YOUNGSTOWN, Ohio – Four ex-officers and directors of defunct Lordstown Motors Corp. will be allowed to obtain advances of a company insurance policy to pay their legal bills, a bankruptcy judge ruled Tuesday.
Judge Mary F. Walrath approved a motion filed last month by Steve Burns, former Lordstown CEO and chairman; Darren Post, former engineering director; Julio Rodriguez, former chief financial officer; and Caimin Flannery, former senior vice president of business development, requesting a relief of stay in the court allowing them to obtain insurance payouts.
The former executives are defendants in an ongoing class-action lawsuit filed four years ago by shareholders in U.S. District Court for the Northern District of Ohio. An amended complaint was filed with the court in February. Also named in the complaint are Rich Schmidt, former president, and Shane Brown, former chief production officer.
The complaint alleges former executives committed fraud by knowingly making false statements about the financial status of Lordstown Motors and its inaugural electric vehicle, the Endurance pickup, court documents show. Specifically, the complaint says the former officers made misleading public statements as to the number of “pre-orders” for the Endurance.
The class action suit, along with similar complaints, were filed shortly after a short seller published in March 2021 a lengthy report alleging misconduct by former Lordstown executives. The report sent Lordstown stocks plummeting, costing investors millions, according to court documents.
Burns and Rodriguez resigned in June 2021 after an internal inquiry found that public misstatements were made regarding the company and product. Despite new management and the sale of the Lordstown plant to tech giant Foxconn, the company’s stock continued to drop.
In the meantime, Burns unloaded more than $66 million in stock options before Lordstown Motors declared bankruptcy in June 2023.
The company emerged from bankruptcy protection last year as Nu Ride Inc. Burns purchased the remaining assets of the company for $10.2 million and has started a new venture, LandX.
“This is a classic ‘fake it ’till you make it’ fraud,” the amended complaint declared. The 200-page document alleges that the defendants violated securities law and are therefore culpable to fraud. The complaint has requested a jury trial.
“Burns, Rodriguez, Flannery, Schmidt, Post, and Brown managed LTM [Lordstown Motors] and are responsible for the wrongful conduct alleged herein,” the amended complaint states.
The amount of the defendants’ legal bills was not disclosed in the latest motion or ruling.
Still, the former executives “have incurred, and continue to incur, fees and expenses in connection with the District Court action,” the bankruptcy court filing reads. “At all relevant times, the debtors maintained insurance policies covering various business risks” related to potential legal exposure of directors and officers, court records say. A portion of the policy defines costs and expenses covered as “reasonable and necessary legal fees incurred” because of any claim or investigation of the insured, court papers say.
Pictured at top: Steve Burns, former Lordstown CEO and chairman.