WHITE PLAINS, N.Y. (CN) - The CEO of Trans-Lux Corp. sold off the company's "only real assets" - its nationwide chain of movie theaters - in a $26 million "sweetheart deal" that cheated shareholders and enriched the family of CEO Richard Brandt, shareholders claim in Federal Court. They say Brandt sold Trans-Lux's entertainment division too cheaply to Storyteller Theaters, which agreed to hire Brandt's sons "under lucrative employment agreements, and to provide them with equity stakes in Storyteller."
The complaint continues: "Meanwhile, Richard Brandt himself was retained by Storyteller on a lucrative consultant contract, which amounted to a finder's fee on the transaction. The net result of this quid pro quo transaction was therefore a sweetheart deal for the defendants, at the expense of the plaintiff, the company and its other shareholders"
Shareholders sued all three Brandts - Richard, 81, and his sons, Matthew and Thomas Brandt. They claim Richard Brandt hollowed out the company in a deal that was "fraudulently constructed by the defendants exclusively for their own personal benefit, at the expense of the interests of the plaintiff, the company and its other shareholders. ...
"In furtherance of this transaction and fraud, the defendants also knowingly made untrue and false statements and misstatements of material facts, and/or omissions of material facts, which were misleading, in various public filings and press releases, upon which plaintiff relied to its detriment."
The "sweetheart deal" caused Trans-Lux's market capitalization to decline by "millions of dollars ... in the wake of the transaction," the complaint states, while "the Brandt defendants retained the profitable Entertainment Division and a secure future, while TLX was left behind to fend for itself."
Plaintiffs, the Gabelli Funds, suing derivatively on behalf of Trans-Lux, are represented by Joseph Sack of Purchase, N.Y.
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