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.