Storied Golf Club Accused of 50-Year Fraud

     (CN) — The Winged Foot Golf Club, a five-time host of the U.S. Open, has misrepresented itself as a non-profit for more than half a century to encourage shareholders to sell their valuable stock for pennies on the dollar, a federal lawsuit claims.
     With its West Course ranked 9th in Golf Digest’s listing of “America’s 100 Greatest Golf Courses,” the Mamaroneck, N.Y.-based golf club has attracted the sport’s top contests since shortly after it opened in 1923.
     Six years after it launched, Winged Foot presented its first U.S. Open, and the U.S. Golf Association announced that the tournament will mark its 120th anniversary on its Westchester green in 2020.
     Before it attained those distinctions, Winged Foot began with 600 investors pooling $1,000 each into a $600,000 consortium, a hefty sum for the Roaring ’20s.
     With that amount, noted golf architect A.W. Tillinghast designed two 18-hole courses on the club’s 280 acres. Winged Foot’s stockholders were its original members, but the club started allowing others to pay annual dues during the Great Depression to make ends meet.
     Kevin Clune, whose late mother Barbara Clune inherited one share from her father, claims that Winged Foot’s directors, lawyers, and corporate entities have been goading stockholders like him to sell their shares at fire-sale prices for decades.
     The defendants include Winged Foot’s director and president Desmond Barry, Jr., its longtime member and ex-governor George Gillespie, III, and the club itself.
     “Starting no later than the early 1960s, over the past decades and continuing up to the present day, plaintiff, and other class members, were solicited to sell their shares based upon materially false and misleading representations, for amounts ranging from approximately $1,000 to the recent $3,000 purchase by the club of plaintiff’s share, when defendants knew this share could be worth between $500,000 to $1,000,000 or more,” his 36-page complaint states.
     Dancing around their disclosure obligations, Winged Foot directors claimed the holding company was not a for-profit entity and its shares were not valuable, according to the lawsuit.
     In 1960, top law firm Kelley Drye Newhall & Maginnes advised Winged Foot Holding Corporation that the club made its Depression-era lease amendments without legal authority because of the “extreme informality” of the corporate proceedings, according to the lawsuit.
     The firm advised the club to acquire the shares legally by getting an independent appraisal of their market value, but shareholders claim that the directors knowingly ignored that counsel.
     In 1975, then-president Gillespie wrote in a letter: “Someone, who [can afford to hire a lawyer] may come along one day [and litigate a rejected transfer], but so far we have been lucky,” according to the complaint.
     “If such litigation were brought, my view is that Winged Foot would not only lose the case, but would also lose many future opportunities to pick up shares,” he allegedly wrote.
     Clunes demands class-action punitive damages for three counts of violating the Exchange Act, common law fraud, and breach of fiduciary duty.
     He is represented by John Halebian, a partner with the Manhattan-based firm Lovell Stewart Halebian Jacobson, who filed the complaint in White Plains on Monday.
     The Winged Foot Golf Club did not immediately respond to an emailed request for comment.

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