By James McNair
The Cincinnati Enquirer

The long wait for a pension check by workers for the defunct Electro-Jet Tool & Manufacturing Co. of Evendale should soon be over.

Lawyers in the 10-year-old civil fraud case in U.S. District Court in Cincinnati said Friday they have reached a preliminary settlement calling for the payment of $14.3 million. The money will be shared by the 113 former rank-and-file workers at Electro-Jet after the plaintiffs' lawyers receive their one-third share.

"I'm a happy camper. This gives me a chance at having a nice retirement and to send my kids to college," said Bill McDannold of Erlanger, 59, a former tool-and-die maker at Electro-Jet.

McDannold's $70,000 profit-sharing account balance at Electro-Jet was rolled into company stock in 1988 when the retirement plan was converted to an employee stock ownership plan (ESOP). When the company failed in 1997, Electro-Jet shares became worthless.

By then, the finger-pointing melee had begun.

The workers accused Electro-Jet's former owner, John Endres, of selling a company that he knew had started to falter. Their lawsuit, filed in 1994, also named the profit-sharing plan's trustee, Star Bank, now known as U.S. Bank; the ESOP's lawyer, William Kirkham of Cincinnati; and the company that appraised Electro-Jet's value, Gradison & Co., now known as Gradison McDonald Investments. Endres sued his own lawyer, Thomas Simons Jr. of Cincinnati.

The preliminary settlement, approved by Judge Thomas Rose, covers the 44 employees who filed the lawsuit and will be sent to Electro-Jet's other 69 employees for their approval. If no further appeals or objections are filed, Rose will consider finalizing the settlement March 25.

"This is a big victory for these workers who have waited for more than a decade to receive their hard-earned retirement money," said Judith Boyers Gee, a Covington lawyer who filed the suit. A Chicago lawyer who joined her, Norman Berger, said the agreement "sends a message to corporate America that you can't play fast and loose with employee pension funds."

The financial tussle dates to 1987, when Endres decided to retire, sell Electro-Jet and move to Phoenix. To pay fewer capital-gain taxes, he agreed to sell to an ESOP to be created for his employees. Gradison valued the company at $16 million to $19 million. Assured that it was a good deal, employees did not oppose the ESOP's borrowing of $10.2 million from Star Bank to complete the purchase of Endres' 82 percent stake in the company.

Employees did not learn until years later just what they had walked into. In their lawsuit, they contended that Gradison's appraisal did not take into account Electro-Jet's declining orders and its problems in meeting the quality standards of its biggest customer, GE Aircraft Engines. They accused Star Bank of failing to conduct an independent review of the transaction. They accused Kirkham of failing to protect the interests of the ESOP's shareholders, that is, the employees.

The defendants denied wrongdoing and stood ready to defend themselves in what was expected to be a month-long trial that was to start Tuesday. But after five mediation sessions with a federal magistrate, the two sides agreed to settle Feb. 16.

The settlement does not state how much each defendant will pay toward the $14.3 million. It does, however, call for the two former Electro-Jet officers, Paul Weber and Laura Gerding, to forfeit their balances in the ESOP. Gerding died in January.

"The case was around for a long, long time and was difficult for everyone involved to get resolved," said David Greer, a Dayton lawyer who represents Simons. "The federal mediator in Dayton, Michael Merz, did a good job of untying the Gordian knot."

Thomas Schuck of Cincinnati, who represented U.S. Bank; Charles Faruki of Dayton, who represented Kirkham; and John Hust of Symmes Township said they were pleased to resolve the case out of court.

"I think it was a good settlement for all of the parties," Hust said. "I think everybody realized they had a lot to lose and is happy that it's over."

Endres, 87, is living in Phoenix.

The settlement could hit a snag in the form of an intervention attempt by Eric Holzapfel, a Cincinnati lawyer who represents the Electro-Jet corporate shell. Electro-Jet, he said, contributed the money needed by the ESOP to repay the $10.2 million loan from Star Bank. In the end, that put the company out of business.

E-mail jmcnair@enquirer.com