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Ergen may face Class Action suits

January 28, 2013

By Chris Forrester

for saleTeams of lawyers are always on the look-out for potential easy money from breaches of this or that rule in a company’s obligations. One enterprising Madison Avenue, New York, law firm, Harwood Feffer LLP says it is investigating whether EchoStar Corp “has breached its fiduciary duties” to shareholders. The action is supported by the USA’s Shareholder Foundation.

Last year EchoStar’s board of directors approved the grant of 1.5 million stock options (worth a useful $21.6 million) to Charles Ergen “contrary to pre-existing limitations on the grant of such stock options to no more than 800,000 per year. The ultra vires grant of such options together with misrepresentations about such grant of options may constitute breaches of the fiduciary obligations of loyalty, good faith and candor.”

Of course, there are many explanations for such a move, but the lawyers are asking shareholders to join them in a claim for those alleged breaches, plus (for good measure) alleged “gross mismanagement, waste, and/or abuse of control”. Their grumble is that given that Ergen holds 43.6 per cent of EchoStar’s common stock then he has more incentive than most to maximise shareholder value!

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