They are screwed until this is resolved.. Last time in court was march 17 2016.. Going no place until they figure out what happened.. Statement from Bruce... Moreover, since management has no idea how many of these deals Ms. Tsai has
negotiated, we cannot sign off on financial statements, without which we cannot restore Viropro
ILED: NEW YORK COUNTY CLERK 03/17/2016 09:51 AM INDEX NO. 654167/2013
NYSCEF DOC. NO. 238 RECEIVED NYSCEF: 03/17/2016
Short Caption:SPRING HILL BIOVENTURES SDN BHD, derivatively on behalf of Viropro, Inc. - v. - CYNTHIA EKBERG TSAI et al Case Type:Commercial Division Case Status:Active eFiling Status: Full Participation Recorded Assigned Judge:Eileen Bransten
SUPREME COURT OF THE STATE OF NEW YORK
COI.INTY OF NEW YORK
SPRING HILL BIOVENTURES SDN BHD,
derivatively on behalf of Viropro, Inc.
Index No. 65416712013
IAS Part 3
(Bransten, J.)
Motion Seq #004
CYNTHIA EKBERG TSAI and RICHARD SERBIN,
Defendants.
AFFIDAVIT OF BRUCE A. COHEN
STATE OF CALIFORNIA )
SS:
COLINTY OF SANTA CLARA )
BRUCE A. COHEN, being duly sworn, hereby deposes and says as follows:
1. I am the Chairman of the Board of Viropro, Inc. ("Viropro")o the Plaintiff in this
litigation. Except as stated otherwise, I have personal knowledge of the facts set forth herein.
2. I submit this affidavit in support of Plaintiffs Motion by Order to Show Cause for
an Order punishing Defendant Cynthia Ekberg Tsai ("Tsai") for civil contempt and sanctionable
spoliation of evidence due to her (i) willful violation of this Court's June 2, 2014 Order directing
her, pursuant to the Court's May 27, 2Al4 Order, to "immediately deliver and tum over
possession, custody and control of any and all information, documents or other records
pertaining to Viropro, its subsidiaries and affiliates" (the "June 2 Order") to the new Board of
Directors of Viropro, Inc., and (ii) her admitted destruction of the contents of her personal Yahoo
email account (cynthiahealthquest@yahoo.com) (the "Yahoo Email Account"), which was the
primary email account Ms. Tsai used in her former capaciq as Chairman and CEO of Viropro.
FILED: NEW YORK COUNTY CLERK 01/26/2015 01:51 PM INDEX NO. 654167/2013
NYSCEF DOC. NO. 179 RECEIVED NYSCEF: 01/26/2015
3. Ms. Tsai does not submit an affidavit in opposition to Plaintiffs motion, but
rather, relies on the affirmation of her defense counsel, Sarah J. Green, Esq. Critically, her
attorney does not dispute that the Viropro-related emails in Ms. Tsai's personal Yahoo Email
Account are company property.
4. Instead, her attorney contends that Ms. Tsai did not violate the June 2 Order
because she deleted the Viropro-related emails before the Order as a "normal" business practice,
despite this litigation pending since December 2013, and that even with the deletion of the
company-related emails, Viropro was not prejudiced because the company was in financial peril
anfvay. Affirmation of Sarah J. Green, Esq. dated January 14,2015 ("Green Aff.") 1i']T5-13.
5. Defendants' counsel further contends that the two flash drives Ms. Tsai provided
somehow satisfu the June 2 Order despite her admitted wholesale destruction of company
records, and that her client's Viropro-related emails from the Yahoo Email Account were either
saved to the company directory or other Viropro Directors or employees have copies of them.
Id. at tllJ 8-11.
6. While it is not apparent how Defendants' counsel could possibly have personal
knowledge of such matters, as demonstrated below, Ms. Green's assertions have no basis in fact.
