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Noble Roman's top investor loses Green Mountain chair

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Green Mountain Coffee Roasters Inc. has stripped founder Robert P. Stiller of his position as chairman after he sold shares to meet a margin call at a time when the company’s trading policies prohibited such sales.

Stiller is the largest investor in Indianapolis-based pizza chain Noble Roman's Inc., owning nearly 20 percent of the company's stock.

Vermont-based Green Mountain said Tuesday that Michael J. Mardy, chairman of the company's audit and finance committee, will serve as interim chairman starting immediately. Board member William D. Davis, who also violated the trading policy, will no longer serve as lead director, the company said. Stiller and Davis will remain on the board without pay and won’t serve on any committees, Green Mountain said.

The board turmoil marks a new obstacle for a company already combating increased competition from other makers of single-cup coffee brewers and the pods that fill them. Green Mountain has also been criticized by hedge fund manager David Einhorn, who in October questioned its accounting practices.

“People who are on the board know what’s going on with their corporation much more than people on the outside,” Tamar Frankel, professor at Boston University School of Law, said. “One of the main issues is insider trading.”

Together, Stiller and Davis sold about 5.5 million shares at times when the company’s internal trading policy prohibited trading, Green Mountain said in the statement.

Green Mountain stock fell as much as 5.1 percent, to $25.03 per share, in extended trading Tuesday. The shares had dropped 41 percent this year through Tuesday.

Green Mountain called the forced sales “disappointing” and said Stiller and Davis are required to settle outstanding margin loans by the end of this year.

Stiller told CNBC late yesterday that he didn’t break any regulations or laws with the stock sale.

“I am really shocked and hurt,” Stiller told CNBC. “I’ve always been transparent with the board. I think it’s an overreaction.”

Stiller, who founded Green Mountain in 1981 as a small Vermont cafe and served as CEO from 1981 until May 2007, has put about 12.5 million of his Green Mountain shares into margin accounts or pledged them as collateral for at least one loan, according to the company’s latest proxy statement.

About $125.5 million of Stiller’s Green Mountain stock, or about 5 million shares, were sold on May 7 to meet margin requirements after the shares tumbled last week, according to a filing with the U.S. Securities and Exchange Commission. Green Mountain on May 2 reported revenue that trailed analysts’ estimates, sending the shares down 48 percent the next day.

The sale brought Stiller’s stake down to about 8.39 million shares, making him the fifth-largest holder, from 13.4 million as of March 27, according to data compiled by Bloomberg.

Davis sold about 400,000 shares on May 4 and about 148,000 on May 7, Green Mountain said.

The company’s governance and nominating committee will review appropriate board and committee structure and composition, Green Mountain said in the statement.

Stiller sold $66.3 million of his stake in the company earlier this year before Starbucks Corp. announced a coffee brewer that will compete with Green Mountain’s Keurig machine. In addition to his stake in Noble Roman's, he is the second-biggest shareholder of Krispy Kreme Doughnuts Inc.

Stiller’s loss of the chairman role should serve as a “cautionary tale” to other officers to “avoid making margin loans or margin investments based on your company’s stock,” said Rick Munarriz, a Miami-based analyst at the Motley Fool.
 

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