Shareholder Jasbir Sandhu filed a complaint with the U.S. Bankruptcy Court in the Southern District of New York earlier in the month, claiming that CEO Jim Keyes and billionaire investor Carl Icahn worked together to stymie recapitalization efforts in order to increase the return on investment for Icahn and other stakeholders.
Icahn stepped down from the board of directors back in January, citing Institutional Shareholder Services guidelines regarding how many directorships he can hold. He also sold off nearly 80% of his stake in the company.
Days prior to Blockbuster's Chapter 11 filing, it was reported that Icahn purchased $100 million in the company's debt.
Sandhu, who is being backed up by 200 other shareholders who signed a petition, is claiming Keyes purposely kept Blockbuster Express kiosks operations, Blockbuster Canada and other international assets from the bankruptcy in order to downplay the company's portfolio value. The investor said shareholder equity should have included all Blockbuster properties.
"Jim Keyes continued to create a bankruptcy fear to support Icahn's plan," Sandhu wrote in the filing. "Carl Icahn, on the other hand, continued to reduce his shareholder position to drag the prices of the bond down. Jim Keyes and Carl Icahn may have already known the exact date and outcome of Chapter 11 filing."
Other allegations include Keyes and Icahn playing a role in failing the reverse split and class conversion measures that ultimately pushed Blockbuster's stock to be delisted from the New York Stock Exchange.
Sandhu cites an article from TheWrap.com, where Keyes was quoted as saying Icahn "remains a good friend" and "could be even more helpful on the outside."
Sandhu is calling for an SEC investigation.
