May 6, 2020
Two former Casino Queen employees have filed suit against the casino’s old owners over the 2012 sale of the property that made it employee-owned.
The plaintiffs, Tom Henseik and Jason Gill, allege the former owners of the Casino Queen Inc. sold their stake in the company into an employee stock ownership program (ESOP) at a vastly inflated price and then kept the true value secret for years. The proposed class action lawsuit was filed last month in U.S. District Court in East St. Louis.
“Plaintiffs allege that the Casino Queen ESOP’s fiduciaries concealed for years that the ESOP transaction was intended to benefit the Casino Queen’s prior owners and executives while providing only a hollow promise to employees,” said Michelle C. Yau, a lawyer representing Henseik and Gill. “Employees learned in October 2019 that the Casino Queen stock in their retirement accounts [the only asset held in those accounts] was nearly worthless.”
. . .
In 2012, the Casino Queen sold for $170 million to an employee stock ownership plan (ESOP), a trust that was supposed to guarantee retirement savings for current employees.
The transaction happened after the owners spent years unsuccessfully trying to sell the company to a third-party buyer, according to the suit.
“Given their inability to find a buyer willing to pay what the selling shareholders wanted for the Casino Queen, the selling board members created their own buyer for the company by establishing the ESOP to buy it outright,” according to the filing.
. . .
“The board retained the power to dismiss the co-trustees (who continued serving on the board while charged with approving the 2012 transaction) and administrative committee members, and thus controlled their decision-making,” according to the filing.
The plaintiffs allege the board violated their responsibilities to employees of the casino by approving $170 million in debt the ESOP took on to purchase Casino Queen stock.
The complaint also states that employees of the casino were unaware of any transaction until after it occurred and were forced to invest their employee-sponsored retirement savings into Casino Queen stock.
“Shortly after the 2012 transaction, the company stopped making employer contributions to other retirement plan(s). Instead, the company contributed solely to the ESOP which holds only Casino Queen stock, a stock that lacks a public market,” according to the filing.
The plaintiffs allege the board misled them to believe their retirement accounts were growing quickly until 2019 when employees learned the value of Casino Queen stock, the only investment in their ESOP accounts, was worth 5% of what they had been told.
Read Former Casino Queen Employees Sue Company Over 2012 Sale.