Ex-Havens workers can sue for stock losses

Former employees of Haven Steel Co. can sue former officers of the company in a class action for allegedly causing the bankrupt company's employee stock-ownership plan to lose all its value, a federal judge has ruled.

Lawyers for five former officers have until Tuesday to file motions for summary judgment seeking dismissal of the class-action suit on other grounds.

U.S. District Judge Scott Wright certified a class of former employees on Dec. 5 in the suit, which was filed in November 2004 with eight former Havens employees as plaintiffs.

Wright's ruling could expand the suit to include 500 plaintiffs, attorney Neil Sader of Kansas City-based Sader & Garvin LLC said Friday.

The case hasn't been restricted by the bankruptcy court's automatic stay on suits against companies undergoing reorganization because the company isn't named as a defendant, Sader said.

"We're not suing the corporation," he said. "We're only suing former directors and officers."

Attorneys for the five former corporate officials couldn't be reached for comment Friday morning. Former CEO Kenneth McCullough and former officers Donald Price, Jesse Bechtold, Tom Collins and Steven Cowan, were named as defendants in the suit.

Havens had an employee stock-ownership plan governed by the Employee Retirement Income Security Act. The suit alleges that the five officers were required to "manage the plan in a prudent fashion" and "act solely" in the interests of the plan and its participants.

But by allegedly paying themselves "huge bonuses" and investing solely in Havens stock, the officers allegedly "disregarded the interests" of the employee stock-ownership plan's participants, an amended complaint filed in November said.

The suit also alleges that the officers caused Havens to borrow $2.3 million for the bonuses and that they rebuffed purchase and takeover offers for the company from investors.

McCullough and Bechtold also allegedly allowed "executive expense account spending, including thousands of dollars in ATM cash withdrawals and payments for expensive meals and strip clubs," the complaint said.

The company filed for bankruptcy in March 2004, allegedly rendering the employees' stock "valueless," the suit said. The complaint alleges that the officers breached their fiduciary duties to the plan from Dec. 21, 2001, through July 22, 2004.

Wright designated Sader and Greg Garvin as class counsel, along with Andrew Rainer of McRoberts Roberts & Rainer LLP in Boston.

The named plaintiffs are Jack and Janet Kirse of Lee's Summit; Betty Jean Pitchford of Kansas City, Kan.; Lori Michaels, James Hall and Glenna Grafton of Kansas City; Ronald Berr of Quenemo, Kan.; and Keith Feuerborn of Ottawa, Kan.

The case is scheduled for trial on April 3 in U.S. District Court in Kansas City.