Former Casino Queen Workers Defeat Ex-Board Members in a Director Stock Suit

Casino Queen Inc.'s former employees sued its board members for dumping the company's equity shares at inflated prices in an employee retirement plan. The members asked the U.S. District Court for the Southern District of Illinois to dismiss the suit, but it rejected their motion.

The casino is located in East St. Louis. III. Defendants Timothy Rand and Charles Bidwell III claimed that the case had exhausted the six-year statute of limitations that the Employee Retirement Income Security Act (ERISA) set. But the court disagreed with them stating that it made a prior decision to reject the claim.

James Koman was another defendant in the suit and he lost his judgment on the pleadings motion. Rand, Koman, and Bidwell are indicated as Casino Queen's founders. They partnered with other individuals in October 2012 to establish Casino Queen Holding Company (CQHC) for Casino Queen Inc.

Still, they later created an employee stock ownership plan after two months to buy the holding entity's outstanding shares. The plan took a $170 million loan in December 2012 to buy CQH's shares.

The plaintiffs stated that the 2013 Asset Sale and 2012 Stock Purchase violated the Defendant's duties as ERISA states. They added that WSOP paid higher rates than the existing market value for stock in the 2012 Stock Purchase.

A court filing indicates that stock was ESOP's single asset. But, the plaintiffs added that the price that the stock plan paid was high according to Casino Queen's future financial predictions.

Stiff Competition in the State's Gaming Market Adversely Affected the Casino

The complaint stated that Casino Queen performed well in its first few years of operation. Unfortunately, Illinois' gaming market's drastic expansion hindered it from increasing its operations. Besides, the state has one of the biggest casino markets in the country.

Plaintiffs alleged that Casino Queen unsuccessfully tried to sell itself several times between 2005 and 2011. Its founders decided to split it in 2012 and 2013. They sold the Illinois riverboat casino for $140 million to Gaming and Leisure Properties (GLPI).

The casino later decided to lease the site for $210 million from GLPI for more than 15 years. Yet, the estate's assessed value at the time was $12.1 million.

A court filing stated that the transaction disregarded how the workers would vote and it was done on behalf of CQH and the Board of Directors. Moreover, most of the stock was unallocated and the Co-Trustees voted on it despite having the mandate to vote unallocated shares according to the plan.

GLPI owns several gaming properties that it leases to different operators. Also, it owns several casinos like Casino Queen which an employee management group operates now.

What Was the Defendants' Argument?

The U.S. District Court for the Southern District of Illinois ruled that instances such as concealment and fraud are a few exemptions for the employee ownership plan's time limit. The defendant's attorney claimed that the repose statute is a jurisdictional issue yet, other courts had ruled those statutes of repose and limitations are claim-processing and non-jurisdictional rules.


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