A dissident shareholder of Cowles Media, owner of the Minneapolis Star and Tribune newspaper, has filed suit against five past and current directors of the company.
The suit, filed by Kingsley Murphy, charges that the directors breached their fiduciary responsibilities and engaged in "the sale of a corporate office for personal profit" by hiring a Cowles family member for a top management position in exchange for his stock voting rights.
Murphy, who owns 17 percent of Cowles Media stock, is seeking damages "in excess of $40 million" in the suit, filed in Delaware's chancery court.
The filing comes in the wake of last week's announcement by David Kruidenier, chairman and chief executive officer of Cowles Media, that the voting trust he and four other trustees control had raised its ownership position from 44 percent to more than 50 percent. In addition, the life of the voting trust was extended by 10 years to the year 2000.
Murphy, whose family sold the Minneapolis Tribune to Cowles Media in 1941, has long been critical of the company's management. He charged that Kruidenier and the other defendants who are members of the trust are trying to expand the trust to block an unfriendly takeover.
Murphy, who retained the investment firm of Morgan Stanley & Co. to sell his stake in the privately owned company, said in the suit that he had "received several serious expressions of interest and a solid offer to purchase his stock at a price well in excess of twice the price at which Cowles Media has traditionally been traded. . . . "
He asserts that the voting trust's recent actions have reduced the value of his stock by more than $40 million.
The complaint maintains that to garner additional family support for prolonging the trust, Cowles Media gave John (Jay) Cowles III a "senior management position" in corporate planning for which he is "not qualified."
Cowles had been a director of financial analysis at the New York-based United Satellite Communications Inc., a fledgling satellite television company.
"Those accusations are utterly ridiculous," said David Cox, president and chief operating officer of Cowles Media. "Jay is well qualified for the role for which he had been hired."
Asserting that there has been no family pressure to hire the 30-year-old Harvard MBA and former intern at the Minneapolis Star and Tribune, Cox said, "The decision to hire Jay was entirely mine."
A former Star and Tribune company executive, who asked not to be identified, said, however, "At a normal company, you wouldn't see someone with that sort of background hired for a top management position. But at Cowles Media you would."
John Cowles III could not be reached for comment.
The issues underlying the suit are of particular concern to Cowles Media in light of the December decision to sell the Des Moines Register & Tribune Co. Almost all the stock of the Des Moines company is owned by members of the Cowles family. Because the Register and Tribune owns more than 12 percent of Cowles Media, there are fears that whoever acquires the Des Moines company could combine with the dissident Murphy to change or topple Cowles Media's management.
In fact, Murphy's suit charges that "the defendants know that some of the bidders for the Register are also bidders" for the Murphy shares.
Cowles Media declined to comment on the suit.