Hedge Fund Sues Citadel Over Executive Stock Payouts
Slams 'A Shocking Display Of Corporate Greed And Dishonesty'
October 8, 2010 at 3:08 PM (PT)
Hedge fund R2 INVESTMENTS filed what the NEW YORK TIMES called an "unusually venomous" lawsuit against CITADEL BROADCASTING, asking a judge to revoke multi-million dollar stock awards given to company executives, including $55 million to CEO FARID SULEMAN, a few months after it exited Chapter 11.
The suit describes board rewarding itself with stock grants worth $110 million -- over $1.35 million to each board member -- as "a shocking display of corporate greed and dishonesty" and "one of the most egregious frauds by a company emerging from bankruptcy under Chapter 11."
R2 contends the payouts were made contrary to the company’s reorganization plan, which called for awards of options and not common stock grants. "CITADEL now has the highest paid management in the terrestrial radio broadcasting industry," the suit asserts, adding that the radio group's reorganization strategy "would be a blueprint for all other management teams to emulate in order to loot company coffers."
Predictably, CITADEL released a statement that refuted those allegations. "The filing by R2 INVESTMENTS contains misleading and inaccurate charges," the company said. "The board of CITADEL BROADCASTING, which was appointed by the lenders, acted appropriately, within its authority under the equity Incentive plan that was filed with the court and in the best interests of the company. When the court reviews the record, we are confident this motion will be dismissed."