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Chairman Sues Public Storage Over Purchase

June 18, 2003|From Bloomberg News

The chairman of Public Storage Inc., the nation's largest owner of self-storage warehouses, filed a preemptive lawsuit to keep the company from challenging the terms of its 2001 purchase of his family's insurance company.

Bradley Wayne Hughes said he has been informed that Public Storage intends to attempt to recover at least some of the $31.7 million he and his family received for the sale of PS Insurance Co. to Public Storage. The family owns 37% of Public Storage shares, a controlling stake.

A committee of independent directors at the Glendale-based company has been investigating the acquisition since a shareholder last year demanded that the board recover profit earned by PS Insurance from 1995 to 2001. The Hughes family wants a court determination that the sale was just and reasonable at the time it was authorized.

Joining Hughes in the suit was his son, B. Wayne Hughes Jr., and another family member, Tamara Hughes Gustavson.

"Plaintiffs believe that the threat that the company might take action against them is harmful to their reputations and, with respect to Hughes and Hughes Jr., harmful to their ability to fulfill their roles as directors," according to the suit filed Monday in state court in Los Angeles.

Public Storage officials couldn't be reached for comment.

Shares of the company fell 23 cents to $34.77 on the New York Stock Exchange.

Hughes co-founded Public Storage more than 30 years ago and expanded it to 1,409 warehouses in 37 states. Hughes Jr. is a director and former vice president at Public Storage.

In the suit, the Hughes family said it agreed to sell PS Insurance, which reinsures policies issued to customers against lost or damaged goods in storage, to Public Storage after a 2001 change in tax laws that allowed real estate investment trusts to own taxable subsidiaries. The sale was approved by an independent majority of the board's directors and a financial advisor, according to the suit.

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