A dispute in one of the most prominent families in the beer industry — the Massachusetts-based Sheehans, owners of Sheehan Family Companies, which operates beer wholesalers in 13 states and Washington, D.C. — has spilled into the court system.
Timothy G. Sheehan and George L. Cushing, a trustee who represents trusts that benefit Tim Sheehan and his brother John T. Sheehan, filed a civil lawsuit in Massachusetts’ Suffolk Superior Court alleging that the patriarch and matriarch of the family, Gerald (“Jerry”) and Maureen Sheehan, have violated their fiduciary duties and misappropriated company funds.
The complaint was filed on December 21; the Boston Globe first reported the story Sunday evening.
According to the lawsuit, the plaintiffs “do not bring this action lightly.”
“They have done all that they can to avoid litigation,” the lawsuit says. “Gerald and Maureen have, however, forced Plaintiffs’ hands by violating their solemn duties as trustees and company directors to protect Tim and John’s interests, and by draining millions of dollars in value from the Sheehan Family Companies (and disproportionately from the 60/40 companies) to enrich themselves and others of their choosing.”
The lawsuit names several defendants in addition to Jerry and Maureen Sheehan: Margaret Sheehan, one of the eight siblings, in her capacity as director of several Sheehan Family Companies; Charles E. Clapp III, in his capacity as trustee for Margaret and Susan Sheehan and sibling Anne Landers; and L. Knife & Son, Inc., the company’s flagship distributor.
A statement provided on behalf of Jerry Sheehan by Peter Mancusi, EVP of PR firm Weber Shandwick, referred to the lawsuit as “unfortunate” and punched back at Tim and John, saying their father has given them jobs that “provided them with tens of millions more than the amounts received by their siblings, and now each have net worth well in excess of a hundred million dollars due to their father’s largesse.”
“Despite all that they have been given, and all they continue to take from the company, the sons want more, at the expense of their siblings, company employees (whose benefits they see as overly generous) and charitable causes the company supports,” the statement reads. “In an attempt to get it, they have filed this ill-conceived and inaccurate lawsuit. That they did so just days before Christmas and even included their own mother as a defendant shows just how misguided their actions are.
“Jerry and Maureen Sheehan will defend the litigation; their only question is why these two sons are so ungrateful for having been given a life of almost unparalleled privilege.”
Of the eight Sheehan siblings, only three — Tim, John and Christopher Sheehan (who is not a party to the lawsuit) — have taken on active roles within the company. To compensate the active siblings properly, the family devised a 60/40 agreement, which gives the active siblings the option to purchase 60% of any new distributors outside Massachusetts and splits the remaining 40% into eight equal shares among the other siblings. An active sibling is defined as a full-time company employee who is “willing to relocate as needed to help establish and manage new distributorships,” according to the lawsuit.
Five of Sheehan Family Companies’ largest subsidiaries by revenue are set up as 60/40 companies, including Liverpool, New York-based T.J. Sheehan Distributors, Inc. (TJSD); Westmoreland, New York-based Tri-Valley Beverage, Inc.; New Berlin, Wisconsin-based Beechwood Distributors, Inc.; New York City-based UB Distributors, LLC; and New Paltz, New York-based Craft Beer Guild Distributing of New York, LLC, all of which are named as nominal defendants.
Knife & Son — which was founded in 1898 and sells Anheuser-Busch InBev products, as well as craft offerings from Bell’s Brewery, Boston Beer Company, Sierra Nevada, Allagash, and New Belgium, among several others, in the southeastern part of Massachusetts, including Cape Cod, Martha’s Vineyard and Nantucket — is organized as a ⅛ company, meaning all eight siblings own equal amounts of its non-voting shares. Jerry Sheehan owns all of the voting shares.
The filing alleges that Jerry and Maureen Sheehan have inappropriately reallocated wealth from 60/40 companies to L. Knife in the form of management fees to the tune of $80 million, “documented only through a one-line invoice, as well as millions of dollars in interest in intercompany loans.”
