ISCO’s $97 Million Stock Plan Buyback Spurs Proposed Class Action

Three former participants in ISCO Industries Inc.'s employee stock ownership plan accused the company, along with top executives and the stock plan’s trustee, of orchestrating an unfair stock buyback that caused plan participants to lose tens of millions of dollars, according to a complaint filed in the Western District of Kentucky.

The lawsuit, filed April 24 by plan participant Nathan Best, challenges the 2018 termination of ISCO’s employee stock ownership plan through a $96.6 million stock sale to the company’s top executives and trusts affiliated with their families. Best says the defendants manipulated the transaction’s timing and purchase price so that participants would miss out on gains from the company’s “record-breaking financial results” in 2018 and 2019.

Best also claims the executives replaced the stock plan’s original trustee, Wilmington Trust NA, in favor of a “local CPA with little experience.” This was done because of Wilmington’s “hesitation to approve the buyback” that was being pushed by the defendants, Best claims.

Best’s lawsuit comes four months after Wilmington—which isn’t named as a defendant in this case—agreed to pay $5 million to settle a lawsuit challenging its handling of the transaction that first established the ISCO plan in 2012. Best recently filed an objection to that settlement, arguing it’s overbroad and insufficient.

Causes of Action: Breach of fiduciary duty and the Employee Retirement Income Security Act.

Relief: Declaration of fiduciary breach and prohibited transactions, declaration setting aside 2018 stock plan transaction, restoration of losses, creation of successor trust for plan benefits, interest, attorneys’ fees, and costs.

Potential Class Size: About 411 participants in ISCO’s employee stock ownership plan, along with their beneficiaries.

Response: ISCO and the stock plan trustee didn’t immediately respond to requests for comment.

Attorneys: Kaplan, Johnson, Abate & Bird LLP represent the proposed class.

The case is Best v. James, W.D. Ky., No. 3:20-cv-00299, complaint 4/24/20.