(Direct Newsline) Former Foster & Gallagher employees are likely to lose their retirement money as the result of a decision handed down in a federal court last week.
U.S. District Judge Michael Mihm ruled that the $70 million paid for stock options by employees’ stock ownership plan (ESOP) in 1995 was not excessive and that executives of the now-defunct catalog house did nothing wrong, according to the Peoria “Journal Star.”
In addition, Mihm absolved U.S. Trust, the ESOP’s trustee, of negligence.
The decision, which ends a three-week trial, could affect almost 4,000 former workers, according to the “Journal Star.”
Filed in April 2001, prior to Foster & Gallagher’s bankruptcy and collapse, the suit alleged that the defendants drove the ESOP deeply into debt by purchasing stock options from the shareholders. The complaint continued that company founder Tom Foster and his fellow officers failed to tell U.S. Trust that sweepstakes, a marketing technique relied on heavily by the firm, were about to be regulated almost out of existence. The other officers included chairman Melvyn Regal and president Robert Pellegrino.
Foster & Gallagher entered Chapter 11 bankruptcy in July 2001, listing $100 million in liabilities. Several assets, including catalog subsidiaries Walter Drake and Stark Bros., were subsequently sold, and the firm was liquidated.