EDITOR'S NOTE: Pochal & Pochal in Mystic is a law firm. Information in an earlier version of this story was incorrect.

Mystic — One former Pfizer Inc. employee wanted to know if anyone were willing to sign onto a class-action lawsuit against the company, while another said the drug firm's move to merge with Allergan in a so-called inversion was tantamount to theft from shareholders.  

Other shareholders grumbled about the likelihood that Pfizer executives — as has occurred in previous inversions but which the company has denied is in the works — will be compensated by the corporation for any tax consequences they will have to face as a result of the deal they initiated.

The scene Friday at the Mystic Hilton was startling: An event intended initially for about 40 people had swollen to 120 after an article in The Day last Sunday alerted investors to the tax consequences of Pfizer's plan to reconstitute itself as an overseas company — a move that could cost some in the room 30 percent or more of their holdings.

"This is very unfair to the shareholders," said one Pfizer retiree who, like others, didn't want to be identified. "It's as if one-third of the stock is being stolen and one-third of the dividends is being stolen."

Pfizer's inversion — which would allow the company to convert to a foreign domicile and escape relatively high U.S. corporate tax rates — is forcing stockholders to exchange the company's American-based stock for shares in the new Irish-based drug firm to be known as Pfizer plc. 

Investors must then pay federal capital gains taxes that for some locals — especially those who worked at Pfizer in the early days, when the stock was cheap — could be in the hundreds of thousands of dollars or more.

Other taxes, including state levies, could add to the burden, according to financial experts, and a lot of people in southeastern Connecticut will be affected because of Pfizer's history in Groton and New London that dates back to the 1950s.

One investor said after the meeting that some early shares of Pfizer he owned had increased exponentially — one exploding to more than 4,000 shares through stock splits alone.

The Hilton event, coordinated by Russ Burgess of Charles Schwab & Co. brokerage in Mystic, offered insights into the deal as well as a discussion of some of the tax consequences.

A separate meeting that Burgess is planning down the road will look at how shareholders can minimize their tax impact through charitable giving.

David Toung, a senior health care analyst at Argus Research Company, said he believes the deal will go through before the presidential elections in November.

And the timing of the deal is important, he said, because investors need to make their tax decisions before shareholders and government regulators approve the deal — after that point, people who give away stock to charities or family members will not be able to take deductions.

Toung said two things Pfizer investors with significant holdings should do are to consult with an accountant and start figuring out the cost basis of various batches of stock.

The basis is the face value of the stock at the time of purchase.

"This can be very convoluted," Burgess said. "This is going to take significant work for a lot of shareholders."

Jason Cerniglia, principal of Coastal Wealth Management in Mystic, didn't attend the meeting, but he did have one option for investors: Sell Pfizer stock now and buy Allergan at a relative discount to what it is slated to sell for once the deal is complete.

If the deal goes through, he said, investors will be earning a 14 percent return in about eight months.

"Most people think it's going to happen," Cerniglia said of the inversion.

Susan Pochal, principal of the law firm Pochal & Pochal in Mystic, said stockholders have three basic choices: do nothing and pay the capital gains taxes, either out of pocket or through the sale of shares at the time of the conversion; sell stock in advance, which also will trigger capital-gains taxes but could allow shareholders to diversify; or gift shares.

The gifting of shares to family members in lower tax brackets will result in lowering taxes related to the forced sale of stock, but of course there is also loss of control over the money, Pochal said.

Giving to charity of at least a portion of the shares will allow for tax deductions to offset gains, she added, and donors can choose to give shares with the lowest initial price to nonprofits that don't have to pay capital gains on them.

Donor-advised funds, which allow for a big deduction now but a slow transfer of funds over the years, is one option for giving, Pochal said.

Charitable-remainer trusts, which allow donations that offer gift annuities back to the donor, is another possibility.

"You have to make the gift before it's considered a done deal or the IRS will tax the gains anyway," Pochal said.

Pochal said Pfizer stock held in retirement accounts are not subject to capital-gains taxes related to the inversion, but mutual funds could be affected unless the funds take losses in other stocks to compensate for Pfizer gains.

For Pfizer retirees and current employees at Friday's meeting, though, questions continued to get back to what they saw as the fundamental unfairness of the deal for long-term investors who had been loyal to the company for decades.

They heard from Toung that the deal appeared to be a merger not likely to generate antitrust concerns or lead to a dividend cut, as occurred after the company's merger with Wyeth.

Still, not all were happy that the only power they had would be to vote their share against the merger when stockholders are asked to approve the deal, and one retiree's question about a possible class-action suit received no support.

"It's even worse than eminent domain," said one retiree, harkening to Pfizer's role in kicking off the legal fight in New London by backing use of eminent domain that led to the infamous Supreme Court case known as Kelo v. City of New London.

In that case, said the shareholder, at least the homeowners got some money out of the deal.

In this case, he said, Pfizer has left shareholders holding the tab.

l.howard@theday.com

Twitter: @KingstonLeeHow