[Corrected 10/12/17 4:21 p.m. See below.] A little over a year after a group of shareholders of the life sciences supplies business Promega sued the company, alleging malfeasance by founder and CEO Bill Linton, Promega has begun sharing its side of the story.
In multiple counterclaims filed recently in Dane County Circuit Court, lawyers representing Fitchburg, WI-based Promega accuse some of the shareholders who brought suit against the company in July 2016 of conspiracy, fraud, and racketeering, and claim they were allegedly double-dealing in communications with fellow shareholders and leaders at Promega, and concealing their true motives.
Details of the counterclaims were first reported by the Wisconsin State Journal.
Promega, which Linton founded in 1978, is one of the area’s leading life sciences companies. It manufactures and sells more than 3,500 different life sciences research tools, such as reagents and DNA analysis kits. Total sales in 2016 were nearly $400 million, according to the company’s website. A majority of the company’s 1,400 employees are based in Wisconsin, and over the years a number of Promega spinoffs have been launched, including Epicentre, Lucigen, and PanVera.
The group of plaintiffs that sued Linton and Promega last year is led by Ted Kellner, a Milwaukee-based investor, and Nathan Brand, a Miami-based real estate developer. In the lawsuit, they claim that Linton initially acknowledged his company’s obligation to get shareholders a “fair return” on their investment. However, the plaintiffs allege that in recent years Linton has not only shirked that obligation, but he even set up a nonprofit, the Usona Institute, with the alleged goals of acquiring a controlling stake in Promega and effectively using its investors’ money to fund research into the possible therapeutic effects of hallucinogenic drugs.
In one of the counterclaims, lawyers for Promega call the notion that Linton is no longer pursuing the best interests of the company a “false” statement. They also say the language plaintiffs used to describe Linton’s behavior—that he “bullied, lied [to], threatened, [and] manipulated” other stockholders in order to bolster his stock position—is more befitting of Brand and his fellow plaintiffs.
The initial allegations and subsequent recriminations stem in part from disagreements between Promega and some of its largest stockholders over the company’s worth, which is used to determine the value of individual holdings. Feeling that they were unable to sell their shares at what they viewed as a fair price, Brand, Kellner, and others hatched an unsuccessful plan to buy Promega, according to court documents. They also discussed ousting Linton. In an e-mail message made public in court filings, Brand apparently wrote to a fellow shareholder in April 2015 that “our best hope would be … to convince the majority of the board [of directors] to fire Bill.” Ultimately, the group led by Brand and Kellner was not able to accomplish this, and decided to take legal action.
According to court files, Linton owns 792,670 of the 1.6 million-plus outstanding shares in Promega, a 47 percent stake. Brand and his family have the second-largest stake in the company—about 17 percent. It’s unclear how much stock Kellner owns.
In one of the counterclaims, attorneys for Promega say the company’s shareholders, including the plaintiffs who filed suit in 2016, “have been given repeated opportunities for liquidity at fair, equitable, and non-discriminatory prices.” However, “fair” is not how some of the company’s shareholders describe the amounts for which Promega has offered to buy their holdings.
The upper bound of the price range Promega set as part of a reverse, or “Dutch,” auction held in 2014 was “way too low,” Brand wrote in an e-mail to a fellow shareholder later that
