include,
inter alia, all of the acts that each of them is alleged to have committed
in furtherance of the wrongful scheme complained of herein, except those
relating to the reaching of agreements or understandings sufficient to
characterize their conduct as conspiratorial.
BACKGROUND
11. Kaiser is an asset development company that is the reorganized
successor to Kaiser Steel Corporation ("Kaiser Steel"), an integrated steel
manufacturer that filed for bankruptcy protection in 1987. Since it
emerged from bankruptcy, Kaiser has developed a core of assets obtained in
connection with Kaiser Steel's reorganization with a view toward the
disposition of such assets.
12. For approximately the last two years, and as Kaiser's assets have
matured and its asset development projects have been completed, the
principal shareholders of Kaiser, including VEBA and PBGC, have been
encouraging Kaiser to evaluate means of maximizing shareholder value in
order to permit Kaiser's stockholders, many of whom have held their shares
since its emergence from bankruptcy, to realize returns on their
investments. Among the proposals contemplated have been the sale,
monetization and/or distribution of Kaiser's assets or a sale or merger of
Kaiser. Such a monetization or distribution of Kaiser's assets, or a sale
of the Company or its assets, provides the only mechanism to allow
<PAGE>
13D
CUSIP No. Page 14 of 21 Pages
shareholders to realize the full value of their investments in Kaiser
because the shares of the Company's common stock, listed on NASDAQ, are
thinly-traded and shareholders are thus unable to dispose of a significant
amount of their holdings through stock sales without depressing the market
price.
13. In response to shareholders' concerns, Kaiser's Board of Directors
formed a Special Committee in 1997 to evaluate and consider pursuing
various strategic alternatives and transactions with respect to the Company
and its assets. Soon thereafter Merrill Lynch was retained to assist the
Special Committee in its work.
14. In its periodic filings and public announcements since 1998, most
recently, in its quarterly report for its 1999 fiscal third quarter filed
with the Securities and Exchange Commission ("SEC") on or about November
15, 1999, Kaiser has represented consistently and repeatedly, in substance
or effect, that it is continuing to evaluate its completed projects and
investments in light of how to best maximize value to its shareholders.
ISC'S ACQUISITION OF PMI AND KAISER'S SALE OF ISC STOCK
15. One of Kaiser's principal assets has been its interests in PMI, which
Kaiser acquired as a result of its contribution to PMI in 1995 of
approximately 480 acres of property and its subsequent sale of a business
park to PMI. Until July 26, 1999, Kaiser owned more than 1.6 million
shares, or approximately 11.73 percent, of PMI's common stock.
16. On July 26, 1999, PMI was acquired by, or merged into, ISC. In
connection with this transaction, Kaiser elected to, and received,
approximately $24 million in cash and 1.2 million shares of ISC's Class A
common stock, which, as of the date of the merger, was valued at
approximately $57 million.
17. Since the PMI-ISC merger, Kaiser has sold all or most of the shares in
ISC it received in connection with the merger, realizing over $63 million
in cash. However, as alleged below, rather than make an equitable
distribution of the almost $90 million in cash Kaiser generated from its
PMI-ISC transactions, such funds have instead been used to pay off and
substantially buy out Kaiser's two majority shareholders to the detriment
of its more than 2000 minority shareholders.
THE STOCK PURCHASE TRANSACTION WITH VEBA AND PBGC
18. On November 22, 1999, Kaiser announced that it had purchased 2,730,950
and 1,693,551 shares of its common stock from VEBA and PBGC, respectfully,
for total consideration of over $60 million. The cash portion of the
purchase price, approximately $57 million, was funded entirely from cash on
hand, which was obtained by Kaiser as a result of the PMI-ISC merger and
the subsequent sales of ISC stock owned by Kaiser.
