April 28, 2020
Employees of an Illinois casino were cheated out of “tens of millions of dollars” after their retirement plan severely overpaid for the casino parent company’s stock in a $170 million deal, according to a new proposed class action.
Tom Hensiek and Jason Gill, who formerly worked at the Casino Queen and who had participated in the casino’s employee stock ownership plan, filed an Employee Retirement Income Security Act suit in Illinois federal court on Monday. They claimed that even though the ESOP bought all of CQ Holding Company Inc.’s stock in 2012 for $170 million, the value of that stock was worth significantly less than what employees were told for years.
“Defendants’ ERISA violations caused tens of millions of dollars in losses to the ESOP participants, who overpaid for the company stock and will not receive the deferred compensation they had earned,” the complaint said.
A group of Casino Queen investors tried and failed for years to find a buyer for the casino, according to the suit, which names CQ Holding Company’s board of directors, the plan’s administrative committee and various individuals as defendants.
After not being able to find a buyer for the casino at a price they wanted, a group of those shareholders who were also board members decided to establish the ESOP — an ERISA-protected retirement plan — to buy it, according to the complaint.
The suit alleges that workers were promised that the ESOP was a good way to enable them to create significant wealth for themselves, and that employees “would be able to buy second homes due to their ESOP participation.”
That promise, however, was just a tall tale, the workers said. The stock at issue was revealed in 2019 to be worth much less than what participants believed it was worth, according to the suit.
The casino’s workers didn’t even know about the $170 million stock purchase until after it was already finished, they said.
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Michelle C. Yau, an attorney for the proposed class, said in a statement to Law360 on Tuesday that she and her team were “committed to obtaining justice for our clients and all of the Casino Queen ESOP participants.”
“The complaint alleges that the ESOP transaction was designed and executed to benefit the Casino Queen’s prior owners and executives while providing only a hollow promise to employees,” Yau said. “The complaint also alleges that, after years of concealing their fiduciary mismanagement of the ESOP, the house of cards defendants constructed fell in October 2019, when employees were told that the company stock in their retirement accounts was almost worthless.”
The former workers are represented by Mary J. Bortscheller, Michelle C. Yau and Sarah D. Holz of Cohen Milstein Sellers & Toll PLLC, and Kai H. Richter, Paul Lukas and Grace Chanin of Nichols Kaster PLLP.
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