Defendant Tsai's Deficient Turn Over of Viropro's
Records and Her Willful Destruction of Comnany Emails
7. Ms. Tsai's counsel references the turning over of two flash drives to Viropro's
new management, but both are woefully incomplete and contain only a fraction of the electronic
records Ms. Tsai should have had in her possession as former CEO and Chairperson of the
company. Green Aff. 1|fl 6-8. While one flash drive contained approximately 4,735 electronic
documents, none of which are emails, a large number of which are drafts of agreements and only
a few of which are fully executed contracts.
A.
8. For example, there are drafts of the agreement with Vivo Bio Tech Limited
("Vivo"), which Ms. Tsai negotiated, but nothing more. As the Court may recall, the Vivo
transaction involved an August 21,2013 letter of intent in which Vivo would gain a 60Yo stake in
Viropro in exchange for acting as a guarantor for financing, rather than an investor, the current
shareholders' interest would be collectively diluted b 3AYo, and "Key Management of Viropro",
i. e., Ms. Tsai and co-Defendant and then co-Director fuchard Serbin, would receive a l\Yo stake.
See Affidavit of Kenneth A. Sorensen, previously submitted to the Court in support of Plaintiffs
Preliminary Injunction Motion, sworn on February 11,2014 ("Sorensen Aff.") fl1t25-27.
9. Further, there is nothing on the flash drive relating to the proposed deal with
Therapix Biosciences Ltd. in which, as the Court may also recall, Ms. Tsai negotiated a
memorandum of understanding without Board of Directors approval on December 4, 2013,
which would have caused a change in control of Viropro and the dilution of current shareholders'
interest. Sorensen Aff. llti 30-31.
10. In addition, Viropro is currently in a disputs over unpaid fees with a consultant
whom Ms. Tsai allegedly retained in December 2013, but there are no documents related to this
alleged agreement on the flash drive.
11. In fact, there is nothing on the flash drive from after October 5,2013, which
leaves the eight month period during which Ms. Tsai had orchestrated the deadlock of Viropro's
Board of Directors that left her in de facto unfettered control of the company unaccounted for --
i.e.,Ms. Tsai has conveniently disposed of the entire record of her conduct as Viropro's former
CEO during the period most directly at issue in this litigation. Tellingly, the flash drive contains
several subdirectories with no documents, suggesting that documents once there were either
removed or deleted by Ms. Tsai prior to the flash drive's delivery to Viropro, further increasing
the void in information.
12. This has left Viropro's management blind as to what deals Ms. Tsai was making
(for Viropro or Defendants), what opportunities she failed to pursue, and, as more importantly,
what promises she made that could bind the company.
13. While the first flash drive provided by Ms. Tsai contained no e-mails, the other
only contained 5l emails. Of the 51 emails, 24 are duplicates, which leaves 27 unique messages.
None of these 27 emalls are new to management as most of them are messages to or from the
other Directors -- Le., Ms. Tsai produced virtually no emails concerning her communications
with third parties in her former capacrty as Viropro's CEO.
14. Defendants' counsel contends, presumably based on what Ms. Tsai has told her,
that any emails missing from Ms. Tsai's Yahoo Email Account can be retrieved from the email
accounts of current and former Viropro Directors or employees. Green Aff. 'li 11. Yet Ms. Tsai
did not copy those Directors or employees (or her Viropro account) on all her emails, as
evidenced by the March 28, 20L3 email attached as Exhibit 4 to the moving Affirmation of
Richard B. Brosnick, dated December 9,20T4.
15. This is further evidenced by a February 14,2013 emall, included in the second
flash drive, which was to Ms. Tsai from a third party and did not copy any other Viropro
Director, employee, or Ms. Tsai's company email account. Attached hereto as Exhibit 1 is a true
and correct copy of the referenced February 14,2013 email.
16. Moreover, this February 14,2Al3 email also refutes the assertion of Defendants'
counsel that it was Ms. Tsai's "regular business custom and practice to routinely delete and or
[sic] erase emails from her personal account after any attachments, contacts, or information had
been saved into the Viropro directory ... or the email was forwarded to other Viropro employees
or Board members." Green Aff.'lT 10.
