Staff report
BELLOWS FALLS, Vt. — A 2016 federal lawsuit filed against Sonnax Industries Inc. in Bellows Falls was dismissed recently following the company’s multimillion-dollar sale in March.
The lawsuit alleged the company’s former owners sold their stock shares to employees at a price that exceeded the company’s value.
The suit was filed against Sonnax, former owners Tommy Harmon and Rick Fritz and First Bankers Trust — the trustee of the company’s employee stock ownership plan — by the U.S. Department of Labor.
The department said it requested dismissal after Sonnax was sold for at least $65 million to Sonnax Transmission Co., a new subsidiary of Marmon Holdings Inc. on March 30.
Harmon and Fritz also paid $2 million to the employee trust as part of the settlement, while First Bankers Trust paid $225,000 to the trust, according to court information.
Sonnax employees will share in more than $35 million in proceeds from the sale.
Harmon and Fritz maintained they did nothing wrong, according to a prepared statement released by the company.
“I am confident we would have prevailed had this case gone to trial,” said former Sonnax CEO Tommy Harmon in the statement.
“Rick and I took the high road and did what we felt was best for the employee-shareholders of the ESOP,” Harmon said. “Without the settlement, this opportunity for the employee-shareholders to cash out through the acquisition would have been missed.”
Harmon and Fritz were also required to pay $200,000 in civil penalties, while the First Bankers Trust was required to $25,000 in civil penalties.
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