19. In connection with the Stock Purchase Transactions, Kaiser paid VEBA
and PBGC $13 per share in cash. In addition, under the agreements entered
in respect of such transactions, VEBA and PBGC are purportedly entitled to
<PAGE>
13D
CUSIP No. Page 15 of 21 Pages
a contingent payment of approximately $1.10 per share, or a total of about
$4.9 million, if the previously announced transaction for the sale of
Kaiser's remaining Mill Site property to Ontario Ventures I, LLC closes on
its current terms. In addition, under such agreements, VEBA and PBGC have
received five-year warrants to purchase 460,000 and 285,260 shares of
Kaiser's common stock, respectively, at an exercise price of $17 per
warrant. The warrants allow VEBA and PBGC to participate in the future
success of the Company without any of the risk of loss that Kaiser's other
minority shareholders must bear.
20. According to Stoddard, Kaiser's Chairman and CEO, "the stock
repurchase is fair to and is in the best interest of all shareholders as it
substantially reduces the potential overhang of stock from VEBA and the
PBGC in the market, streamlines our governance structure and allows us to
focus more time and resources on developing and growing our existing
projects and investments." In truth, however, there is and was no
"overhang" in the market, and Kaiser's governance structure could be
streamlined and the Company and its board could and should have been able
to focus more time and resources on developing and growing its existing
projects and investments, and maximizing value for all shareholders,
without regard to VEBA's and PBGC's ownership of the majority of the
Company's outstanding shares.
21. In connection with the Stock Purchase Transactions, VEBA and PBGC
acted as a group and pursuant to a cooperation agreement they entered in
1997. The cooperation agreement provides, among other things, that "once
the parties have reached mutual agreement on the terms of any . . . action,
such agreement will bind each party to the outcome or set of outcomes . .
.."
DELETEROUS CONSEQUENCES OF THE STOCK PURCHASE TRANSACTIONS TO KAISER'S
MINORITY SHAREHOLDERS
22. The Stock Purchase Transactions are clearly beneficial to VEBA and
PBGC, as it allows them to liquidate substantially all of their holdings
for cash at current market prices, while reserving for them the ability to
participate, without risk, in the future success of Kaiser. The
transactions also allow the Company's current management group to entrench
themselves, since, by virtue of the resignation of various VEBA and PBGC
affiliates, the Board is now dominated by board members affiliated with
members of management. Conversely, the Stock Purchase Transactions have
been and are detrimental to Kaiser's minority shareholders and are
otherwise contrary to the interests of the Company, in, inter alia, the
following respects:
(a) By virtue of the Stock Purchase Transactions, the outstanding number
of shares of Kaiser's common stock has been reduced from roughly 10.7
million shares to 6.3 million shares, making the market for the Company's
shares substantially less liquid and thus rendering it markedly more
difficult, if not impossible, for Kaiser's minority shareholders to dispose
of any significant amount of their holdings without depressing the market
price for the Company's stock. Indeed, in the few trading days since the
Stock Purchase Transactions were announced, the market price for Kaiser's
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stock has declined by approximately fifteen percent on relatively light
volume. Thus, unlike VEBA and PBGC, Kaiser's minority shareholders are
unable to realize the true value of their investments in the Company, and
they cannot obtain in the market the same amount of consideration VEBA and
PBGC received in connection with the Stock Purchase Transactions.
(b) The majority of Kaiser's liquid assets, which following the PMI-ISC
merger and the Company's sales of ISC stock, could and should have been
used to make a distribution on an equitable basis to all shareholders
and/or to position the Company's other investments for completion and
liquidation for the benefit of all shareholders, have been substantially
depleted by virtue of the Stock Purchase Transactions.
(c) The merger between PMI and ISC and Kaiser's subsequent sale of ISC
stock, which provided the cash to permit the Stock Purchase Transactions to
be effected, are taxable events. By virtue of the Stock Purchase
Transactions, VEBA and PBGC are effectively able to avoid bearing their
proportionate interest for the approximately $9 million in taxes associated
with the PMI-ISC merger and ISC stock sales, whereas Kaiser's minority
shareholders who are not able to liquidate their holdings must shoulder the
full burden of such tax consequences.
