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Administration March 1, 2006
Judge Gives Nod for Steel Company ESOP Case
January 3, 2006 (PLANSPONSOR.com) - A federal judge
has decided that former employees of Havens Steel Co. have a
case against and can sue former officers of the company for
allegedly causing their accounts in the company's employee
stock ownership plan (ESOP) to lose their value.
Reported by Rebecca Moore
The Kansas City Business Journal reports that former CEO Kenneth McCullough and former officers Donald Price, Jesse Bechtold, Tom Collins, and Steven Cowan are accused of breaching their fiduciary duties to plan participants by allegedly paying themselves huge bonuses and by investing only in Havens stock.
In addition, the suit also alleges that the officers caused Havens to borrow $2.3 million for the bonuses and that they turned down purchase and takeover offers for the company from investors, according to the Business Journal. McCullough and Bechtold were also accused of allowing “executive expense account spending, including thousands of dollars in ATM cash withdrawals and payments for expensive meals and strip clubs,” the complaint said.
The breaches went on from December 21, 2001 through July 22, 2004, the suit said. The company went bankrupt in March 2004.
The case hasn’t been restricted by the bankruptcy court’s automatic stay on suits against companies undergoing reorganization because the company isn’t named as a defendant, an attorney for the plaintiffs said.
The case was certified as a class action in early December, and could grow to 500 plaintiffs.