CHICAGO, Ill (From news reports) - A Federal Court of Appeals revives a portion of a lawsuit accusing former Appvion officials of inflating the company's value before it went bankrupt. The lawsuit was filed in 2018 by Appvion workers that were involved in the company's Employee Stock Option Plan.
It alleged that in 2001, then-owner Arjo Wiggins hired a financial firm that intentionally overvalued the company to increase the price to form the ESOP-and to boost their own commission on the sale. The plaintiffs also argued that valuation was continually inflated by State Street Bank and Trust and Reliance Trust every year in setting the employee stock option price, and that company officials, including former C-E-O Kevin Gilligan, accepted those numbers, despite knowing they were not accurate. Appvion eventually declared bankruptcy in 2017.
Green Bay Federal Judge William Griesbach initially dismissed the suit, ruling that the six-year statute of repose for the original over-valuation had passed. The ESOP members filed a new complaint alleging continued over-valuation of the company dating back to 2012, but again the suit was thrown out.
The 7th Circuit Court of Appeals in Chicago ruled last month that the plaintiffs had presented viable evidence of continued failure of fiduciary responsibility by State Street, Reliance Trust and former Appvion executives, and has ordered the federal court to reconsider the case.
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