This lawsuit, Hensiek v. Board of Directors of CQ Holding Company, Inc., et al., brought on behalf of participants and beneficiaries of the Casino Queen Employee Stock Ownership Plan (“CQ ESOP”), alleges numerous violations of the Employee Retirement Income Security Act (“ERISA”) in connection with the sale of CQ Holding Company, Inc. to the ESOP for an inflated value, which caused a multi-million-dollar loss to the ESOP.
A federal class action was filed in the United States District Court for the Southern District of Illinois (3:20-cv-00377) on April 27, 2020. The Complaint alleges that the Board of Directors of CQ Holding Company, Inc., the Administrative Committee of the Casino Queen Employee Stock Ownership Plan, Charles Bidwill III, Timothy J. Rand, and James G. Koman, Jeffrey Watson and Robert Barrows breached their fiduciary duties to the participants in the CQ ESOP and engaged in prohibited transactions in connection with the sale of CQ Holding Company, Inc. to the ESOP. Specifically, Plaintiffs allege that in December 2012, the Selling Shareholders sold 100% of the CQ Holding Company, Inc. company stock to the newly-created CQ ESOP for approximately $170 million. In October 2019, Plaintiffs and other ESOP participants learned that the value of the CQ stock held in their ESOP accounts dropped by nearly 95%.
The lawsuit is brought on behalf of all participants and beneficiaries in the CQ ESOP who vested under the terms of the Plan. The case arises from the sale of 100% of the stock of CQ Holding Company, Inc. to the CQ ESOP for approximately $170 million. According to public filings made by the ESOP in October 2019, the value of the CQ stock dropped to $2.8 million by the end of 2018. Plaintiffs allege that the ESOP paid more than fair market value for the CQ stock, and that the ESOP fiduciaries and parties to the ESOP transaction violated ERISA.
Plaintiffs in the case seek to represent all participants in the Casino Queen ESOP who vested under the terms of the Plan, and those participants’ beneficiaries, excluding Defendants and their immediate family members; any fiduciary of the ESOP; the officers and directors of CQ Holding Company, Inc. or of any other entity in which a Defendant has a controlling interest; and legal representatives, successors, and assigns of any such excluded persons.
Status of the Litigation
On January 25, 2021, the Court issued a decision denying Defendants’ Motion to Compel Arbitration. The Defendants appealed the decision to the Seventh Circuit Court of Appeals. Briefing on the appeal was stayed pending the outcome of the Smith v. GreatBanc Trust Company, et al. appeal, which dealt with a similar issue. Following that ruling, Defendants-Appellants sought successfully to dismiss the appeal.
On January 28, 2022, the Court issued a decision denying Defendants’ Motion to Dismiss for Failure to State a Claim.
Since January of 2022, there have been additional Motions to Dismiss filed by Defendants, all of which the Court has denied to date. On December 16, 2022, Plaintiffs moved for Class Certification, which is pending before the Court. Discovery is ongoing.
Whom to Contact for More Information
If you are a participant in the CQ ESOP, or if you have information which might assist us in the prosecution of these allegations, please contact:
Ryan Wheeler, Esq. (email)
Jillian Pincus, Paralegal (email)
Cohen Milstein Sellers & Toll PLLC
1100 New York Avenue, N.W., Suite 500
Washington, D.C. 20005
Telephone: 888-240-0775 (Toll Free) or 202-408-4600
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