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Sale of family-owned business leads to lawsuit

January 28, 2013

A family dispute over the sale of a business has led a former shareholder to sue her brother and mother, claiming they earned multimillion-dollar profits at her expense by selling the company without her knowledge.

Deborah A. Ecksten of Fortville filed suit in Hamilton Superior Court on Monday following the December 2010 sale of Indianapolis-based Createc Corp. to DeKalb, Ill.-based Tegrant Corp.

Ecksten says in her complaint that brother Alan R. Lewis and mother Linda A. Lewis committed fraud and violated state securities laws by declining to inform her about the $61 million sale until after her stock-option rights expired.

As a result, Ecksten’s share from the sale of $1.5 million was far less than the $15 million made by her mother and $12 million made by her brother, respectively.

“Alan hid from Debbie what he and Linda would receive from the sale of Createc so Debbie would not discover she was deprived of the opportunity to be treated equally with Alan in the sale,” Ecksten’s suit said.

Richard Lewis, the father of Alan and Debbie and former husband of Linda, founded Createc in 1975. The company produced polystyrene and polypropylene foams used to make protective packaging, containers and automotive parts.

As part of a divorce settlement in 2000, the family agreed to a stock-option agreement in which Richard and Linda each received 162.5 shares and Alan and Ecksten 15 shares apiece.

The aim of the agreement was to maintain family control and to give Alan and Ecksten an opportunity to assume greater ownership and control of the company, the suit said.

An amended version they signed in 2007 created a 20-for-1 stock split in which Alan agreed to purchase all of his father’s 2,755 shares for $6 million over a five-year period.

But Ecksten alleges that her brother didn’t have the money to buy the shares and drew on a company line of credit to pay his father.

In 2010, as president and CEO of the company, Alan entered into discussions to sell Createc to its largest competitor, Tegrant, according to the complaint, without informing Ecksten. She claims in her suit that she didn’t learn of the sale until the day before the scheduled closing—Dec. 30, 2010.

Under the stock agreement, Ecksten said she had the right to purchase her mother’s stock for $2,000 a share, similar to how Alan had purchased their father’s stock.

Had she known of the pending sale to Tegrant, Ecksten said she would have purchased her mother’s shares, which ultimately fetched $8,628 each under the terms of the sale.

“Defendants hid from Debbie the deal that had been struck to sell Createc to Tegrant for the sum of $61 million until Dec. 29, 2010, to make sure that Debbie did not exercise her right to purchase all of Linda’s shares for the sum of $2,000 per share,” the suit said.

Ecksten is seeking a judgment against each defendant in an amount “sufficient to fully compensate” her.

Sam Laurin, attorney for Alan and Linda, said his clients believe the suit is without merit. A mediation session is scheduled for Feb. 13.

“We’re disappointed that there was a need to go public with this issue prior to the time that we hope we can resolve it,” Laurin said Monday afternoon.

Also named in the suit are former Createc executives Michael Votaw and Michael Bacon, who owned a minority share in the company.

Createc had three manufacturing plants in the United States and one in Mexico when it was acquired by Tegrant. Tegrant was acquired by Sunoco for $550 million in late 2011.

 

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