Hawaii Tech Firm Embroiled in CoStock Controversy

June 27, 2006 (PLANSPONSOR.com) - Eleven former employees of a Honolulu optical technology company have charged in a federal lawsuit that the firm reversed course and refused to buy back shares of its stock as promised.

According to the suit filed in US District Court in Honolulu NovaSol Central made changes to its retirement program, which includes pension and 401(k) plans, the Honolulu Star Bulletin reports. Prior to the changes employees were allowed to cash in shares after leaving NovaSol by selling them back to the company.

The suit claims that NovaSol management changed the program in late 2004 and early 2005 to reflect the fact that the company was no longer required to buy back the employees’ shares. Not only that, according to the suit, management also changed the status of shares held by former employees by making them non-voting, which the employees claimed rendered the shares less valuable. The suit alleges the changes violated the Employee Retirement Income Security Act (ERISA).

According to the suit, several of the plaintiffs accumulated large positions of NovaSol stock, with one acquiring nearly 250,000 shares. The Star Bulletin quoted plaintiff lawyer John D’Amato who said that while the former employees could sell their NovaSol shares to a private buyer, it would be unlikely to find such a buyer, particularly since the shares carry no voting rights.

The former employees have asked the court to require the company to buy back a total of approximately 460,000 shares.

Bill McCorriston, an attorney for NovaSol, told the newspaper that the suit is “completely without merit.” According to Mccorriston,”It’s a rather transparent attempt to obtain money without any justification whatsoever.”