A Case for the Books
Potter & Company takes on the task of managing a $100 million settlement case

What would you do with your share of a settlement that averages $91,000 per person? Almost 1,000 workers in Montana are no longer dreaming about it -- they now have checks in hand.

It all started in 1985, when a former Atlantic Richfield Co. (Arco) executive bought the hard-to-sell Columbia Falls Aluminum Co. from Arco for a token price of one dollar. At that time, all hourly and salaried workers at the struggling plant in Columbia Falls, Montana, agreed to take a 21 percent cut in wages and benefits to try to save their jobs. In return, according to lawyers for the employees, the new ownership agreed to share half the profits with the employees.

Actually, the terms of the profit-sharing agreement referred to paying 50 percent of distributable profits to the employees. However, "distributable" was never defined.

In 1992, an accountant at the plant sued the company, charging that it was failing to divvy out profits to workers as promised. The suit, filed on behalf of salaried workers, was later joined by unionized hourly workers. It was settled in December, 1997 for $100 million. Two qualified settlement fund trusts were established to distribute the money to over 900 current and past employees. Potter & Company, LLP, a Kentucky CPA and business consultants firm with offices in Louisville and Lexington, was asked to serve as the trustee of both funds.

Initially, Potter looked at the income tax returns, financial statements, profit sharing plan records and documents of the company from 1985 through 1995 (the end of the agreement), to determine if the new owner of the plant was complying with the terms of the agreement. And he was - for the first few years. Things started getting questionable with the new fiscal year that began in 1988.

Then the formidable task really began for Potter: establishing an equitable settlement for over 900 workers. "Equitable" was complicated by issues such as employees' divorces, estates, and child support liens. Now, imagine -- from Potter's Louisville office -- dealing with plant records located in Montana and California, and attorneys in Washington D.C., West Palm Beach, Atlanta, two cities in Montana, and Louisville. And, along the way, obtaining agreements with the IRS and the State of Montana to provide guidance on withholding, payroll tax matters, and taxation of the settlement funds.

For Jim Noe, CPA and partner at Potter, it wasn't unusual to spend five to seven hours each day on the phone dealing with the various parties and issues.

"The judge, in his fairness order, said this was one of the largest and most complex cases ever decided in Montana history," Noe adds.

Potter began sending out letters to collect information from all the participants last fall, then building data that soon averaged three pages per person. Approximately 700 Potter man-hours later, checks went out to the workers at the end of April. ("Acting as Trustee would have been an enjoyable challenge if it would have happened outside of our busy tax and audit season," observes Noe.)

Admittedly, there were a few glitches. Potter received a phone call from a dead man -- according to their records -- wanting his check, liens and legal claims have held up a few checks.

What will the future bring? For this small Montana town, that's what everyone -- from local car dealers to Wall Street -- wants to know. The Wall Street Journal reports that economists everywhere plan to study the effects on the mostly blue-collar workers in a town of 3,500.

For Jim Noe and Potter & Company, the end of this project means work as usual and a place in textbook-case history.

For the workers with the fat checks, just how the money is spent (or saved) remains to be seen. A new car or vacation? jewelry or big-screen TV? It would be a nice question to ponder, don't you think?

Vicki Lenz is a contributing writer for The Lane Report.

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