MISLEADING DISCLOSURES REGARDING STOCK PURCHASE TRANSACTIONS
23. Prior to November 15, 1999, the Company consistently represented that
it would undertake to maximize values for all shareholders and had been
evaluating several proposals to do so. In its Form 10-Q filed on or about
November 15, 1999, Kaiser indicated for the first time that it had
appointed an independent committee to evaluate and negotiate "some form of
transaction for the repurchase of the Company's stock, including the
repurchase of a substantial portion of only the stock owned in the Company
by [VEBA] and/or [PBGC]." In this Form 10-Q, Kaiser did not, however,
disclose that any such negotiations between VEBA and/or PBGC and Kaiser
were then ongoing, or that an agreement between Kaiser, on one hand, and
VEBA and PBGC, on the other, had been reached or had developed to the point
where an agreement in principle had been reached or where the documentation
for such an agreement was in the process of being finalized. In fact, as
admitted by Stoddard during a conference call conducted by the Company on
November 22, 1999, the terms of the Stock Purchase Transactions had been
negotiated over several months.
24. The indicia of interest by the Company, on the one hand, and VEBA and
PBGC, on the other, in entering a stock repurchase transaction including
VEBA and PBGC only, and not the Company's minority shareholders, had
reached a point before November 22, 1999 so as to have obligated the
Company and VEBA and PBGC to make disclosures required by the Exchange Act.
Such disclosures would have been required in, inter alia, proxy material
required to be disseminated in connection with Kaiser's 1999 annual meeting
of shareholders, which should have occurred in or about June, 1999.
Apparently, however, the defendants intentionally delayed the holding of
the annual meeting and the attendant need to disseminate proxy materials
for the very purpose of avoiding having to make the required disclosures
about the contemplated Stock Purchase Transactions. Such disclosures would
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CUSIP No. Page 17 of 21 Pages
have been material to minority shareholders' decisions to vote for or
against the members of the board up for re-election. Such disclosures were
also material to plaintiffs' decisions to purchase additional shares of
Kaiser's stock, which they have done continually since the beginning of
1999.
FIRST CLAIM FOR RELIEF
(Breach Of Fiduciary Duty Against VEBA And The Individual Defendants)
25. Plaintiffs reallege and incorporate herein by this reference each of
the allegations contained in paragraphs 1-24 of this complaint.
26. Plaintiffs assert this First Claim for Relief against VEBA and the
Individual Defendants for breach of fiduciary duty.
27. As the majority shareholders of Kaiser, VEBA and PBGC owed fiduciary
duties to both the Company and its minority shareholders. VEBA and PBGC
were thus required to conduct themselves in the highest good faith and with
loyalty and were prohibited from taking unfair advantage of or procuring an
undue benefit from Kaiser or its minority shareholders.
28. As majority shareholders, VEBA and PBGC were also forbidden from
obtaining an advantage by misrepresentation or concealment of material fact
or by dealing with the property of Kaiser in a manner other than for the
sole benefit of the Company and all of its shareholders.
29. VEBA and PBGC were likewise obligated to affirmatively protect the
interests of Kaiser and its minority shareholders and to refrain from
taking any action or from engaging in any conduct that would work injury to
them.
30. Plaintiffs actually and reasonably placed confidence and repose in the
fidelity and integrity of VEBA and PBGC, and, under California law, a
confidential fiduciary relationship thus existed between plaintiffs, on the
one hand, and VEBA and PBGC, on the other.
31. By entering, assisting, facilitating and causing the Stock Purchase
Transactions, VEBA and PBGC breached their fiduciary duties to the minority
shareholders of Kaiser, including plaintiffs.
32. By virtue of their positions as directors and, in the case of
defendant Stoddard, his position as an officer of Kaiser, the Individual
Defendants and, in particular, those of the Individual Defendants who
directly controlled VEBA and PBGC, owed separate fiduciary duties to Kaiser
and its minority shareholders. The Individual Defendants had the ability
and power to control Kaiser. Moreover, by structuring, assisting and
acquiescing in the Stock Purchase Transactions, the Individual Defendants
actually exercised said power and ability.
33. Each of the Individual Defendants knowingly breached his fiduciary
duties in directing Kaiser to enter the Stock Purchase Transactions and to
perform the acts herein alleged in that each knew that the purpose and
effect of the Stock Purchase Transactions was to allow VEBA and PBGC to
prefer their own interests over those of the minority shareholders.
