Michael Sitrick and Reliance Trust Co. have agreed to settle a lawsuit charging the crisis public relations guru with undervaluing an employee stock option plan (ESOP), TheWrap has learned.
Under the settlement agreement filed Thursday, insurance companies for Sitrick and Reliance will pay $6.25 million to the roughly 60 members of the ESOP. That sum includes attorneys' fees.
Originally filed in April 2010 by former Sitrick employee Richard Wool, the complaint alleged that Sitrick undervalued shares of his company, allowing him to regain control of the firm prior to its October 2009 sale to Resources Connection.
The suit charged Sitrick with bilking ESOP members to the tune of millions of dollars by buying his employees out at a discount.
Reliance served as the plan's independent trustee.
Allan Mayer, head of 42West's Strategic Communications Division and a former Sitrick executive, joined the legal action as a co-plaintiff a month after the suit was first filed. Both men brought the action on behalf of the plan's members.
Sitrick and Co. was acquired by Resources along with corporate turnaround firm Brincko Associates for $44.7 million in cash and stock.
When the suit hit, Sitrick initially vowed to fight the charges. He apparently changed his mind when faced with a costly and time-consuming public battle.
From the beginning of the litigation, the independent trustee that was in charge of the ESOP transaction has denied any wrongdoing, as have I, Sitrick told TheWrap. While I remain confident that the claims in the lawsuit did not have any merit and had we proceeded with the litigation we would have prevailed, I decided to settle rather than spend the next two years litigating.
He added, As the settlement papers state, an independent trustee was retained to determine whether to proceed with the repurchase transaction and if so, to negotiate the price on behalf of the ESOP. They determined, based on their own due diligence, that the repurchase transaction and the sale price they negotiated were in the best interests of and fair to the ESOP and its participants.
Mayer declined to comment. Wool could not be reached.
The settlement has not been approved. On Friday, a conference with a judge will take place, during which a hearing will be set for this spring. Before the hearing, all of the members of the ESOP will have time to file their comments about the settlement.