By Dan Christensen, FloridaBulldog.org
The billionaire owner of the Florida Panthers hockey team, Vincent Viola, is at the center of a Delaware lawsuit that alleges he’s used his control of a large publicly traded financial services company to improperly divert hundreds of millions of dollars to himself, his family and his cronies.
The suit asks a judge to force the company, Virtu Financial Inc., to produce its books and records for inspection by the plaintiff – the pension fund of Toledo, Ohio’s Iron Workers Local No. 55 – which suspects it’s been cheated.
“Virtu’s controlling shareholder, Vincent Viola, is abusing his control over Virtu’s ‘Up-C’ corporate structure to expropriate value from Virtu at public stockholders’ expense,” says the complaint. “Virtu’s Board of Directors is aware of the issue, but instead of fixing it, the Board has actively facilitated Viola’s expropriation. Virtu now refuses to produce documents necessary to investigate the apparent wrongdoing.”
The Delaware attorneys for both sides – Jeffrey Gorris for the pension fund and Matthew Stachel for Virtu – declined to comment. In paperwork filed with the court, however, Virtu denied any wrongdoing.
According to the complaint, Viola, through his affiliates, “controls 82 percent of Virtu’s voting power. Viola has stacked Virtu’s Board with family, friends and longtime business associates.”
VIOLA TAKES VIRTU PUBLIC
Viola, 67, a West Point graduate who bought the National Hockey League’s Panthers in 2013 for a reported $250 million, founded Virtu Financial LLC in New York City in 2008. He took it public in an initial public offering (IPO) in 2015 using a so-called umbrella partnership corporate, or Up-C, structure in which a newly created shell company, Virtu Financial Inc., became the parent whose principal asset is shares of the underlying operating company, Virtu LLC.
Public shareholders own what’s known as Class A shares in Virtu. Viola and other pre-IPO insiders continue to directly own units of Virtu LLC that are economically equivalent to Class A shares. Additionally, the suit says, Viola owns nonpublic, super-voting stock that lets him retain control over Virtu and Virtu LLC.
Viola has used his control to “create economic in-equivalence in ways that result in Viola and other pre-IPO owners receiving a substantially larger share of the cash distributions from Virtu LLC than the Class A stockholders receive.
“The numbers are staggering. Viola and other pre-IPO owners, who combined own only a little more than 1/3 of the equity units of Virtu LLC, have received a total of $706 million in cash distributions from Virtu LLC during the last seven quarters,” says the complaint, which was filed last March to little media attention. “In contrast the Class A stockholders, who through Virtu own nearly 2/3 of the units of Virtu LLC, have received only $208.4 million in cash dividends during this same period. These outsized distributions to Viola and other pre-IPO owners represent an increase of over 130 percent from the previous two years, while dividends to the Class A shareholders have stayed the same.”
The complaint goes on to say it “appears that Viola and the Board have knowingly used cash that rightfully belongs to the Class A shareholders in ways that benefit Viola and other pre-IPO owners. Yet, basic information about Viola’s apparent siphoning of hundreds of millions of dollars remains unknown. Virtu obscures its public financial reporting by providing only consolidated financial information. Virtu has aggressively fought Plaintiff’s books and records demand.”
‘DELAYS, MISDIRECTION AND GASLIGHTING’
The complaint accuses Virtu of “many months of delays, misdirection and gaslighting” while withholding records necessary to its investigation, such as how much cash has been paid out to Viola. “Judicial intervention is required to end Virtu’s obstruction of Plaintiff’s statutory right to books and records,” the complaint says.
The case is in Wilmington, DE’s Chancery Court before Vice Chancellor Paul Fioravanti Jr. At the end of January, the court was notified that both sides are engaging “on a schedule” with the next update by the end of the month.
Virtu, traded on NASDAQ, is an electronic trading firm and market maker that uses proprietary technology to handle high frequency stock trades. In 2019, the company repurchased more than $500 million in company stock from Viola.
According to Forbes, which ranks Viola’s current real time net worth as $3.4 billion, Viola used the money to splurge on real estate – including the $10-million purchase of a pair of beachfront condos in Fort Lauderdale’s Auberge Beach Residences & Spa.
Viola and his wife, Teresa, sold the places in March for $11.3 million. In December 2021 they paid $19.725 million for a six-bedroom, six-bathroom single-family beachfront home on the Gulf of Mexico in Boca Grande, records show. The home is held in the name of a Delaware corporation using the property’s address.
Former President Trump nominated Vincent Viola to become Secretary of the Army in 2017. Viola later withdrew, however, citing business conflicts.
Teresa runs the interior decorating company Maida Vale Designs and also owns Teresa Viola Racing Stables. She and her husband also own St. Elias Stables, based in New York City.
In 2017, their horse, Always Dreaming, won the Kentucky Derby.