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http://www.law360.com/commercialcontracts/articles/440515/ex-ceo-raided-entertainment-co-s-assets-rico-suit-says Ex-CEO Raided Entertainment Co.'s Assets, RICO Suit Says Share us on: Twitter Facebook LinkedIn By Linda Chiem Law360, New York (May 10, 2013, 2:36 PM ET) -- Entertainment company ValCom Inc. launched suit in New Jersey federal court Friday accusing its ousted former president and CEO Vince Vellardita and other top brass of defrauding ValCom out of millions of shares in violation of the Racketeering Influenced Corrupt Organizations Act. ValCom alleges that Vellardita and five other executives and shareholders schemed to defraud Valcom out of millions of shares and assets, engaged in self dealing and business activities that conflicted with ValCom’s business interests, such as consulting for rival entertainment companies, and usurped corporate authority for their own benefit, according to the complaint. ValCom contends that it discovered the fraud as part of an extensive investigation into its financial records it launched after its board voted to remove Vellardita as CEO in August 2011 over his alleged repeated failures to properly fulfill his CEO duties, the complaint says. “During the course of this lengthy investigation and based on the depth and extent of the malfeasance discovered, it became apparent that Mr. Vellardita and others acting on his behalf raided the company's assets over a period of time to serve their personal and collective financial agendas,” ValCom CEO Tim Harrington said in a statement Friday. ValCom alleges that Vellardita for years issued stock to settle his personal obligations and unilaterally and unlawfully issued at least 131 million shares since the quarter ending June 30, 2011, without the board’s knowledge and consent. In addition to taking out unsanctioned loans with Solomed PTE Ltd., Vellardita failed to account for more than $4.6 million in capital and expenses, wrote off $435,000 of the company’s alleged bad debts, and violated his employment agreement by serving as an officer or director for other entertainment companies while he was with ValCom, the complaint alleges. Vellardita and his wife, Teresa, who was ValCom’s bookkeeper, also directed that payments worth nearly $200,000 be made to another entertainment company, Bridgeport Enterprises Inc. — for which Vellardita later served as CEO — purportedly for consulting work between 2007 and 2011 that the board never approved, the complaint says. “Defendant Vince Vellardita, by engaging in conduct contrary to the best interests of ValCom, disregarded on multiple occasions his responsibility as an officer and director of the company to comply with his fiduciary responsibilities of good faith, loyalty and care by engaging in fraud, civil theft, embezzlement and fraudulent misrepresentations for personal gain ...” the complaint says. Also named as defendants in the suit are former ValCom board director Frank O'Donnell, Teresa Vellardita, shareholders Nalinkant Rathod and Rahul Rathod, former ValCom employee Ingrid Clavijo, as well as Bridgeport Enterprises Inc. In a statement to Law360 on Friday, Vellardita rejected ValCom’s allegations, saying the company is trying to deflect shareholders’ attention from at least three separate suits against ValCom. “Simply not true to any of the charges for any of the parties,” he said in the statement. “Valcom refuses to let their shareholders know of three separate lawsuits filed against them for breach, defamation, copyright infringement and several other charges.” In addition to the RICO claim, the suit asserts claims for common law fraud, breach of fiduciary duty, breach of contract, civil conspiracy and negligence, among others. ValCom Inc. is represented by Neal H. Flaster of Neal H. Flaster LLC. Counsel information for defendants was not immediately available Friday. The case is ValCom Inc. v. Vincent Vellardita et al. in the U.S. District Court for the District of New Jersey. A case number was not immediately available.
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