Senator Baldwin announces ‘Brokaw Act’
Last Friday morning, US Senator Tammy Baldwin (D-WI) met with a packed house at the Brokaw Village Hall, consisting of both current village residents as well as many former employees of the Wausau Paper-Brokaw Paper Mill, which closed in February of 2012.
The purpose of Baldwin’s visit was to announce and discuss the “Brokaw Act,” a bill designed to address financial abuses, increase transparency and strengthen oversight of activist hedge funds and associated “wolf packs,” which were responsible for the progressive overtaking of the mill’s governance board and ultimate closure of the facility.
Prior to its closure, the Brokaw Mill was the world’s largest producer of colored specialty paper.
As village president and former mill employee of 35 years Jeff Weisenberger explained, the process of the takeover began in 2010.
“It all started when this group of investors from out east called Starboard Group showed an interest in the mill,” he said. “Company executives explained to us the investors were going to come in and have a look at the mill, and if all went well, they would invest in the mill to help keep everything running. At the time we all thought it was a good thing, ya know? We needed some financial help and they looked like they may be the answer we were looking for.”
Unfortunately, the group’s answer and motives would prove to be the last thing the mill or its employees were looking for.
“It wasn’t long before they had one of their members on our board. Then eventually a few more joined,” Weisenberger added. “By the winter of 2011, they had five members on our board of directors which meant they had a majority.”
In December of 2011, the final word was given of the mill’s closure.
“I’ll never forget the day…” Weisenberger said during an emotional testimonial to Baldwin Friday morning during a roundtable discussion. “It was December 7th and I had just buried my father when the phone rang. That was the call to tell me they were shutting down the mill.”
Layoff notices went out a short time later and in mid-February of 2012 the doors closed for good.
“They scrapped out everything, took the money and moved on,” Baldwin stated as she introduced the Brokaw Act, a measure derived with the intent to prevent a repeat of the Brokaw chain of events, hence its name.
“I wish I was here to tell you I have a plan to go back and undo what has been done to your village and your paper mill,” Baldwin stated. “I can’t do that. However, I am here today to tell you I do have a plan to keep these sorts of activities from happening anywhere else. I have a plan to try and prevent other areas from suffering like Brokaw has.
“In the last decade these wolf pack activist hedge funds have been multiplying,” she added. “They have increased by 60% and no industry seems too small or too large to be targeted by their activities. They do like they did in Brokaw and move right on to their next target. The Brokaw Act will have provisions to help prevent something like this from happening again.”
Those provisions consist of measures to restore transparency and force disclosure by activist groups, in order to prevent the forming of wolf packs, like that which targeted Brokaw.
Verbiage of the act includes:
“Reform the definition of ‘person or group’ in order to prevent wolf packs from skirting the intent of the disclosure rules. Activists’ collective stake in a company may be well above 5 percent, but individually, they stay below the threshold to avoid disclosure. This reform identifies these funds as a single group to require disclosure.”
“Congress has long recognized the potential for abuse when activist hedge funds form loose associations of “wolf packs” and engage in “tipping” allies to the impending 13 (d) disclosure. The Dodd Frank reform bill explicitly gave the Securities Exchange Commission (SEC) the power to address abuse, yet the Commission has been unwilling to use this authority. This legislation removes the opportunity for riskless gains that activists achieve by shortening the 10-day disclosure window to 2 days.”
Although the Brokaw takeover was the first such incident in Wisconsin, Baldwin mentioned another situation in small-town Wisconsin which nearly had the same result.
“Very similar circumstances unfolded in Park Falls, but fortunately they were able to avert the end result which Brokaw experienced. That is the whole basis for the Brokaw Act though, to prevent something like this from happening anywhere else whether it be a small village or big city. It happened here (Brokaw) and the aftermath affected the entire village and its residents. That is once too many.”
Although she can’t predict an exact time frame, Baldwin stated she would like to see the Brokaw Act pass sometime within the 2017 legislative session.
According to statistics from the Department of Workforce Development, approximately 25% of the 450 mill employees were Merrill and Antigo area residents.