Sensitive stuff at Cintas…

August 1, 2008

Earlier this year a Canadian publication called uniform maker Cintas Corporation (CTAS) one of the best employers in Canada. But last week, here in America, a union-backed group – angered by the 2007 death of a Cintas worker dragged into an industrial dryer at the firm’s Tulsa plant – embarked on a “Painful Truth Tour” to publicize company practices that, the group claims, put profits ahead of safety.

The safety issue popped up again in the 10-K Cintas filed Wednesday, which discloses that in mid-July it was hit with a shareholder derivative suit by the Manville Personal Injury Settlement Trust (the fund created by those big asbestos lawsuits against Johns-Manville). According to the K, the suit claims that Cintas officers and directors “breached their fiduciary duties to the Company by consciously failing to cause Cintas to comply with worker safety and employment-related laws and regulations.” The filing doesn’t reveal the amount of damages sought. (The defendants include founding Chairman Richard Farmer and his CEO son, Scott Farmer.)

But if this story in a Cincinnati business journal is accurate, Cintas’s disclosure seems rather skimpy. According to the article, not only does the Manville lawsuit allege safety violations, illegal hiring practices and “matters related to union organizing,” but it also accuses the company of some shady business dealings. It says Cintas paid $9.5 million to settle a suit relating to the bankruptcy of a minority-owned company, Terry Manufacturing Co., with whom Cintas had a joint venture to try to get uniform contracts from McDonald’s. The Manville complaint supposedly mentions allegations by the bankruptcy trustee that “Cintas conspired with management to drain money from Terry, eventually driving it into bankruptcy.”

Whatever the merits of these allegations, the story quotes a Cintas spokeswoman who does acknowledge that the company settled the Terry litigation. So it’s odd that the 10-K says nothing about this settlement. Indeed, it doesn’t mention the Terry matter at all, even though Cintas has been disclosing it in its Qs and Ks since early 2005, including in last quarter’s 10-Q. And those disclosures said the Terry bankruptcy trustee was seeking only $150K in damages, a far cry from the $9.5 million the firm has supposedly paid to settle the case.

The documents from the Manville suit, by the way, are “locked” on the court clerk’s website because they “may contain sensitive information.” Rather intriguing.

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