The plaintiffs claim that the management fees and interest payments “have been used to finance Gerald and Maureen’s flagrantly wasteful spending.” They allege this includes:
- Compensation of more than $45 million to Jerry from 2015-2019;
- “a salary to Maureen (who performs no work for the Companies) in amounts approaching $3 million;
- Gerald and Maureen’s purchases of tens of millions of dollars’ worth of expensive artwork, furniture, automobiles, real estate, and women’s jewelry for their own exclusive use;
- and charitable contributions to their pet charities in their own names in amounts that vastly exceed the amount of shareholder distributions issued.”
In addition to the management fees L. Knife charged other distributors in its network, the plaintiffs allege Jerry and Maureen Sheehan sold a 5% equity stake in one of the 60/40 companies without informing the active siblings or seeking their permission and have diverted real estate opportunities from 60/40 companies to ⅛ companies so that the ⅛ companies can charge the 60/40 companies “excessive rent.”
“Plaintiffs have been forced to bring this action in order to preserve Tim and John’s fair share of the family businesses they worked so long and hard to build, and to safeguard all of the family companies from Gerald’s mismanagement,” the lawsuit alleges.
The lawsuit also claims that Jerry Sheehan was “once an enthusiastic proponent of the 60/40 agreement” but he has since “vowed to ‘level the stacks’ among the eight siblings by redistributing wealth from the 60/40 companies to himself and certain inactive stockholders.”
In their roles as company executives, the active siblings left jobs at outside companies and uprooted their families as the family business expanded across the country.
Tim Sheehan forfeited his equity stake in TJSD and moved his family from New York to Wisconsin to take a leadership role at Beechwood in 1987. John Sheehan left a role in wholesaler financial planning at A-B in St. Louis, Missouri, to train as his brother Tim’s successor at Beechwood in 1989. Chris Sheehan moved to Syracuse, New York, for a role at TJSD in 1993, only to relocate to New York City three years later after A-B approved him to lead SFC’s newly acquired UB Distributors in 1996.
“The 60/40 Agreement has been an engine of wealth for the entire Sheehan family, enabling the companies to grow into one of the largest distributors of Anheuser-Busch beverages (and other alcoholic beverages) in the country,” the filing says. “Without the benefits promised to active siblings under that agreement — including an ongoing remunerative role in the Sheehan Family Companies’ management and distributions front he 60/40 Companies — Tim, John and Chris would not have been willing to make the sacrifices needed to acquire and nurture new Anheuser-Busch distributorships.”
Meanwhile, according to the lawsuit, A-B forced Jerry Sheehan to resign from his role as equity agreement manager (EAM) at L. Knife in 2000 and approved Tim Sheehan to supplant him. A-B approves EAMs at the distributors that sell its products, and can revoke approval if the company loses faith in a manager’s ability. At L. Knife, the EAM is given 10% of the company’s equity with the option to acquire another 15%, the lawsuit says.
In October 2018, after serving as L. Knife EAM with A-B’s approval for nearly two decades, Tim Sheehan received a letter from his father saying he was being replaced in the role and put on administrative leave from the company. The letter alleged that Tim Sheehan had moved to Florida and “purportedly risked the company’s compliance with the Anheuser-Busch EAM requirements,” according to the lawsuit. However, Tim Sheehan “had at all times remained a Massachusetts resident,” and had only “taken some estate and tax planning measures in Florida (where he owns real estate), the lawsuit says. A-B’s EAM agreements have “never considered an EAM’s state of residency a condition of holding the position,” the suit continues.
Tim Sheehan’s 36-year career at his family’s company ended with a letter from his father terminating him in September 2019 and banning him from the company’s offices.
The lawsuit seeks a jury trial, along with 19 prayers for relief, including unspecified damages, the reinstatement of Tim Sheehan as EAM of L. Knife, and an extension of the 60/40 agreement to acquisitions made outside of Massachusetts, among other requests.