Detroit pension system slams WWE with lawsuit amid ex-CEO's return
Detroit's Police and Fire Retirement System has filed a lawsuit against World Wrestling Entertainment, in which it has a vested interest, to prevent a sale after its CEO was removed by the WWE board.
The board filed the class-action suit, announced Tuesday, in the Court of the Chancery in the state of Delaware to prevent the sale of the WWE enterprise after Vince McMahon "had re-inserted himself" as chairman of the WWE Board of Directors. Following his return, McMahon removed three board members and indicated he intended to sell WWE to another entertainment company.
The retirement system, or PFRS, is a shareholder in WWE with some 350 shares, initially worth $100,000.
"The PFRS believes that there is an important public policy issues at stake given the allegations leveled against McMahon and his efforts to undermine the orderly conduct in running the enterprise for the benefit of its shareholders and employees," according to a Police and Fire Retirement System statement.
"Altering the company’s governance structure in the absence of bargained for exchange between WWE and McMahon, the system asserted, “usurps the power of the (WWE) Board over critical corporate management functions and vests it solely in McMahon in his capacity as a stockholder.”
McMahon rejoined the board of WWE earlier this month after he retired as co-CEO from the sports entertainment company during an investigation into alleged misconduct last year. The lawsuit said McMahon made than $12 million in “secret settlements to his accusers (of sexual harassment), dating back to 2006” as well as letters between McMahon and the board from December that were included in Securities and Exchange Commission filings.
According to the complaint filed on behalf of the PFRS, 77-year-old McMahon’s recently moved to re-insert himself as chairman and seek to sell the enterprise. Pensioners say the move runs afoul of the Delaware General Corporation Law and WWE’s charter.
The PFRS Board is comprised of a 16-member board of trustees. The board includes six elected active-duty police and fire personnel (3 each); two elected retired personnel (one each, police and fire); one appointed City Council designee; and seven ex-officio appointees of the city of Detroit, appointed by the mayor.
The board oversees a $2.8 billion fund serving some 8,000 retired police and fire, and approximately 3,000 active-duty first responders.
The lawsuit contends that neither Delaware law nor WWE’s charter permits the kind of transfer of power the system says occurred, and the system wants a declaration the consent is void. The PFRS is being represented by attorneys from Labaton Sucharow, Friedlander & Gorris as well as Kaskela Law.
McMahon owns 39% of WWE’s equity but 81% of its voting power due to Class B stock, bringing his total ownership to 92%.
Shares surged more than 22% with the announcement of McMahon's return.
The PFRS Board is comprised of a 16-member board of trustees, which oversees the $2.8 billion fund serving some 8,000 retired police and fire, and approximately 3,000 active-duty first responders.
The pension board did not say when or why they invested in WWE.
WWE did not immediately respond to a request for comment Tuesday.
McMahon appeared to address the possibility of selling WWE to another entertainment company in a letter to the board, dated Dec. 20.
“I believe WWE has a unique opportunity during this critical juncture to maximize value for its shareholders and all other stakeholders,” McMahon said. “Specifically, given the rapidly evolving media landscape in which more and more companies are seeking to own the intellectual property offered on their streaming platforms — I firmly believe that the best thing to do for all of WWE’s shareholders and other stakeholders is to undertake a comprehensive review of strategic alternatives.”