April 16, 2020

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A lawsuit filed in the Northern District of Illinois accuses GreatBanc Trust Co. of mishandling a stock plan transaction that caused employees of Triad Manufacturing Inc. to pay $106 million for employer stock that may have been worth less than $4 million.

The class action complaint, filed Wednesday by former Triad employee James Smith, claims GreatBanc signed off on the deal without performing adequate due diligence. GreatBanc, which allegedly represented the Triad employees by serving as the stock plan trustee, disregarded structural problems and failed to account for Triad’s “shrinking customer base due to the widespread closure of retail stores,” Smith claims.

At issue is a 2015 transaction in which Triad—a producer of custom wood furniture and fixtures—became 100% employee-owned through the creation of an employee stock ownership plan. Smith alleges that Triad employees had no input on the deal, which significantly reduced their retirement savings and caused them “tens of millions of dollars in losses.”

Specifically, Smith says the deal was based on unrealistic and inflated financial projections that didn’t account for the rapid closure of brick-and-mortar retail stores, which make up Triad’s primary customer base. Smith also charges GreatBanc with failing to properly account for how the deal’s financing would affect Triad’s balance sheet and future cash flow.

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Cohen, Milstein, Sellers & Toll PLLC and Nichols Kaster PLLP represent the proposed class.

The complete article can be accessed here.