17. As the heading on Exhibit 1 establishes, Ms. Tsai forwarded the February 14,
2013 emall to her counsel on July 30,2014. Ex. 1. In other words, contradicting Ms. Tsai's
conveniently alleged "regular business custom," she maintained this email in her Yahoo Email
Account for seventeen months.
18. Attached hereto as Exhibit 2 is a true and correct copy of a November 15,2012
email included in the second flash drive, which was addressed to Ms. Tsai and copied a Viropro
then co-Director. Ms. Tsai forwarded this email to her counsel on July 3A,2014, which means
she had maintained it in her personal account for twenty months, again contradicting her alleged
"regular business custom" to delete such emails when a fellow Viropro Director or employee
received it.
19. Attached hereto as Exhibit 3 is a true and correct copy of a December 30,2012
email, also included in the second flash drive, from the CEO of Viropro's subsidiary Alpha
Biologics Sdn Bhd ("Alpha") (who was Ms. Tsai's then co-Director of Viropro) to third parties,
on which Ms. Tsai was copied. Like Exhibits I and 2, despite Ms. Tsai's alleged "regular
business custom" to delete such emails involving other Viropro directors, she maintained this
email in her personal account for nineteen months.
20. Also contrary to her lawyer's assertion, almost none of Ms. Tsai's communications
in her former capacity as Viropro's CEO were saved on Viropro's directory.
21. Of course, I cannot know precisely what Ms. Tsai deleted, except to say that it
included most of her communications and business undertakings in her former capacity as
Viropro's CEO, and virtually all such documents generated during the period from October 2013
until she was removed as CEC) in June 2A14.
B. Defendant Tsai's Admitted Destruction of Viropro Records
Has Severely Preiudiced Viropro
22. Defendants' counsel also "affirms" that Plaintiff is not prejudiced by Ms. Tsai's
willful destruction of Viropro property because Alpha, "Viropro's only substantial asset," was
seized by creditors three months after Ms. Tsai failed to turn over the company's records
pursuant to the June 2 Order, and Viropro may be forced into dissolution. Green Aff. lT 13. This
argument is circular and nonsensical because Viropro has suffered from the fact that it had no
access to the wrongfully withheld or destroyed records in order to have been able to negotiate
with Alpha's creditors in time to save it. Without the emails from Ms. Tsai's Yahoo Email
Account, we do not have the record of any negotiations she had with Alpha's creditors or
regarding Alpha's business or potential investors that may have prevented the pending
foreclosure. In sum, Ms. Tsai's misconduct at issue is primarily the cause of Viropro's and
Alpha's current state.
23. This is, however, far from the only example of prejudice due to Ms. Tsai's
destruction of company records that has interfered with my and the rest of Viropro's
management's efTorts to rebuild Viropro's business. For example, absent the full set of its former
CEO's documents and emails (particularly with respect to late 2013 and 2014), current
management cannot complete Viropro's financial statements because we do not know the fulI
extent of the company's liabilities.
24. I have already noted that Viropro is involved in a dispute with a consultant over
allegedly unpaid fees based on an alleged agreement negotiated by Ms. Tsai. Until the
consultant made her claim for unpaid fees, Viropro's management had no idea of her alleged
agreement as there was no documentation in our possession concerning it. I still do not know
what the consultant's understanding was with Ms. Tsai regarding the scope of her allegedly
intended work or whether she performed as she alleges.
25. Viropro also has outstanding claims from other alleged service providers who
negotiated with Ms. Tsai, but in the absence of Ms. Tsai's emails and other records, current
management does not have the documentation necessary to defend or otherwise address such
claims.
26. Moreover, since management has no idea how many of these deals Ms. Tsai has
negotiated, we cannot sign off on financial statements, without which we cannot restore Viropro
to compliance with applicable SEC regulations. Nor can management negotiate a potential sale
of the company, in the altemative, because we would not be able to sign the standard
representations and warranties about Viropro's current state.
