A proposed class of World Travel Inc. employees has accused Prudent Fiduciary Services and its owner of overpaying for a $200 million stock buyback from the company's founders by saddling the employee ownership plan with "tens of millions" of dollars in debt.
The complaint, filed by employees of the travel agency on Tuesday in Pennsylvania federal court, claims plan manager Prudent and owner Miguel Paredes mishandled a 2017 stock buyback by allowing three stockholders, World Travel founders James A. Wells, James R. Wells and Richard G. Wells, to sell their shares back to Prudent at above market value while retaining control of the company board even though the transaction made World Travel entirely employee-owned.
Prudent purchased 19,860,000 World Travel shares from the founders — each of whom owned 10% or more of World Travel — for $200 million through a loan of the same amount to Prudent from World Travel to be paid off over 45 years with an annual 2.64% interest rate, according to the complaint, which alleges the buyback violated the Employee Retirement Income Security Act.
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World Travel is a travel agency specializing in corporate travel management since 1983 and, according to the complaint, has remained privately traded since its founding.
The investors bring claims for causing and engaging in transactions forbidden by ERISA and U.S. Code 23 and for breach of fiduciary duty. They seek a declaration against Prudent and Paredes affirming the trustees' conduct, confirmation of an ERISA violation and a range of financial damages intended to reimburse the employees for investment value and the cost of the suit
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