Legal Victory for Former Workers of Casino Queen Inc.

By John Isaac,
Editor at online-gambling.com

John Isaac Editor at online-gambling.com

John Isaac is an editor with many years of experience in the gambling industry. He writes expert articles on card games like blackjack and poker. In addition, he is also well aware of the US gambling laws and the Indian and Dutch gambling markets. You can rely on verified information and insightful details.

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Last updated: March 13, 2023

In a significant victory for former employees of Casino Queen Inc., a riverboat casino located in East St. Louis, Illinois, the US District Court for the Southern District of Illinois has denied a motion to dismiss a lawsuit filed against ex-board members. The ex-staffers claim that the former board members sold shares of the gaming company’s equity to the plan for retirement during inflation.

Defendants Charles Bidwell III, James Koman, and Timothy Rand claim that the suit surpassed the limitations it had for six years imposed by the Employee Retirement Income Security Act (ERISA). However, the court rejected this claim and dismissed Koman’s claims for the judgment.

Lawsuit Allegations

According to legal documents, Bidwell, Koman, and Rand have been identified as the founders of Casino Queen, an Illinois-based gaming company. In October 2012, these individuals and others established the Casino Queen Holding Company (CQHC) for the parent company, Casino Queen Inc. Soon after, in December 2012, they created a stock ownership plan for employees with the intention of acquiring the outstanding shares in CQHC. To fund this acquisition, the ESOP lent $170 million in December 2012 to buy shares from CQHC.

In a lawsuit filed by the plaintiffs, the Defendants breached their fiduciary duties under the Employee Retirement Income Security Act (ERISA) during the 2012 Stock Purchase and 2013 Asset Sale. The plaintiffs allege that the employee stock ownership plan (ESOP) paid a significantly higher amount than the fair market value for the stock – an ESOP’s asset.

The plaintiffs allege that the ESOP paid an inflated price for the equity based on overly optimistic financial forecasts for Casino Queen. Additionally, the expansion of the Illinois casino-gaming market hindered the company’s initial success. Casino Queen tried to sell itself several times from 2005 to 2011, but with no success.

In 2012 and 2013, the founders broke up the company and sold the Illinois riverboat casino to Gaming and Leisure Properties (GLPI) for $140 million. However, the casino had an assessed value of only $12.1 million at the time. Casino Queen then leased the venue again from GLPI for $210 million over 15 years.

According to the plaintiffs, the Board of Directors and CQH conducted this transaction without considering the employees’ voting preferences, despite the fact that the ESOP owned the majority of CHQ’s stock and had yet to allocate it. As a result, the Co-Trustees had the authority to vote on these unallocated shares under the Plan.

Court Decision

The defendants tried to argue that the employee ownership plan is no longer entitled to its ERISA entitlements because the time has expired. However, the US District Court for the Southern District of Illinois rejected this claim, pointing out that there are exemptions for the time limit, particularly when it comes to concealment and fraud.

The plaintiffs argue that fraud and/or concealment are at play in this case. The defendants also mentioned that the statute of repose should be taken as a jurisdictional matter, but other courts didn’t accept this claim.

In conclusion, the US District Court for the Southern District of Illinois rejected the motion to dismiss the suit brought by ex-staffers of Casino Queen Inc. The plaintiffs claim that the employee ownership plan paid significantly more than fair market value for the stock, which was the ESOP’s only asset. The defendants argued that the employee ownership plan exhausted its ERISA entitlements, but the court rejected this claim and pointed out that there are exclusions for the time limit in instances of fraud and concealment. This is not the first casino to have a lawsuit brought against them by their employees, MGM Resorts is under fire for its 401(k)-retirement saving plan.