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34. In connection with the Stock Purchase Transactions, the Individual
Defendants also breached their fiduciary duties to the Company's minority
shareholders by failing to retain for them separate and independent legal
and financial representation. Given the conflicts of interest posed by
VEBA's and PBGC's domination of the Company and Board, this failure or
refusal to act violated the Individual Defendants' obligation to protect
the interests of Kaiser's minority shareholders.
35. The conduct of each of the defendants named in this claim for relief
was fraudulent, malicious and oppressive, entitling plaintiffs to exemplary
and punitive damages.
36. As a direct and proximate result of the foregoing conduct, plaintiffs
have sustained damage and pray for the relief hereinafter specified.
SECOND CLAIM FOR RELIEF
(Aiding And Abetting Breach Of Fiduciary Duty Against Coleridge, Pacholder
And Merrill Lynch)
37. Plaintiffs reallege and incorporate herein by this reference each of
the allegations contained in paragraphs 1-24 and 27-34 of this complaint.
38. Plaintiffs assert this Second Claim for Relief against Coleridge,
Pacholder and Merrill Lynch for aiding and abetting breaches of fiduciary
duty.
39. Coleridge and Pacholder substantially assisted and participated with
VEBA and PBGC and the Individual Defendants in accomplishing the Stock
Acquisition Transactions. In particular, Coleridge and Pacholder are
registered investment advisors who had the power, discretion and authority
to enter the Stock Acquisition Transactions on behalf of their respective
clients, and they entered into agreements respecting such transactions on
behalf of VEBA and PBGC. In so doing, Coleridge and Pacholder acted with
knowledge that the Stock Acquisition Transactions represented self-dealing
by Kaiser's majority shareholders in violation of their fiduciary duties.
Each such defendant, therefore, participated in the alleged wrongdoing.
40. Merrill Lynch also aided and abetted the foregoing breaches of
fiduciary duty with knowledge that the conduct herein complained of
represented self-dealing by Kaiser's majority shareholders in violation of
fiduciary duties. In particular, by virtue of its fairness opinion,
Merrill Lynch substantially assisted VEBA and PBGC in effecting the Stock
Purchase Transactions. In rendering its opinion, Merrill Lynch was legally
obligated to perform an investigation of all the facts and circumstances
underlying the representations contained in said opinion. As a result,
Merrill Lynch knew that its opinion that the transaction was fair was
materially misleading in that it had no reasonable basis for opining or
suggesting by its opinion that the Stock Purchase Transactions were fair to
Kaiser and its minority shareholders.
41. Coleridge, Pacholder and Merrill Lynch benefited directly from the
Stock Purchase Transactions in that they received fees in connection with
it.
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42. The conduct of each of the defendants named in this claim for relief
was fraudulent, malicious and oppressive, entitling plaintiffs to exemplary
and punitive damages.
43. As a direct and proximate result of the aforesaid conduct, plaintiffs
have sustained damage and pray for the relief hereinafter specified.
THIRD CLAIM FOR RELIEF
(Violation Of Section 10(b) Of The Exchange Act And Rule 10b-5 Promulgated
Thereunder Against Kaiser)
44. Plaintiffs reallege and incorporate herein by this reference each of
the allegations contained in paragraphs 1-24, 27-34 and 39-41 of this
complaint.
45. Plaintiffs assert this Third Claim for Relief against Kaiser for
violation of Section 10(b) of the Exchange Act (15 U.S.C. Section 78j), and
Rule 10b-5 promulgated by the SEC thereunder (17 C.F.R. Section 240.10b-5).
46. Kaiser's Form 10-K for its fiscal year ended December 31, 1998, filed
on or about March 31, 1999, the amendment to that report filed on or about
April 29, 1999, and the Forms 10-Q filed for the Company's first three 1999
fiscal quarters are false and misleading and misrepresent and/or omit to
state material facts required to be stated in order to make the statements
therein contained not misleading in that they, inter alia, omit to disclose
that VEBA and PBGC, on the one hand, and Kaiser on the other, were involved
in negotiating to structure and accomplish the Stock Purchase Transactions.
Moreover, they falsely represent that the Company would take action to
maximize value for all shareholders, not just for VEBA and PBGC.
