Internal Under Armour review finds no wrongdoing by CEO Kevin Plank in Port Covington dealings

Under Armour founder and CEO Kevin Plank did not enrich himself improperly and ignore shareholders’ interests by seeking through his separate real estate firm to turn Port Covington into a waterfront community anchored by a new global headquarters for the athletic apparel brand, an internal review has found.

Shareholder Scott King asked Under Armour’s board to review the purchase of parcels along the Patapsco River in South Baltimore by Plank’s private Sagamore Development Co. as early as 2012. King alleges Plank used inside knowledge about the apparel maker’s need to expand from its current Locust Point headquarters and schemed to acquire substantial land, both to sell to Under Armour and to keep as an investment.


Since requesting an initial review in May 2017, then subsequent ones in January and March, King, who is from Virginia, has filed a lawsuit in Baltimore federal court against Plank, members of the company’s board and Sagamore, the joint owner of Port Covington. It is one of two similar, pending federal lawsuits filed by shareholders on behalf of Under Armour seeking damages.

The Port Covington development, which has secured $660 million in public financing, is envisioned as a $5.5 billion mini-city with offices, residences and retail, as well as Under Armour’s headquarters. The company unveiled plans in 2016 for a sprawling waterfront campus with three skyscrapers and a small stadium at the heart of the new community on 260 acres south of Interstate 95.


Filed in one of the federal court cases, the report by a group of independent directors and outside attorneys found no evidence to support King’s allegations and recommended against pursuing claims against Plank and other directors.

“This matter was thoroughly examined by independent outside counsel, and the findings clearly show that the narrative presented by Mr. King is not supported by the facts,” said Kelley McCormick, an Under Armour spokeswoman, in a statement Tuesday. “While we don’t comment on ongoing litigation, we believe the claims raised here and in similar derivative cases are without merit and we intend to defend the claims vigorously.”

An attorney for King, Eric Zagar, declined to commend on the case.

King has alleged Plank breached his fiduciary duty by, among other things, “usurping a corporate opportunity” from Under Armour to buy and develop land for the future campus, driving up the price and steering the company to buy the land at an excessive price.

Cases involving usurping a corporate opportunity typically involve situations where a company missed out on an opportunity because a director acted in his or her own interest, said Anthony Ashton, a Baltimore attorney who is not involved in the case but specializes in shareholders’ rights and fiduciary duties of officers and directors.

If the company had the chance but chose not to take it, no usurping occurred, said Ashton, a partner in Baxter, Baker, Sidle, Conn & Jones in Baltimore.

The review group said it examined about 3,000 pages of Under Armour and Sagamore internal documents as well as press and media coverage from 2010 to now, and interviewed Plank and other directors and executives.

In November 2012 and in August 2013, Plank discussed his vision for Port Covington real estate development with the board, urging the company to participate in the real estate development.


“On both occasions, the board declined the opportunity to develop the property and declined to commit to purchase or lease any portion of the property,” the report said. “The decision was based on a business judgment that doing so would have entailed significant expense, exposed the company to an unnecessary level of risk and was premature given the company’s needs at the time.”

The board also advised Plank that Under Armour “was not in the business of real estate development,” the report said. “The risk and capital required to pursue Sagamore’s plans were to be borne solely by Plank.”

Sagamore purchased several parcels in 2014 after Under Armour declined to purchase them, the report said. They included The Baltimore Sun’s printing plant, where the news enterprise currently is relocating its offices.

The development firm previously bought more than five acres at 301 E. Cromwell St. in August 2012 at auction. That is now the site of Sagamore Spirit, a whiskey distillery owned by Plank, and a parcel that was “never proposed nor considered as a potential headquarters” for Under Armour, the report said.

The review group said it stands by an earlier conclusion that Sagamore bought Port Covington parcels in 2014 with no commitment that Under Armour would buy them later, though the board knew of and consented to Plank’s development plans since 2012.

“Indeed [former board member] Tony Deering,” the former head of the Rouse Co. who died last year, “viewed Port Covington as an attractive and favorable site for expansion,” the report said.


The report concluded that when a fast-growing Under Armour needed more space in 2014, it studied not only Port Covington but alternative sites including expanding at its current Hull Street location. When that was deemed unfeasible, the company focused on Port Covington, but with the agreement that it would go forward only if the board judged Under Armour needed the space.

By fall 2015, the board decided to buy land at Port Covington.

Still, the report said the purchase was evaluated until shortly before it was finalized in June 2016. Under Armour negotiated at arms length with Sagamore and closed the deal with no profit for Sagamore and limited Under Armour exposure to unfavorable tax financing.

While Sagamore requested a $4.5 million return on equity, Under Armour refused to agree to it, the report said.

The ultimate price fell within the range of value determined by two independent, third-party appraisers and resulted in a $1.5 million loss to Sagamore, according to Sagamore leadership, the report said.

King’s lawsuit is in the process of being consolidated with another shareholder lawsuit. Patricia Mioduszewski, a shareholder from New Jersey, had filed a suit in April in U.S. District Court in Baltimore on behalf of the sports apparel brand, also naming two board members and Under Armour as defendants. She alleged that Plank profited from the sale of land to Under Armour and that millions of dollars in tax incentives and public financing that will go to Plank’s development firm belonged to Under Armour. She is seeking damages for the company.


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From this point, a case such as King’s can take different turns, Ashton said. The plaintiffs can dispute the fact of the report in court or amend their lawsuit. The defendants could use the report to ask the court for a summary judgment, a ruling in their favor without a trial, he said.

In the long run, such shareholder lawsuits will not necessarily damage a company, said Jason Moser, an analyst with the Motley Fool's Million Dollar Portfolio who follows Under Armour but was not familiar with the lawsuits.

Under Armour, which has been struggling after years of rapid growth, is in the midst of a restructuring to become more efficient and boost its brand.

“I’m not terribly worried about this as a threat to investors, but the optics of it don’t help his cause,” Moser said of Plank, who he said “feels the pressure that the investment world is watching him.”