27. I have personally communicated with one of Viropro's creditors concerning the
company's outstanding debt, but in the absence of Ms. Tsai's correspondence with their
principals, Viropro's management does not know what agreements were made for payment or
anlthing about the context of how Viropro arrived at its current debt status.
28. As another example, Viropro is currently in a dispute with one of its shareholders
based on his claim that he is owed additional shares for work he allegedly performed on behalf
of the company. Without Ms. Tsai's emails (with him or concerning his work), Viropro lacks
information as to what the shareholder might have done, and so we cannot address his claim on
an informed basis.
29. We also know that Ms. Tsai had been in contact with its subsidiary Alpha's
creditor bank regarding proposed restructuring, but cuffent management has no emails between
her and that bank, and has only a limited, partial record of what documents she provided to it.
Viropro management has been hobbled in its efforts to negotiate with that and other financial
institutions because we do not know urhat representations Ms. Tsai previously made on Viropro's
behalf or what she was told by those counterparties. Indeed, combined with her other
malfeasance at issue in this litigation, Ms. Tsai's misconduct is the primary cause of the current
difficulties of Viropro and Alpha that Ms. Tsai's lawyer disingenuously cites as somehow
absolving her.
30. Not content with the damage she caused during her tenure at Viropro and in
destroying its primary business records, it has come to my attention that Ms. Tsai has also been
in direct contact with Alpha's creditors as recently as January 5,2015 even though she has no
funher role at Viropro (much less Alpha) and is barred by her employment agreement from
interfering with any Viropro business or opportunities. Attached hereto as Exhibit 4 is a true and
correct copy of an email from a consultant of Alpha's creditor bank to Ms. Tsai, dated January
20,2015. As that email states, the consultant was responding to Ms. Tsai's referenced email to
him, dated January 5,2015, conceming Viropro and Ms. Tsai's allegation of "issues [she] may
have had with the Board of Directors of Viropro."
31. Exhibit 4 also evidences yet another instance of Viropro being prejudiced by Ms.
Tsai's failure to address Viropro's needs during her tenure as its CEO. Due to an alleged failure
to pay a mandatory stamp tax in connection with Viropro's acquisition of Alpha, it is now being
alleged that Viropro's ownership of Alpha is not perfected. Although I am informed that Viropro
can correct this mistake by paying the tax, Viropro will now also have to pay penalties as a result
of Ms. Tsai's failure to address this issue earlier. For present purposes, it is important to note that
I only recently learned of this situation because I had no access to Ms. Tsai's relevant records
concerning Alpha.
32. Finally, perhaps the most obvious and not coincidental prejudice to Viropro from
Ms. Tsai's admitted destruction of her Yahoo Email Account records is to Viropro's ability to
prosecute this litigation based on Defendants' malfbasance and breaches of duty during Ms.
Tsai's tenure as CEO of Viropro and Mr. Serbin's tenure as one of its Directors. Having lost
much of the record of Ms. Tsai's communications with third parties (including former business
partners with which she was involved in self-serving negotiations) -- including the entirety of her
communications during the crucial period from October 2013 to June 2014 drning which she was
in exclusive control of the company -- Viropro must now proceed without what was likely the
best record of Ms. Tsai's conduct.
33. In sum, contrary to her lawyer's assertions, Viropro has been severely prejudiced
by Ms. Tsai's violation of the June 2 Order andlor willful destruction of her Viropro records from
her temre as Viropro's former CEO.
34. Therefore, I respectfully request that Plaintiffs motion be granted in its entirety.
Sworn to before me this
Z] day ofJanuary, 2015
r-? / ,1 {fruttU.,(,t"w
BRUCE A. COHEN
ANNIE C. WAI{G
Commrssion # 2079275
Notary Public - Califo{nia
Santa Clara County
23,2018
