A radiologic technologist is suing his former Colorado imaging practice employer, criticizing the execution of an employee stock ownership plan a few years ago.
Robert Harrison and his attorneys first filed suit against Envision Radiology on Jan. 29, seeking class-action status for the complaint. His dispute dates back to December 2017, when the firm became 100% owned by its employees in a $164 million deal.
Harrison—who worked there from 2016 up until this past August, according to LinkedIn—believes employees overpaid, among other concerns.
“Ultimately, the [employee stock ownership plan] transaction allowed the sellers to unload their company on the ESOP participants for significantly more than Envision was worth,” attorneys wrote in the complaint, filed with the U.S. District Court in Colorado. “And by creating the ESOP, the sellers created a buyer to purchase their interest in Envision for $164 million, without having to give up a scintilla of control over Envision, and without having to negotiate the price for their stock with a truly independent third-party buyer.”
According to the lawsuit, the plan did not have enough money to buy the practice from its private owners—Darrel Creps III, Paul Sherwood, and Jeff Jones. So instead, the ESOP borrowed more than $103 million from the sellers and nearly $51 million from the company. And following the transaction, any retirement contributions Envision made to the plan’s employee participants’ accounts were used, first, to pay interest owned on that debt.
“The imprudent and disloyal transaction terms caused ESOP participants to suffer monetary losses in their retirement accounts,” the complaint alleged.
Harrison further claimed that employees were not given a chance to negotiate the stock pricing. The final deal “inexplicably” had the plan paying two different share prices for the same Envision stock. About 64,000 shares went for $1,770 apiece while the remaining 36,000 went for $1,404. Participants allegedly later learned that the stock could be worth as little as $349 per share.
“There is no clear reason why the ESOP would pay $366 more per share for nearly two-thirds of the Envision stock,” the complaint stated. “According to the Articles of Incorporation for Envision, the company has only one class of shares,” it added, noting that the disparity would amount to at least $23.4 million extra going to the sellers.
Attorneys are seeking a jury trial and want an independent fiduciary appointed to manage the plan. They’re also asking the court to restore any losses suffered by the participants, among other remedies.
Lee Vogel, general counsel for the radiology practice, declined to comment when reached Tuesday, citing a company policy against speaking on pending litigation. Harrison’s attorneys did not immediately respond to a Radiology Business request for further comment the same day.
Founded in 2000, Envision Radiology operates 36 imaging centers, with locations in Colorado, Louisiana, Oklahoma and Texas, employing 1,000 team members. The firm is headquartered in Colorado Springs and has no relation to Nashville, Tennessee-based Envision Healthcare.
Bloomberg Law first reported news of the complaint.