A federal lawsuit that accused AIT Laboratories founder Michael Evans of breaching his fiduciary duties by selling the Indianapolis-based company to employees at an inflated price has been settled, the company announced Friday afternoon.
Terms of the settlement were not disclosed, but the company said the agreement resolves the case and will let all parties go about their business.
AIT Holding Co., the parent of the American Institute of Toxicology Inc. — also known as AIT Labs — was sold in 2009 to its employees for $90 million, just three months after it was appraised for less than one-fifth as much, according to the lawsuit filed in August 2014 by the U.S. Department of Labor.
That sudden swing in value is why the federal government sued Evans and the bank he hired to help sell AIT. The suit, filed in federal court in Indianapolis, asked the court to force Evans and Louisville-based PBI Bank to give back any gains they made from the sale.
Evans owned nearly 88 percent of AIT when it was sold to an employee stock ownership plan, or ESOP, according to the lawsuit. Evans did not cash out that entire stake immediately when the sale was made, but instead was to be paid over time as AIT employees made contributions to the ESOP, which functions as their company retirement plan.
The lawsuit claims that Evans had been paid $16.3 million when the suit was filed. Evans had committed $48 million of his expected proceeds from the AIT sale to Marian University, to help it finance the College of Osteopathic Medicine it launched in 2013. He was forced to slow his payments to Marian due to financial troubles at AIT afer the sale.
Without providing details, AIT said the 25-year-old company and the ESOP are "beneficiaries of the settlement agreement" Evans worked out with the government. Specific information about the settlement could be disclosed after it is approved in federal court later this year.
“This global settlement of actions arising from the creation of the AIT Employee Stock Ownership Plan in 2009 removes an ambiguity that has surrounded AIT since 2013," AIT President Matthew Neff said in a written statement. "All parties have now agreed to settle their respective actions, which significantly improves AIT’s capital structure, and benefits the employees of AIT. This resolution will permit AIT to focus on its core business, assisting health care practitioners in the management of narcotics prescribing, and the support of forensic experts around the country.”
AIT also said Friday that it has settled a related case against Philadelphia-based ACE American Insurance Co., which it sued for not paying up on a so-called “excess liability” insurance policy that AIT thought would help it cover legal costs related to the lawsuit.
AIT and its former executives racked up more than $5 million in legal expenses related to the case.