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July 30, 2009 Forum Report:

Management Choice of Adversary Response to Shareholder Interests



Forum Report: TDS

Management Choice of Adversary Response to Shareholder Interests

A letter was received yesterday from the prominent Delaware corporate litigation lawyer, A. Gilchrest Sparks, III, of Morris Nichols Arsht & Tunnell LLP, indicating that he has been engaged by TDS for a defense of management's refusal to provide the information required by shareholders.[1]  Stating that he is responding "on behalf of the Company, with the concurrence of the members of the Audit Committee,"[2] he repeats management's previously reported position that the Forum's demand for records did not comply with unspecified "statutory requirements" of Section 220 of the Delaware General Corporation Law, enforcement of which would require proceedings in the state court where he practices.

As many of you know, it is unusual for a company's management to engage litigation counsel to represent them in communications prior to the initiation of any legal action requiring defense.  It is also unusual for them to refuse to specify what statutory requirements might require attention to satisfy investor information requirements.  We must consider the possibility that this conduct is intended to discourage investor efforts to exercise their rights by imposing on them the burden of formal enforcement processes.  In any event, it must be assumed that

(a)   management will be aggressively adversarial in its responses to investor interests, and

(b)   the "independent" members of the Audit Committee will not act to require management's respect of investor interests.

We will of course be developing Forum plans to address the recently summarized alternatives in this context.  Your comments will be appreciated.

GL July 30, 2009


Gary Lutin

Lutin & Company

575 Madison Avenue, 10th Floor

New York, New York 10022

Tel: 212-605-0335



[1] See the July 28, 2009 letter of A. Gilchrest Sparks III of Morris Nichols Arsht & Tunnell LLP on behalf of Telephone and Data Systems, Inc. (1 page, 27 KB, in PDF format), and the responding July 29, 2009 letter of Gary Lutin on behalf of the Shareholder Forum  (1 page, 44 KB, in PDF format).

[2] As previously reported, Forum communications relating to the shareholder information requirements had been referred to the Audit Committee for its review of management compliance with company codes of conduct. There was no other response from the Audit Committee.




This Forum program is open to all shareholders of Telephone and Data Systems, Inc. (NYSE: TDS), and its controlled subsidiary, United States Cellular Corporation (NYSE: USM), and to any fiduciaries or professionals concerned with their investment decisions. Participation is free of charge, according to the Forum's standard Conditions of Participation.

The purpose of the Forum is to provide shareholders with access to information and a free exchange of views relating to their consideration of issues described in the Forum Summary. As stated in the Conditions, all Forum participants are expected to make independent use of information obtained through the Forum, subject to the privacy rights of other participants. Forum polices are intended to support anonymous communication, and provide that participants will not be identified or quoted without their explicit permission.

The initiation of this program was supported by Southeastern Asset Management, Inc., which as manager of the Longleaf Partners Funds and other client funds is the largest TDS shareholder with common and special common stock aggregating more than 15% of the total of all classes outstanding. TDS has been invited to assume corporate responsibility for the costs of addressing issues of apparent significance to a broad range of its investors, according to the Forum's Conditions, and other participants may be invited to contribute support to the continuing program pending the company's acceptance of responsibility.

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