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Kevin McHale sues Glen Taylor over medical device company mess

Glen Taylor, Kevin McHale, Rush Limbaugh, and "Incredible Hulk" actor Lou Ferrigno all in one lawsuit? Reader: You betcha.

Glen Taylor, Kevin McHale, Rush Limbaugh, and "Incredible Hulk" actor Lou Ferrigno all in one lawsuit? Reader: You betcha. Dave Brewster, Star Tribune

Right about now, Minnesota Timberwolves fans are probably wondering if they could take action against Glen Taylor for that team's performance. 

Instead, it's former Timberwolves' general manager and one-time coach Kevin McHale who's going after Taylor. Only the lawsuit has nothing to do with basketball, and instead accuses Minnesota's richest resident of taking over a medical device manufacturer and then running it into the ground. 

As of 2010, Taylor -- who's also owner of the Star Tribune, which owns City Pages -- held about 15 percent of a start-up called Envoy Medical Corp., and McHale owned about 1.5 percent, according to a Twin Cities Business story about the device company. Taylor said he was impressed with the company's chief investors, three brothers who then controlled more than a third of the company -- and whose sister happened to be Kevin McHale's wife.

McHale, his wife, and two of those brothers, Patrick and Richard Spearman, are among the plaintiffs in a lawsuit filed in Ramsey County this week accusing Glen Taylor of seizing the reins at Envoy and restructuring the company to suit his personal interests. The civil complaint, which also names other members of Envoy's board of directors as defendants, describes Taylor's actions as "a billionaire's underhanded betrayal of his fellow shareholders," at least some of it carried out as "as a result of a personal vendetta related to Taylor's daughter."

Envoy's signature product is a hearing aid implant device called Esteem. As noted in the complaint, Esteem's effectiveness has been promoted by both Rush Limbaugh (as a paid advertiser) and Lou Ferrigno, star of TV's The Incredible Hulk, who had one of the Esteem devices (which cost $30,000 a pop) implanted to help with his lifelong hearing impairment.

As the lawsuit tells it:

While on the season finale of NBC’s "The [Celebrity] Apprentice," Ferrigno told America his Esteem success story. Ferrigno called it “a miracle.” He explained he now had natural hearing thanks to Esteem and could hear things he had never even hoped to have heard.

The company sold some 600 of the implants in a two-year period, the lawsuit says, with "almost all" of those sold to people buying them out-of-pocket, rather than through insurance coverage.

According to the complaint, Taylor's daughter Kendahl Prokop worked at Envoy until she was fired in spring 2012 "with cause." That cause? "Poor performance," at first, which led to "limited... work responsibilities," and then got worse: "Prokop was not showing up for work." 

It was around then that Taylor, a member of Envoy's board, called then-CEO Patrick Spearman and told he was going to "take [him] out," an alleged "promise of retaliation," according to the complaint. Soon, Spearman, company president Shelly Amann, and the company's "successful marketing team" all lost their jobs, allegedly at the direction of Taylor, who was said to have admitted to "protecting his daughter," per the complaint.

In a "company-wide meeting," Taylor then "welcomed his daughter back as an Envoy employee," the lawsuit says, and told employees if they did not like his decisions they were welcome to quit, according to the complaint. Taylor also installed a new leadership team to replace the people recently ousted by the board.

During 2012, Taylor -- through a funding LLC Taylor controls -- issued the company $9 million worth of loans, according to the lawsuit, which says in exchange, "Envoy pledged all of its assets including its intellectual property." 

Starting in 2015, Taylor purchased $20 million worth of company stock. Because Taylor was buying "preferred shares," the lawsuit says, he had "effectively purchased... control of a company which had been valued at $350 million to well over $1 billion."

Those estimated values wouldn't be the same today, as the lawsuit laments the company's abandonment of "its relationships with high-profile spokespersons." According to a press release plaintiffs issued this week:

"The suit claims that Envoy’s financial performance suffered under Taylor, and that Taylor restructured Envoy’s financing so that he could profit from Envoy’s financial distress. The plaintiffs allege that, if Envoy defaults on its loans to Taylor’s financing company, Taylor can take the company’s assets for himself, including the valuable Esteem technology."

In a statement, Patrick Spearman said Taylor and "other Envoy directors are responsible for what I believe could be hundreds of millions to billions of dollars in damages to Envoy’s shareholders."

Envoy has not responded to a request for comment on the lawsuit. We'll update this post if they do.