Ex-Comdisco execs sued over loans
suntimes.com
February 8, 2005
BY HOWARD WOLINSKY Business Reporter
During the Internet boom, top officials with Comdisco took out loans to buy the Rosemont tech company's shares at an average of $1 million each, to demonstrate their faith in their company.
They lived to choke on their faith. Comdisco -- rocked by losing about $500 million in investments in Internet companies -- went bankrupt in 2001, leaving 106 executives holding the bag for the loans.
In lawsuits filed Friday in Cook County Circuit Court, the litigation trustee for Comdisco, which has been liquidating since emerging from bankruptcy in August 2002, is pursuing 76 former executives who took out loans totaling more than $74 million to purchase stock.
Among those the trustee is going after are former CEO Nicholas K. Pontikes, son of Comdisco's founder, who borrowed $10.4 million, and Jack Slevin, former Comdisco chairman and CEO, who borrowed $3.3 million.
The company declined comment Monday.
When the voluntary "shared investment plan" was announced in 1998, Pontikes, then chief operating officer, said, the goal was "to further align management's personal interests more closely with shareholders. This is a motivator to get our senior people to work smarter and harder."
Top executives, division heads and top sales managers earning $100,000 or more made pledges while Comdisco took out a loan for the group from First National Bank of Chicago, which became Bank One.
The executives were obliged to borrow a minimum of $276,000 and stock had to be held at least a year. The top dogs bought 3 million shares, or 4 percent of the company's stock.
Comdisco guaranteed repayment, and the bankruptcy filing in 2001 triggered a claim against Comdisco by Bank One. Bank One and Comdisco settled last December.
As it went through the bankruptcy, the company offered a break to employees. Current employees could settle the loans for 20 cents on the dollar, while former employees had to cover 30 cents on the dollar. About 25 Comdisco employees settled loans in 2002.
The unpaid loans put the company in the position of being a collection agency going after its former high-level employees, many of whom are staring personal bankruptcy in the face.
During the first quarter, the reorganized Comdisco Holding Co., which is traded over the counter, reported earnings of approximately $9 million, or $2.24 per share.
During the quarter, revenue decreased 63 percent to $17 million compared with the same period a year earlier.
Before going bankrupt, Comdisco lost $67 million in fiscal 2000, compared with earnings of $70 million in fiscal 1999. The company had $3.9 billion in sales in 2000. |
