Glen Taylor, majority owner of the Timberwolves and owner of the Star Tribune Media Co., is being sued by former Wolves coach and General Manager Kevin McHale in a dispute over control of a Minnesota hearing-device company called Envoy Medical.

In a lawsuit filed in Ramsey County District Court on Jan. 29, McHale and a group of investors including the company's former CEO accuse Taylor of "self-dealing" following a series of business deals that gave Taylor control of Envoy. Taylor and current Envoy Medical CEO Brent Lucas, who is also a defendant in the lawsuit, deny the allegations.

The crux of the alleged scheme is that Taylor issued unpayable loans to Envoy, and secretly gained control over a majority of the privately held company by having it issue preferred shares to him. Taylor effectively paid $20 million to acquire a company once valued at more than $1 billion, the lawsuit claims.

Taylor and Lucas said Monday that the lawsuit is without merit. "I deny these allegations," Taylor said. "The Envoy board will defend themselves vigorously, and we are confident that we will prevail. Envoy Medical remains dedicated to [the] patients who have our devices."

Former Envoy CEO Patrick Spearman is the lead plaintiff in the case, along with McHale, former Envoy President Rochelle Amann and seven other investors.

McHale is a Hibbing native, former University of Minnesota standout and Basketball Hall of Fame player with the Boston Celtics. After retiring in 1993, he began his post-playing career with the Wolves as a TV analyst and special assistant, eventually serving more than a decade as the organization's vice president of basketball operations. He also had stints as the Wolves head coach in 2004-2005 and again in 2008-2009 before leaving the organization for good in mid-2009.

Star Tribune, Star Tribune
Timberwolves owner Glen Taylor is seen in 2008 with newly named coach Kevin McHale.

"Kevin McHale, who encouraged other investors to put their money into Envoy Medical, feels the need to be part of this lawsuit because of the numerous small shareholders that are being harmed," a Jan. 30 news release on the lawsuit said.

Current Envoy CEO Lucas said in an e-mail Monday that the company was "disappointed" by the lawsuit, but stands behind its past decisions: "The company strongly disagrees with the allegations in the complaint, and believes that the claims are meritless and will ultimately be dismissed."

Taylor and Lucas are among 11 defendants named in the lawsuit, along with Taylor's Mankato-based private financing company, GAT Funding LLC, and eight other Envoy directors who are accused of working with Taylor to secretly take over the company.

Envoy Medical is a medical device company based in White Bear Lake that sells a hearing implant called the Esteem. Approved by the Food and Drug Administration in 2010, the device is designed to fix hearing loss in the middle ear.

The lawsuit says the device created "miracle" hearing restoration for celebrities, and was seen as a way to treat police officers and veterans who had lost their hearing in the line of duty. A 2010 story in MedCity News said Envoy got a publicity boost after paying radio host Rush Limbaugh $250,000 a month to promote the device. That exposure was followed by a $10 million investment from Eden Prairie hearing-aid maker Starkey Laboratories, the article said.

The lawsuit says Taylor began to exert untoward influence over the company beginning in May 2012, after his daughter Kendahl Prokop was fired from Envoy for allegedly failing to show up to work. Taylor then, according to the lawsuit, allegedly directed Envoy to fire Spearman, Amann and other key team members, and rehire his daughter and Lucas.

With sales dropping precipitously, the lawsuit says, Taylor made a series of 4.5% interest loans between 2012 and 2018 totaling $36 million. The terms of the loans, the lawsuit says, scared off other potential investors. Taylor also allegedly had Envoy issue $20 million in preferred shares that transferred majority control of the company to him.

The lawsuit asks a judge to order Taylor and the other defendants to pay damages, including "rescissory damages" based on what the stock would have been worth to them before Taylor's alleged manipulation. The case doesn't say how much the other investors put into the company, or what their stakes are worth today, other than including a legal boilerplate statement that the damages were "in excess of $50,000."

Joe Carlson • 612-673-4779