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Rod Smith
 

Lawsuit Says Caesars Execs Shortchanged

9 November 2005

Wally Barr Former president of Caesars files multimillion class action lawsuit against Harrah's Entertainment.

Former Caesars Entertainment President Wally Barr has filed a multimillion-dollar class action lawsuit against Harrah's Entertainment.

Barr claims Harrah's, which bought Caesars last summer, shortchanged executives on the stock option component of the $9.4 billion buyout deal.

Barr claims Harrah's breached its contract with hundreds of executives and seeks unspecified compensatory damages, which sources said could amount to $105 million.

The lawsuit, which was filed last month in U.S. District Court of New Jersey and also seeks reimbursement for legal costs, will be heard by U.S. District Judge Joseph Irenas in Camden, N.J.

Barr; his attorney, Stephen Orlofsky; and Harrah's did not return phone calls about the case.

The lawsuit claims that option holders participating in a 1998 incentive plan should receive the highest price for which Caesars shares traded after the merger announcement, or $23.76, not the $21.85 they recently were paid.

Under the terms of the 1998 plan, 55 million shares of Caesars stock were offered to full-time executives and employees of the company.

Had all those shares been exercised, Harrah's would owe Caesars executives more than an additional $105 million.

The lawsuit claims the terms of the merger agreement were unambiguous, and that participants in the plan are owed compensation at the highest price at which the stock traded before the June 14 merger.

According to the lawsuit, shareholders were paid a lower price for their shares according to provisions of the merger agreement, than option holders should have been paid according the terms of the 1998 plan.

However, a former Caesars executive, who asked not to be named because of the pending litigation, said the appropriate price to be paid option holders under the merger agreement was subject to different interpretations.

"We always knew the issue would have to be litigated. The issue is whether executives should be paid for the price increases after the options had been turned in," he said.

"Actually, (Stephen) Bollenbach is the guy who'll really make out if Wally wins his case," the source said.

Bollenbach is president of Hilton Hotels Corp. and was chairman of Caesars Entertainment before it was bought out by Harrah's

Bollenbach subsequently was named to the Harrah's board of directors. He has also been listed as one of Forbes' magazine's America's Most Powerful People.

"The problem for Bollenbach is that he's on the board. I don't know if he and Wally had a little chat about this or not," the source said.

The lawsuit claims Harrah's refused to comply with the terms of the 1998 plan even after Barr contacted Harrah's officials in June to alert them to the insufficient price being attached to the stock in closing the deal.

Barr controlled options to buy 2.15 million shares of Caesars common stock at the time of the merger, the lawsuit claims.

At a share price of $23.76, Barr would have been paid $4.1 million more than the $47 million he received.

Lawsuit Says Caesars Execs Shortchanged is republished from Online.CasinoCity.com.