Employees sue Lyme Computer Systems over retaliation for ESOP complaints
They charge company put them on leave after they contacted U.S. Labor Department
Five longtime highly paid employees are suing Lyme Computer Systems of Lebanon and its top executives for retaliation after their complaints launched a federal investigation into charges that company executives and board members paid themselves excessive compensation and pocketed Paycheck Protection Program money, devaluing the company and the workers; Employee Stock Ownership Plan shares.
The lawsuit, filed on Jan. 15, alleges that the company put the defendants on administrative leave on Jan. 5, the day after the federal Department of Labor subpoenaed documents related to their complaints.
They also allege that the executives accessed their personal emails to attend a Zoom meeting with their lawyer and they charge the company has not followed federal law when it comes to transparency about the ESOP and by trying to prevent one employee from rolling over his 401(k).
“This is a lawsuit about retaliation against ESOP participants for expressing their concerns,” said attorney Carolyn K. Cole of Cole Associates Civil Law PLLC, in Lebanon. “We are not taking the position that they paid themselves too much or they did anything wrong except for the actions they took against these employees.”
Lyme Computer is an information technology services provider and a large federal contractor. Its CEO, Josh Longacre – one of the defendants in the case – said Tuesday that the company was in the midst of hiring an attorney to represent them, and declined comment. The other defendants are chief financial officer Henry Flickinger Jr, Andrew Sullivan, chief revenue officer, and Michael Nagy, chief technical officer. The first three make up the entire board of the company and also control the ESOP.
Although ESOPs technically own some or all of the company on behalf of employees, who can cash in their shares when leaving the company, the employees usually don’t control them.
This ESOP, which was formed in 2008, was valued at nearly $4 million in 2017 and at over $7 million in 2020, with employee shares growing than fivefold from 2015 to 2020, according to according to the complaint.
Alarm bells rang when the share price went up by less than half of a percent in 2021, despite – claims the complaint – strong sales.
The plaintiffs had already been raising questions about the company and the ESOP, particularly when the board members replaced the retired company founder and former president, Curt Vinson, in 2019.
One plaintiff – Stephen Micare, 63, of Orford, director of technical services, who worked there for 26 years, and earned a salary of $95,000 – had been raising concerns since 2017.
The other plaintiffs are Colin Nicol, 67, a senior account executive for 33 years, who earned an average of $525,000 on commission and worked remotely from Florida; William McCarthy, 64, who worked in sales for 17 years and lives in Cornish; Linda Neubelt, 65, a commissioned federal account manager for 20 years, who earned an average of $166,000 in 2022 and lives in Maine; and Teresa Orechovesky, 50, a 14-year veteran, who earned $260,000 in commission last year and lives in North Carolina and Georgia.
The ESOP participant group – as they call themselves – started to investigate the company and allegedly learned that after Vinson left, executives started paying themselves based on gross rather than net revenue and they awarded themselves some $1.1 million of PPP money as bonuses, which according to the complaint, is illegal if board members make more than $100,000. (The complaint did not specify the executive compensation but said it is more than $100,000.)
The group brought these concerns to the U.S. department of Labor Department in Boston, which launched an investigation and subpoenaed documents on Jan. 4.
In a letter sent the next day, the plaintiffs were placed on administrative leave. It stated: “Lyme Computer Systems has experienced an information security breach. We have learned that confidential company (not customer) information has been accessed and disclosed outside of our company. We are in the process of investigating the breach and determining next steps.”
The group was locked out of their computer network and told to stop working on their accounts, said the complaint.
The next day, according to the complaint, CTO Nagy “unlawfully accessed” one of their email accounts and was able to listen in on a Zoom meeting with the plaintiffs’ attorney. The suit charges him with violation of the Computer Fraud and Abuse Act.
The other charges are related to the Employee Retirement Income Security Act (ERISA), which regulates retirement plans like ESOPs and 401(k)s.
The plaintiffs are asking that they be reinstated with their former compensation, or and if the case drags on, for damages.