A family feud over control of Cogswell Motors Inc. in Russellville is moving toward a jury trial expected sometime in the spring.
Keith B. Cogswell III, president and majority owner of the dealership, lost the opening battle Nov. 21 in Pope County Circuit Court. He was ordered to start paying monthly rent of $13,500 to The Keith B. Cogswell Jr. Testamentary Trust.
His late father’s trust owns the real estate associated with the bulk of Cogswell Motors’ operations.
With annual sales of more than $30 million, the 51-year-old enterprise ranked 25th on Arkansas Business’ 1999 list of the state’s largest auto dealerships. Cogswell Motors employs an estimated 70 full-time staffers and its roster of new-vehicle lines includes Ford, Lincoln, Mercury and Mazda.
The beneficiary of the trust is Keith Cogswell III’s mother, Margaret Cogswell. His sisters, Ann and Mary, are successor beneficiaries.
The lease dispute is only one facet of a divisive disagreement over his handling of the family business, acquired by his grandfather in 1949. Keith Cogswell III owns 52 percent of the dealership, and the remaining 48 percent is split between his sisters.
The sisters and mother have sued Keith Cogswell III, accusing him of breach of fiduciary duty and several flavors of fraud in his dealings with the trust and his alleged mismanagement of the dealership.
The three women are asking the court to remove him as director and president of the corporation and to appoint a receiver to oversee the sale of the dealership.
Disputed Valuation
A confrontation two years ago between Ann Cogswell and her brother led him to say: “If you don’t like the way I am running this business, I will go to the bank right now and buy you out.” This exchange led to several valuations on what the sisters’ Cogswell Motors stock was worth.
Wayne Jones, Cogswell Motors’ accountant, valued each sisters’ stock holdings in the company at $650,000 in May 1998. This figure indicates an overall company value of $2.7 million.
Rhea & Ivy, a certified business appraiser based in Memphis, valued each 24 percent block of stock at $950,000 on Aug. 31, 1998. This reflects an overall company value of $3.9 million.
Cogswell’s buyout offer remained dormant until May 24, 1999, when he produced a new valuation of his sisters’ shares produced by Walter L. Hall of Medina, Ohio. That appraisal embraced the $3.9 million overall valuation but introduced two discounts that severely reduced the value of the stock owned by the sisters.
Hall’s valuation subjected the value of their stock to a 70 percent “marketability discount” that is supposed to reflect the illiquidity of minority shares in a private firm. The appraisal also subjects the sisters’ shares to an additional “minority discount” that carves another 70 percent off the value.
Hall’s valuation stated that their combined 48 percent stake is worth $168,960.
More Allegations
The complaint also accuses Keith Cogswell III’s estranged wife, Kelli, of tortuous interference with business relationships in aiding his disputed actions. Keith and Kelli Cogswell are both accused of intentionally inflicting emotional distress.
Another family fracture opened on the legal front when Kelli Cogswell sued for divorce, citing general indignities.
All of the parties are content to do their talking about the various disputes through court filings.
In ordering Cogswell Motors to pay the increased rent to the family trust, the court rendered no ruling on more than $200,000 in back rent claimed by the trust, monetary damages or a request to evict the dealership from the property.
The trust had leased the property to the company at a monthly rate of $4,500 as part of an oral month-to-month agreement. The trust notified Keith Cogswell III that the monthly lease would be increased to the fair market value of $13,500 per month on Aug. 22, 1999.
This move followed his attempts to get the monthly rent reduced to $2,500 and his forced exodus as a trustee of his father’s namesake trust. However, Cogswell refused to pay the new rate and kept the dealership on the trust-owned property, even after the trust canceled the lease.
An amended complaint filed by Cogswell’s mother and sisters includes notes his father penned on the front and back of an envelope. The words are portrayed as enumerating his son’s shortcomings along with corrective advice. Part of the note read as follows:
Concerns Learn to Listen
1 – Lack of love of family
2 – Poor attitude toward everything
Parents – Harsh words No Respect
Work
School
Studies
3 — You must have positive attitude or you will be a failure
Cogswell’s mother and sisters claim these notations capture the underlying cause of the dispute, which dates back to at least 1987. That’s when Keith Cogswell Jr. was incapacitated by viral encephalitis and his son succeeded him as general manager of the family business.
The complaint outlines the deteriorating relationship between Keith Cogswell III and his mother and sisters, which paralleled his father’s deteriorating health.
Keith Cogswell III is accused of never holding legitimate shareholder meetings, failing to send notices of meetings, refusing to respond to questions, failing to provide financial information, failing to allow either of his sisters to participate in management of the Cogswell Motors Inc. board and apparently signing his father’s name to minutes of directors meetings concerning significant company matters related to rent and expenditures on company property.
After Keith Cogswell Jr. died in 1994, the friction escalated as ownership of Cogswell Motors was divvied among the children.
Prior to his death, the three children each held a 16 percent stake in the dealership. Afterward, Keith Cogswell III’s stake grew to 52 percent and his sister’s each held 24 percent.
The sisters’ grievances against their brother include using company funds for personal expenses, including a $200,000 airplane, plus $6,000-$22,000 in annual operation costs and trips to France; for improvements on real estate owned by him and his wife, Kelli; and for land that has no business purpose.
An unnamed Little Rock area concern is noted as having an interest in acquiring Cogswell Motors. That would-be deal is on hold until the family members can reach a settlement or a judge decides the matter.
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