A former Kruse-Western Inc. employee has brought a proposed class-action lawsuit to, in part, void an employee stock ownership plan that was set up to buy all of the company stock for an allegedly inflated value, resulting in tens of millions of dollars in losses to the plan, according to the complaint.
The lawsuit was filed Tuesday against the Goshen, Calif.-based animal feed company in U.S. District Court in Sacramento, Calif. It claims that in November 2015 the stock was sold to the Western Milling ESOP for $244.1 million and that in two months, the stock had lost about 90% of its value. A year later, the company was worth $24.8 million, with the stock valued at $27.4 million as of Dec. 31, 2017.
The complaint alleges that the purchase price did not reflect issues the sellers of the company stock purportedly knew the company was having with its horse feed being contaminated with monensin, an antibiotic added to cattle and poultry feed that is "highly poisonous" to horses, the complaint said. The company had recalled the horse feed in September 2015 due to possible monensin contamination.
The purchase price also failed to reflect a company liability for wage and hour violations at its California facilities, the complaint alleges. Mark LaBounty, the company's chief operating officer and general counsel, could not be reached for comment.