Toledo resident Warren L. Reuther built a multi-million dollar manufacturing business by thinking out of the box.
But now he faces problems that can't be resolved by the high-tech solutions that helped him turn Monroe-based Bay Corrugated Container Inc. into a major supplier of boxes to the auto industry.
A trustee for a trust Mr. Reuther set up for the benefit of his daughter, Marilyn Wilbert, and her children has filed suit in Lucas County Common Pleas Court against him. It accuses Mr. Reuther of harming the company and its stockholders through actions including acceptance of improper personal loans from the company.
Mr. Reuther, chairman of Bay Corrugated, didn't respond to a message left at the firm yesterday. His son, John Reuther, who is the company's president and was named in the lawsuit filed by his sister's trust, also didn't respond.
The trustee, Paul Fransway, couldn't be reached at his Ann Arbor legal office.
The complaint, filed last week and assigned to Judge J. Ronald Bowman, sheds light on a Toledo-founded company that has quietly built customers and profits over the past 39 years. It also exposes squabbles within a family and a family-owned firm.
Mr. Reuther and his ex-wife, Catherine, are known for philanthropy in metro Toledo and the Monroe area. They set up a nonprofit organization promoting Christian education and received an award for “outstanding support” in 1998 from Toledo's Central Catholic High School.
Mr. Reuther operated a vending machine business in Flint, Mich. before moving to Toledo in 1964 and opening a box factory. He moved his firm in the mid-1970s to a vacant, larger factory in Monroe.
Because Bay Corrugated is privately owned, it doesn't release financial information. But the Standard & Poor's corporate directory estimates annual revenues at $8 million.
In 1993, Mr. Reuther and his then-wife turned over most of the common stock in the company to irrevocable trusts set up for the benefit of their four children and eight grandchildren. Establishment of trusts, which is a common estate planning devise used by family businesses to reduce inheritance tax burdens on their heirs, was designed to “cap the value of estate“ for tax purposes at $11.6 million, the lawsuit states.
At the same time, Warren and Catherine Reuther received preferred stock, entitling them to a monthly dividend of $105,000 from the company, according to the complaint.
Sometime after the trusts were established, problems developed.
Disagreements prompted the firm to redeem the stock of one daughter and her family for $1.3 million in 1998. A son, Carl Reuther, who had been president of Bay Corrugated, was fired in July, 2002 after a disagreement with his father, brother, and other shareholders. Then, earlier this year, Walter and Catherine Reuther divorced.
Among allegations made by Mrs. Wilbert's trust against her father:
wHe agreed to pay a $4.5 million settlement to his ex-wife with money he plans to borrow from Bay Corrugated without proper collateral or the approval of the board of directors.
wAssets of Bay Corrugated were improperly used to prop up a struggling box manufacturer owned solely by Warren Reuther, World Corrugated Inc.
wThe pay of John Reuther has increased 200 percent to more than $576,000 a year since his appointment as president of Bay Corrugated in July, 2001.
Mrs. Wilbert, whose trust brought the suit, is employed at the firm as an accounts receivable administrator, according to the lawsuit. Her husband, Gary Wilbert, is vice president and general counsel, the lawsuit states.
The lawsuit, which names three other members of the board of directors, seeks unspecified damages on behalf of the trust and Bay Corrugated; a court order allowing the inspection of firm's books and records of financial transactions; and for the company to buy the Bay Corrugated shares held by the Wilberts.
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