47. By virtue of the foregoing, Kaiser employed devices, schemes and
artifices to defraud and engaged in acts, practices and a course of
conduct, as hereinabove alleged, which included the making or participation
in the making of untrue statements of material facts and omitting to state
material facts necessary in order to make the statements, in light of the
circumstances under which they were made, not misleading and engaged in
transactions, practices and courses of business which operated as a fraud
or deceit upon plaintiffs.
48. At the time said omissions and misrepresentations of material fact
were made, plaintiffs were ignorant of the falsity of said statements and
believed them to be true. In reliance upon said omissions and
misrepresentations of material fact, and in ignorance of the true facts,
plaintiffs were induced to and did, in fact, purchase additional shares of
Kaiser. Had plaintiffs known the true facts, they would not have effected
such purchases.
49. Kaiser had actual knowledge of the misrepresentations and omissions of
material facts set forth herein, or acted with deliberate and reckless
disregard for the truth in that it failed to ascertain and to disclose such
facts, even though such facts were available to it. Such defendant's
material misrepresentations and/or omissions were done knowingly or
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13D
CUSIP No. Page 20 of 21 Pages
recklessly and for the purpose and effect of concealing the Stock Purchase
Transactions from the investing public in order to support the price of its
securities so it could point to such price as a pretext for justifying the
consideration the Company paid to VEBA and PBGC in connection with the
Stock Purchase Transactions. If it did not have actual knowledge of the
misrepresentations and omissions alleged, Kaiser was reckless in failing to
obtain such knowledge by deliberately refraining from taking those steps
necessary to discover whether those statements were false or misleading.
50. As a direct and proximate result of the aforesaid conduct, plaintiffs
have sustained damage and pray for the relief hereinafter specified.
FOURTH CLAIM FOR RELIEF
(Violations Of Section 20(a) Of The Exchange Act Against The Individual
Defendants)
51. Plaintiffs reallege and incorporate herein by this reference each of
the allegations of paragraphs 1-24, 27-34, 39-41 and 46-49 of this
complaint.
52. Plaintiffs assert this Fourth Claim for Relief against the Individual
Defendants for violation of Section 20(a) of the Exchange Act (15 U.S.C.
Section 78t(a)).
53. As hereinabove alleged, the Individual Defendants, by virtue of
directorships, managerial position and/or stock ownership, had the power
and ability, directly or indirectly, to conduct, direct, or cause the
direction of the affairs, management and policies of Kaiser. As such, the
Individual Defendants controlled Kaiser.
54. By reason of conduct herein alleged, the Individual Defendants acted
culpably in connection with the misrepresented and/or omitted material
facts. The Individual Defendants each signed the misleading Form 10-K, and
they authorized its filing as well as the filing of the misleading Forms
10-Q and other periodic reports described above.
55. As a direct and proximate result of the aforesaid conduct, plaintiffs
have sustained damage and pray for the relief hereinafter specified.
STATUTORY SAFE HARBOR
56. The statutory safe harbor provided for forward-looking statements does
not apply to any of the allegedly false and misleading statements pleaded
in this complaint. The statements are of historic fact and of facts about
current conditions. Each of the statements alleged herein to be false or
misleading was authorized by an executive officer of Kaiser and was
actually known by such officer to be false or misleading when made.
WHEREFORE, plaintiffs pray for relief against defendants, and each of them,
as follows:
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1. Awarding plaintiffs damages according to proof, together with
prejudgment interest thereon;
2. Awarding exemplary and punitive damages on the First and Second Claims
for Relief;
3. Imposing a constructive trust on the funds received by VEBA in
connection with the Stock Purchase Transactions;
4. Ordering reasonable attorneys' fees to plaintiffs' counsel;
5. Ordering reimbursement to plaintiffs of the costs of suit incurred
herein; and
6. For such other and further relief as the Court may deem appropriate.
JURY TRIAL DEMAND
Plaintiffs hereby demand a jury trial.
Dated: December 7, 1999
George Donaldson
Daniel B. Harris
LAW OFFICES OF GEORGE DONALDSON
350 California Street, Suite 1750
San Francisco, California 94104
Telephone: (415) 394-8500
By ________________________________
George Donaldson
Attorneys for Plaintiffs
ETR/4023/003/1075630.03
