Former employees sue over stock plan
NEW BRAUNFELS, Texas – The Scooter Store founder Doug Harrison and others who managed the company’s employee stock ownership plan (ESOP) now face a lawsuit by former employees.
Three former employees filed a class-action lawsuit on behalf of 2,938 plan members in U.S. District Court for the Western District of Texas on April 23, seeking to recover damages and all other forms of relief as a result of “the defendants’ multiple breaches of fiduciary duty.”
According to the lawsuit, those breaches include:
• Harrison “usurped opportunities” available to the ESOP when he sold or otherwise transferred or conveyed his shares on or after Feb. 1, 2011, to Sun Capital Partners and these shares were placed under the ownership of Sun Scooter Store.
• Harrison, in coordination with TSS Holdings, TSS and Houlihan Lokey Financial Advisors, manipulated the price per share for the common stock so that he and/or his family members could sell their shares at prices above fair market value.
• Harrison, Principal Life Insurance Company and First Banker Trust Services failed to diversify the assets in the ESOP when they knew that the value of the common shares was very likely to diminish in value substantially from 2011 through to the present.
The lawsuit also claims that $7.5 million in cash in the ESOP as of Dec. 31, 2011, has not been accounted for.
The ESOP has 13.48% equity in The Scooter Store, according to the company’s recent bankruptcy filing. Members who are vested can sell their shares when they retire or leave the company.
While The Scooter Store, the company, is not named as a defendant in the lawsuit, it also faces two lawsuits, another from former employees and one from the city of New Braunfels.
The outcome of those lawsuits is up in the air as The Scooter Store proceeds with the bankruptcy process.