Update On WWE Shareholder Lawsuit, Alleges Vince McMahon Investigation Was a ‘Sham’

New filings in the shareholder class action lawsuit against WWE allege that the company’s investigation into Vince McMahon was a “sham” and that McMahon manipulated the sale process to TKO for his benefit. Wrestlenomics reports that the lawsuit, which was originally filed in November of 2023, is with the Delaware Court of Chancery and that new filings include a second complaint have provided a new look into the claims that shareholders are making aganst the company.

The combined case features plaintiffs who are part of pension funds from Ohio and Michigan along with Dennis Palkon, who has been involved in previous class actions against WWE and other companies. The plantiffs made a legal demand to inspect WWE’s records and obtained copies of the WWE’s Board of Directors’ meeting minutes. The filing state that the minutes have provided insight into WWE’s decisions around the McMahon investigation and merger process. The full context of those minutes are not part of the filings and much of the filings are redacted.

According to what the plantiffs have made public, several board members including Man Jit Singh and Ignace Lahoud attempted to resign the day after the June 2022 report about Vince McMahon’s payments related to sexual misconduct allegations but that Stephanie McMahon — then still a Board member — persuaded them to stay through multiple voicemails and emails. Stephanie McMahon was made interim CEO and Chair the next day after Vince McMahon resigned. Several of the board members including Singh and Lahoud did resign in the weeks and months that followed, with those two in particular resigning shortly after Vince McMahon forced his way back into the company in January of 2023.

The complaint cites Board minutes by stating that “While [Singh and Lahoud] agreed with the Board’s decision to explore the Company’s strategic alternatives, they did not agree with Mr. McMahon’s return at this time.” Vince McMahon was approved as Executive Chairman a few days later with Nick Khan, Triple H and Steve Koonin “revers[ing] course” and voting to approve Vince as Executive Chairman despite the Board’s unanimous opposition in a letter on December 27th, 2022.

The filings also claim that the Board’s investigation into McMahon’s conduct was a “sham” and states:

“During McMahon’s brief hiatus, the Special Committee (including Defendants [then-WWE Board members Steve] Koonin and [Steve] Pamon) conducted a sham investigation of the allegations against McMahon. The Special Committee facilitated the cover-up by ensuring that they received no written materials throughout the entirety of that committee’s existence. The Special Committee did not interview McMahon’s victims, did not reprimand or otherwise censure McMahon, received no interview memoranda, reviewed no evidence, made no factual findings, and issued no report.”

The plantiffs allege that the Board’s minutes from August 14th, 2022 state that the Special Committee “reviewed and considered next steps in the investigation” but say nothing about an investigation to wrap up, and that the Committee’s counsel brought up “new developments” and discussed “potential next steps” on nine days later on August 23rd. Instead of issuing a final report, the plantiffs allege that the Committee “simply transferred its investigation over to multiple different Board committees”.

The filings allege that WWE misled shareholders because despite their claim that the investigation was nearing completion, it was stalled and ended up being buried. They also allege that Vince McMahon and WWE execs made an effort to make sure that Endeavor was the only company allowed to genuinely bid for WWE and that other bidders (whose identities are redacted in the filings) were willing to cash out all WWE investors, but that the Board pushed the Endeavor deal so Vince McMahon would continue to have a role with WWE. The allegation is that this caused WWE to be undervalued and that WWE’s executives structured the Endeavor deal to benefit themselves above the shareholders.

Several parties have been subpoenaed for documents and testimony including Board members and J.P. Morgan, Moelis, Paul Weiss and Kirkland & Ellis, all of whom were involved in the merger process.