Isagenix Employee Stock Ownership Plan ERISA Violations Class Action

This class action is about the Isagenix Worldwide, Inc. Employee Stock Ownership Plan (ESOP). It is brought against Argent Trust Company, the trustee of the plan, and four individuals, for a transaction in which Argent bought shares of Isagenix from the four individuals on behalf of the plan. The complaint alleges that the value of the stock was declining and that the purchase violated the Employee Retirement Income Security Act (ERISA).

The class for this action is all participants in the Isagenix Worldwide, Inc. Employee Stock Ownership Plan who vested under the terms of the plan (or ERISA) and their beneficiaries.

The transaction took place on June 14, 2018. It involved a purchase of 30,000 shares of Isagenix’s preferred stock, at a price of $382,500,000, which represented a 30% ownership share of Isagenix. The complaint alleges that Argent “had sole and exclusive authority to negotiate the terms of the ESOP Transaction on the Plan’s behalf.”

The sellers of the stock were Jim and Kathy Coover and Jim and Tammy Pierce. At the time of the transaction, Jim Coover was the president and CEO and a director of Isagenix; Kathy Coover was the Executive Vice President of Isagenix and a director as well. Jim Pierce was a director.

The complaint alleges that, by virtue of their positions, these three were fiduciaries under ERISA, with the duty of overseeing the plan and monitoring Argent. It claims that all four of the selling individuals were parties in interest.

The complaint claims, “The ESOP Transaction allowed the [Coovers and Pierces] to cash out a portion of their Isagenix stock at a high price at a time when Isagenix’s business was deteriorating, and it placed excessive debt on the Company.” This means, the complaint says, that “Argent failed to fulfill its ERISA duties, as Trustee and fiduciary, to the Plan and its participants…”

The transaction involved preferred stock and not common stock, the complaint suggests, in order to “inflate the purchase price” paid to the sellers.

The purchase was financed by a subsidiary of Isagenix, Isagenix Worldwide, LLC, with a loan to be paid back over thirty-nine years. Behind that loan were term loans with other companies.

The complaint suggests that “Isagenix provided financial projections to Argent for the valuation for the ESOP Transaction” and that those projections “were unreasonably optimistic.” It points to signs of company decline since the transaction, including a decline in revenues and EBITDA and a large layoff of employees.

The complaint alleges that a December 29, 2019 valuation of Isagenix stock “represents a decline of over 70% from the purchase price paid by the ESOP.

The counts include engaging in prohibited transactions and breaches of fiduciary duty, among other things.

Article Type: Lawsuit
Topic: Employment
Tags: Breach of Fiduciary Duty, ERISA Violations, Employment Violations, Prohibited Transactions