Summary of the Lawsuit
This lawsuit alleges that the fiduciaries of the KPC Healthcare Holdings, Inc. Employee Stock Ownership Plan (“ESOP”) breached their fiduciary duties, engaged in prohibited transactions and violated the Employee Retirement Income Security Act of 1974 (“ERISA”) in connection with an August 28, 2015 transaction (“2015 Transaction”) in which Dr. Kali Pradip Chaudhuri sold 100% of KPC Healthcare Holdings, Inc. stock to the KPC ESOP for an amount that was more than fair market value.
Summary of the Claims
Prior to the 2015 Transaction, in 2013, Dr. Kali Pradip Chauduri acquired 100% of the shares of Integrated Healthcare Holdings, Inc. Based on a purchase price of $0.203 per share and 255,307,262 shares outstanding, the Complaint alleges that indicates an implied valuation of $51,827,374. After the purchase, Integrated Healthcare Holdings, Inc. was renamed KPC Healthcare Holdings, Inc. On August 28, 2015, the ESOP purchased 100% of the stock of the Company for $217,107,262.
The Complaint alleges that Kali Pradip Chaudhuri engaged in prohibited transactions with respect to the 2015 Transaction, and that the KPC ESOP purchased KPC stock for more than 438% increase over the price that Kali Pradip Chaudhuri paid to acquire the Company less than two years before (and an even greater increase over prices at which the Company had traded publicly prior to Dr. Chaudhuri’s acquisition). The Complaint alleges that Alerus Financial, N.A., the trustee of the ESOP, breached its fiduciary duties in failing to properly investigate the fair market value of KPC stock and in failing to remedy the ESOP’s overpayment of Company stock in the 2015 Transaction. The Complaint also alleges that the Board of Directors of KPC (who also served on the committee that administers the ESOP) breached their fiduciary duties.
Class Action Allegations
This lawsuit is brought on behalf of the following persons:
All participants in the KPC ESOP from August 28, 2015 or any time thereafter (unless they terminated employment without vesting in the ESOP) and those participants’ beneficiaries.
Excluded from the Class are (a) Defendants, (b) any fiduciary of the Plan; (c) the officers and directors of KPC or of any entity in which one of the individual Defendants has a controlling interest; (d) the immediate family members of any of the foregoing excluded persons, and (e) the legal representatives, successors, and assigns of any such excluded persons.
Status of the Litigation
The Complaint was filed on June 1, 2020. Defendants filed Motions to Dismiss the Complaint on September 3, 2020, which were denied by the Court on January 15, 2021.
Plaintiff filed a motion for class certification and a motion to amend the complaint. The Court held a hearing on the motion for class certification and motion to amend the complaint on August 6, 2021 and granted the motions the same day.
Discovery is currently ongoing.
Whom to Contact for More Information
If you are a member of the proposed class or you have information which might assist us in the prosecution of these allegations, please contact one of the following persons:
R. Joseph Barton, Esq. (email@example.com)
Colin M. Downes, Esq. (firstname.lastname@example.org)
Ming Siegel, Paralegal (email@example.com)
Block & Leviton LLP
1735 20th Street NW
Washington DC 20009
Block & Leviton LLP is co-counsel in this litigation with Donahoo & Associates, P.C., Feinberg Jackson Worthman & Wasow LLPC, and MK LLC Law.