Multinational eyes millions in Fletcher Energy staff fund

Friday 13th July 2001

By Deborah Hill Cone

Staff working for what remains of Fletcher Energy fear its Employee Educational Fund (EEF) is to be plundered and its assets flicked on to a new trust to benefit others, possibly new owner Royal Dutch/Shell.

The sale of FCL's jewel-in-the-crown division to the Anglo-Dutch multinational in March was bitterly fought by most of the Fletcher Energy management, who passionately believed the profitable company should be kept in one piece.

Now some of the few staff who remain are concerned the EEF, intended for staff benefit, is being diverted to a new use. The fund is believed to have assets of about $11 million and was until last year part of a central Fletcher Challenge trust intended to block takeovers.

The central trust held 12% of the letter stocks, preventing anyone else from being able to obtain the 90% of shares they would need to take over the company.

But as part of the dismantling of FCL the central EEF, valued at $110 million last year, was split into individual trusts for each of the letter stocks, including Fletcher Energy.

A June 12 letter sent to EEF trustee Greig Gailey outlining staff concerns says they were told in March by Fletcher Energy's then human resources director, John Woods, the EEF trustees - Mr Gailey, Sheffield Consulting director Norm Godden and Tim Henaghan - were planning to transfer the funds to a newly formed public trust.

The new trust's beneficiaries would be more vague, such as tertiary education and research relevant to the oil and gas industry.

"I understand that the fund was set up for the benefit of employees and question how that which is proposed meets the original intent of the fund," the letter outlining staff concerns says.

Other questions about the EEF which staff want answered include:

Is there any reason the funds could not be distributed to the employees? (Fletcher Energy had about 550 New Zealand staff before its sale last year so if the money was divided equally among them they would each receive about $20,000.)
What recourse will there be for the Fletcher Energy employees if there is evidence the funds have not been dealt with in accordance with the trust deed?
How do the trustees justify the fact no Fletcher Energy employees appear to have ever benefited from the EEF?

They also wonder why staff were not told about proposals for the fund before March 30, at which stage most of the staff who were being made redundant had already left.

EEF trustee Mr Godden told NBR the trustees had this week supplied a comprehensive response to all the questions raised in the staff letter but he declined to release it, answer any questions about the trust and supply a copy of the trust deed.

Shell transition manager Andrew Flett said the trustees were considering a number of options, including setting up a new trust which may have other beneficiaries: "Some options are more do-able than others."

One option Mr Flett used as an example was to make Shell employees beneficiaries of the trust, although that may not be considered in the spirit of the trust deed.

Chapman Tripp trust specialist Neil Gray said whether trustees were able to shift assets of a trust depended on the wording of the trust deed and its winding-up provisions.

Norske Skog, which bought Fletcher Challenge Paper, also inherited an employee education fund. Norske Skog spokesman Rob Keen, who is a trustee of that fund, said he could not comment.

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