The Free Press, Mankato, MN

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April 1, 2013

Lawsuit over control of family-owned MICO ends with $21.8 M award

NORTH MANKATO — The transition of power from the first to the second generation at family-owned MICO Inc. was more like a corporate version of Mortal Kombat, pitting two brothers against a third.

The infighting included humiliation, recrimination and intimidation in an interfamilial battle that spanned nine years, spawned one lawsuit, a three-phase trial and a $21.8 million court award to the brother who was pushed out of the business by the other two.

The story involves Brent and Dan McGrath and half-brother Larry McGrath. They are the surviving sons of Gordon McGrath, an entrepreneur who bought North Mankato-based MICO in 1960, made it a global player in the hydraulic brake business, and left the company to Brent and Dan when he died in 2004.

The dispute, detailed in court documents, offers a textbook example of what can go wrong when a business patriarch transfers the company he grew and nurtured to his adult children.

“This is a tragedy that could have been avoided from a business perspective,” said family business consultant Tom Hubler, who was retained by MICO early on to try and smooth the brothers’ ruffled feathers. “It’s also a tragedy from the family’s point of view.”

Through their attorneys, the three brothers and Glenn Gabriel, a former company executive, declined to comment for this story. But a District Court judge’s opinion awarding damages to Dan McGrath — and a December decision by the Minnesota Court of Appeals — provide an inside account of how the family relationship deteriorated. The lower-court decisions, which included the $21.8 million, were upheld by the state Supreme Court on Feb. 19.

“In the last decade, there’s been a renewed call for honesty, civility and professionalism on Wall Street. The same rules apply to Main Street,” said Douglas Peterson, one of Dan McGrath’s attorneys. “The courts are saying no one’s above the law. They’re saying if you did what these defendants did, you need to be held accountable.”

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