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There's a new twist in the shareholder legal actions against International Game Technology over the decline in IGT's stock price since 2007.
The casino supplier is now being sued by two groups of employee retirement plan participants who say the plan made a poor investment decision when it invested in the company's own stock.
Two lawsuits seeking class-action status to represent past and current IGT employees were filed against IGT on Friday in U.S. District Court for Nevada, charging the employees were harmed when the company's retirement plan invested in IGT stock at a time when IGT stock allegedly was inflated by false statements about the company's prospects.
Reno attorney Geoffrey White filed one of the suits on behalf of lead plaintiffs Randolph and Kimberly Jordan against the company, its profit-sharing plan committee and various IGT officials and directors.
The other suit was filed by Reno attorney Matthew Sharp on behalf of Christopher Carr, Roxanne Clayton and Brian Bennett.
Both suits allege violations of the federal Employee Retirement Income Security Act.
Sharp's suit says IGT and its officials failed to "prudently and loyally manage the plan’s investment in company stock by, among other things: (i) continuing to offer company stock as a retirement saving option; (ii) continuing to acquire and hold shares of company stock in the plan when it was imprudent to do so; (iii) failing to provide complete and accurate information to participants regarding the company’s financial condition and the prudence of investing in company stock; and (iv) maintaining the plan’s pre-existing investment in company stock when it was no longer a prudent investment for the plan."
"As a result of defendants' fiduciary breaches, the plan has suffered substantial losses, resulting in the depletion of millions of dollars of the retirement savings and anticipated retirement income of the plan’s participants," that suit says.
Sharp's suit says the IGT Profit Sharing Plan, consisting of a profit-sharing component and a matching 401(k) component, offered IGT stock as one of the retirement saving options in the "participation contribution component."
The Jordan suit says that as of Dec. 31, 2008, about $34.2 million, or 12.6 percent of the plan's investments, were invested in IGT common stock; down from about 24.4 percent or $104.1 million one year earlier. IGT stock was among 27 investment options participants could choose from, the suit says.
Separately, IGT said it held a special meeting of shareholders on Sept. 30 and shareholders approved a proposal for a stock-option exchange program that would give eligible employees a one-time opportunity to exchange specified outstanding underwater stock options for fewer new stock options that will be granted with lower exercise prices.
Friday's lawsuits are on top of at least five others filed in the same court since this summer by disgruntled stockholders over the decline in the company's stock price. IGT has not yet filed court papers responding to the first suit, filed July 30, and its policy is not to comment on litigation.
The July 30 suit seeks class-action status on behalf of purchasers of IGT stock between Nov. 1, 2007, and Oct. 30, 2008. The lead plaintiff is the International Brotherhood of Electrical Workers Local 697 Pension Fund.
The defendants are accused of making false and misleading statements about the company's financial prospects. The Electrical Workers claim to have been harmed as IGT stock moved from about $45 in November 2007 to about $49 in March 2008, tumbling to less than $8 in November 2008 as sales prospects dimmed due to the recession hitting the gaming industry.
The Reno-based slot machine maker's stock now trades at about $20.
The first lawsuit claims investors were presented with a positive financial picture of IGT on Nov. 1, 2007, when the company issued a press release announcing strong results for its fourth fiscal quarter and year ended Sept. 30 including record annual revenue of $2.6 billion, up 4 percent; and gross profit up 8 percent from the prior year.
The complaint alleges the defendants misrepresented or failed to disclose IGT had diverted substantial funds to the development of the company’s server-based (SB) and AVP (Advanced Video Platform) gaming platforms, which the plaintiff says "materially compromised the company’s growth prospects and undermined defendants’ optimistic statements."
The suit claims the slot machine and gaming technology company was unable to develop and market its SB and AVP gaming platforms within the time frame the defendants had represented to investors due to increasingly challenging market conditions and mounting costs.
IGT's positive representations concerning the company’s shift to non-machine based operations were undermined by the slowdown in the gaming industry, "the impact of which defendants minimized," the law firm charges.
The IBEW lawsuit also complains that during the time frame at issue, company insiders sold shares of their personal IGT stock for nearly $29 million -- at the same time as the investing public was buying the stock on the company's growth story.
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