A former USPI Holding Co. executive is suing the company, alleging it shorted a select number of workers' stock payouts by undervaluing the company after its merger with Tenet, Law360 reports.
What you should know:
1. Former USPI Market President Jeff Andrews claims USPI allegedly offered its employees and minority owner Dallas-based Baylor Scott & White Health a stock incentive-based benefits plan to remain with USPI postmerger. The stocks would have an exercise price that would be determined by the fair market value of USPI. The complaint claims several employees allegedly accepted lower-than market standard wages because the return on the stocks would be high, based upon the KPMG Valuation Model.
2. The complaint alleged that as the plan's redemption date approached in July 2022, USPI and Tenet executives decided to reallocate the value of the options and transfer the wealth to Tenet shareholders. The complaint alleged that Tenet CEO Ron Rittenmeyer sought a second valuation, disagreed with that valuation and then settled on a valuation of $34.13 per share or what would equate to $300 million, different from previous KPMG Valuation Model. The valuation USPI's Compensation Committee used was allegedly supposed to apply to both the key employees and Baylor's minority ownership stake. The committee allegedly claimed that Baylor had different stocks that would be honored using the KPMG Valuation Model rate.
3. The lawsuit alleged that upon hearing that the altered valuation would not meet certain reporting requirements, Tenet CEO Ron Rittenmeyer responded by saying, "I don't really give a [s---]. I'm not paying out the plan anyway, because we don't have the money."
4. USPI allegedly held a meeting Feb. 24, 2020, where it announced it would cancel the plan, agreeing to pay the employees stock options proceeds based on the $34.13 per share valuation. The complaint accused USPI of deciding "it would be cheaper to get sued than to pay the Key Employees what they were owed," adding the company calculated that it would be cheaper to reach financial settlements with key employees than payout at the previous valuation.
5. Mr. Andrews seeks class action status for the lawsuit as well as unspecified monetary damages for the affected workers from USPI. Tenet and its leadership are not named in the lawsuit.
6. A USPI spokesperson made a statement on the lawsuit, saying, "We believe these claims are without merit and will not comment further on pending litigation."
Read the complaint here.
Note: This article was updated at 12:49 p.m.