Katun employees sue over payments
The company demanded payments from employee shareholders to help cover fines levied by the government.
Published: Star Tribune: Newspaper of the Twin Cities
Author: David Phelps; Staff Writer
Date: August 24, 2006
Former and current employees of Katun Corp. took action this week to recover a potential pot of $15 million that they say was improperly demanded after Katun paid the U.S. government $11 million in criminal fines for its role in a mail and wire fraud scheme.
The workers say Katun coerced them, as employee shareholders in the privately held company, to pay the company for pro-rated portions of the $11 million fine.
The employees are attempting to capitalize on a federal court ruling this summer that said former Katun CEO Terence Michael Clarke did not have to contribute $1.7 million toward the fine as part of an indemnification agreement.
The employees say the company should not have demanded such payments from them.
"The idea that the company is going after low-level employees is atrocious," said Greg McEwen, one of the attorneys representing the employees.
The company has said it intends to appeal the Clarke ruling. “We expect [the result of] that appeal to dispose of this lawsuit,” general counsel Luke Komarek said.
Xerox Corp., once a 30 percent owner of Katun, is a codefendant in the lawsuit.
Filed in Hennepin County District Court, the lawsuit names 10 current and former Katun employees as plaintiffs and seeks to represent as many as 250 in a class action.
The suit says plaintiffs paid the company amounts ranging from $92,000 to $1,350. The lawsuit said the company threatened to turn the matter over to collection services if employees did not pay.
McEwen said reimbursement to the employees, plus interest and tax benefits they didn’t receive when Katun was sold to PNA Holdings in 2002, could total $15 million.
David Phelps - 612-673-7269
Copyright 2006 Star Tribune: Newspaper of the Twin Cities