DeVry Handed Out Stock Like Cookies
CHICAGO (CN) - Profit-seeking DeVry chain college gave its CEO thousands of stock options in violation of the company's incentive plan, a shareholder claims in a federal derivative complaint.
Jan Donnawell sued CEO Daniel Hamburger and 11 other directors on behalf of DeVry Inc.
"In gross breach of their fiduciary duties as directors of the company, the members of the Board's compensation committee knowingly granted, and the independent members of the Board knowingly approved, awards of stock options to DeVry's President and Chief Executive Officer Daniel Hamburger in deliberate violation of the company's incentive plan of 2005 and amended and restated incentive plan of 2005," the complaint begins.
The 2005 plan prohibits the award of more than 150,000 shares of DeVry stock to any person in any one fiscal year.
"In blatant violation of this limit, in 2008, 2010, 2011 and 2012, the compensation committee granted, and the independent directors approved, awards of stock options to defendant Hamburger for more than 150,000 shares of DeVry common stock. Specifically, on August 28, 2008, August 27, 2010, August 24, 2011 and August 29, 2012, the compensation committee granted and the independent directors approved awards of 195,200, 184,100, 170,200, and 255,425 stock options, respectively, to defendant Hamburger," the lawsuit states.
"On or about December 17, 2012, defendant DeVry filed with the SEC numerous amended Form 4s in which it was disclosed that the Board rescinded all of Hamburger's excess awards for 2008, 2010, and 2011.
"With regard to Hamburger's excess award for 2012, however, the Board rescinded only 17,515 stock options on the basis that 87,910 of the 255,425 options awarded to Hamburger purportedly were awarded not under the 2005 Plan, but instead under DeVry's stock incentive plan of 2003, and therefore did not count against the 2005 Plan's 150,000 share limit."
Donnawell claims that the 2003 plan does not permit a grant of more than 500 shares to any member of the Board of Directors, which at the time consisted of only one - Hamburger himself.
"In reality, at the time the 87,910 options were purportedly granted to Hamburger under the 2003 Plan there was no plan committee at all. Thus, no one had authority to grant any options under the 2003 plan," Donnawell claims.
A complaint filed in state court in 2012 makes similar allegations.
DeVry has been sued in several other shareholder derivative complaints, accused of propping up its share price by concealing illegal student recruitment practices and deceptive financial aid packages.
The chain college is one of many that came under public scrutiny after a congressional investigation found that virtually every profit-seeking chain college investigated by Congress used deceptive and/or illegal tactics to recruit students, in pursuit of their government-backed financial aid.
Donnawell seeks damages for breach of fiduciary duty, and unjust enrichment.
She is represented by Norman Rifkind with Lasky & Rifkind.