The road to the courthouse started in 1988 when Mr. Endres sold the company to his employees for $15.2 million. Endres, 70 years old, had already moved to Phoenix, as Electro-Jet's fortunes were on the wane. He sold 17 percent of the company to seven of his executives, the rest to the entire work force, whose profit-sharing plan was converted into an ESOP.

Rank-and-file employees were dumbstruck by the news. Their profit-sharing plan allegedly contained about $5 million worth of government securities and stocks. Under the ESOP, their investments would be converted into Electro-Jet non-publicly traded shares. They also discovered that the ESOP had to borrow $10.2 million to complete the deal. The loan, from First National Bank of Cincinnati--now U.S. Bank--would be paid off over time with money from Electro-Jet.

The action alleges that the business was doomed from day one. Unknown to the workers, orders from Electro-Jet's one big customer, GE Aircraft Engines, had plunged, and the company had begun to lose money. Within nine months of employee ownership, Electro-Jet allegedly reneged on its financial obligations to the ESOP. It brought in a crisis manager in 1993--to no avail. Four years later, the company went out of business.

Named plaintiff William McDannold alleges that he had accrued $70,000 in his profit-sharing account before 1988. He and 43 other Electro-Jet workers filed suit in 1994 to rescind the ESOP and restore their lost balances. McDannold, 58, now works for another metalworking shop.

As is often the case with defense subcontractors, Electro-Jet's fortunes were tied to GE Aircraft Engines. The company fabricated rotors, fan blades, air vanes and other metal engine parts for its customer half a mile away. During the defense budget buildup of the early 1980s, Electro-Jet was humming and its workers were happy. Endres, in a sworn statement in 1994, said GE Aircraft Engines accounted for up to 90 percent of his sales.

In November 1987, Devtek, a Canadian company unaware of Electro-Jet's financial turn for the worse, allegedly expressed an interest in buying Electro-Jet for $16 million. To avoid capital gains taxes, Mr. Endres allegedly structured the sale around conversion to the ESOP.

The action alleges that, during the pendency of the sale:

1. Endres didn't tell his employees that Electro-Jet's sales had fallen precipitously and that it was losing money after three straight years of profit.

2. Electro-Jet officers Paul Weber, William Hare and Laura Gerding, who replaced Endres on the company board of directors and who agreed to serve as the ESOP's initial trustees, also failed to tell employees about the company's deteriorating financial condition. They also failed to disclose that Endres loaned them most of the money to participate in management's purchase of 17 percent of Electro-Jet--and that they would receive pay raises to cover the loan payments.

3. The valuation of Electro-Jet at $16 million to $19 million was based on a "grossly inadequate" appraisal that did not factor in Electro-Jet's sharp drop in orders and product quality issues that kept the company on probationary status with GE.

4. U.S. Bank, which took over trusteeship of the profit-sharing plan a month before the ESOP kicked in, failed to live up to its fiduciary duty to employees of conducting an independent review of the transaction and informing them of Electro-Jet's true financial condition.

5. The ESOP's attorneys failed to protect the interests of the employee shareholders, and actually purchased Electro-Jet stock, creating a conflict of interest for themselves.

The action is scheduled to go to trial on March 1, 2004.