Box Ships Inc (TEUFF)

[Pdaddy2]

McGuireWoods LLP
434 Fayetteville Street
Suite 2600
Raleigh, NC 27601
Phone:
Fax:
www.mcguirewoods.com


March 18, 2019

VIA EMAIL AND U.S. MAIL

Michael Bodouroglou
Allseas Marine, S.A.
15 Karamanli Ave., 16673
Voula, Greece
[e-mail]
[e-mail]
[e-mail]

Re: Box Ships Inc. Board Misconduct and Information Second Demand

Mr. Bodouroglou:

I have received no response to my November 2018 letter and demand for a meeting with the board of directors of Box Ships Inc. (the “Company”) and for information relating to the board’s ongoing breaches of fiduciary duties to the Company and its shareholders. I have attached a copy of the November 2018 letter hereto as Exhibit A. As I noted in my previous correspondence with you, I initially directed my November 2018 letter to attorneys at Sichenzia Ross Ference Kesner with whom we had previously corresponded. They advised me that they no longer represent you or the Company and directed me to communicate with you directly. If you have retained new counsel to represent you in this dispute, please advise me immediately so I may direct my correspondence to them.

Despite your refusal to engage in good faith negotiations with a shareholder who is seeking to protect the Company, we have received a response from one of your former colleagues in Greece. While we knew that you had raided the Company coffers, diverted Company funds and assets to your personal accounts and other businesses, and breached fiduciary duties owed to the Company and shareholders, we did not anticipate the full extent of your self-dealing. The documentation and information we have received since my November 2018 letter demonstrate that your conduct has ruined the Company and caused significant harm to its shareholders.

In 2016, you and Seaborne Capital Advisors (“Seaborne”), a company owned by your friend Anthony Argyboulos, colluded to fraudulently charge the Company $3 million for a purported success fee relating to debt extinguished by the Company’s creditors. The Company sent the $3 million to Allseas Marine, S.A. (“Allseas”), as the Company’s treasurer, for payment to Seaborne.
In furtherance of your scheme, and after Allseas obtained possession of the funds, you and Mr. Argyboulos then caused Seaborne to issue a credit note in December 2016 (the “Credit Note”), waiving Seaborne’s purported rights to the $3 million fraudulent success fee. The Credit Note is attached hereto as Exhibit B. This Credit Note was never presented to the Company or included in the Company’s financial statements. Furthermore, the funds were never returned to the Company. We have been informed that you instead diverted the funds to your own private accounts for your benefit. Indeed, the Company’s financial statements do not reflect a payment of $3 million from Allseas returning the funds credited by Seaborne.

You have likewise stolen settlement fees and insurance proceeds from the Company related to the Box Hong Kong, a vessel owned by Triton Shipping Ltd. (“Triton”), a wholly owned subsidiary of the Company, from June 2012 to August 2016. In October 2014, a vessel owned by Hapag-Lloyd Ships Ltd. (“Hapag”) collided with the Box Hong Kong in Australia, causing significant damage to the vessel. Triton made an insurance claim, and the insurance company approved the payment of approximately $500,000 for the damages to the Box Hong Kong. These funds were never transmitted to the Company.

In addition to making an insurance claim, Triton also sued Hapag in Australia in 2016 relating to the accident. In January 2018, Triton and Hapag entered into a settlement agreement wherein Hapag agreed to pay Triton $800,000 to resolve the pending lawsuit. The settlement agreement is attached hereto as Exhibit C. Neither the insurance proceeds nor the settlement funds has appeared on the Company’s financial statements. With regard to the settlement funds, we have been advised that you diverted those funds first to Allseas and then to Seanat Shipholding (“Seanat”), another of your private companies. We have been provided a wire confirmation dated June 2018 showing that you seized the settlement funds and diverted $775,000 (the $800,000 settlement less $25,000 in commission to the adjuster for evaluating the claim) first to Allseas and then to Seanat. The wire transfer is attached hereto as Exhibit D. Interestingly, the reason provided for the transfer from Allseas to Seanat is “INTERNAL TRANSFER,” suggesting that you are commingling the funds of Allseas and Seanat and treating these companies as your personal piggy banks as well.

Finally, we have also been advised that you, Allseas, and insurance broker H.W. Wood colluded to defraud the Company by causing H.W. Wood to issue inflated invoices to the Company for insurance costs and then issue credits back that Allseas then used to cover its payments owed to H.W. Wood. Examples include credits of $190,299.30 in February 2013, $214,961.86 in July 2014, and $274,842.62 in December 2014. Statements from H.W. Wood are attached hereto as Exhibit E. These credits were not transmitted to the Company and never included in the Company’s financial statements. Interestingly, H.W. Wood’s invoices include transactions associated with both the Company and Paragon Shipping, yet another one of your companies, suggesting further commingling of funds in order to aid your corporate theft.

These additional conflict of interest transactions not only served to dilute the Company’s stock and divest the Company of substantial assets, but they fraudulently and unjustly enriched you and your other companies at the expense of the Company and its shareholders. These self-dealing transactions breached the fiduciary duties that you and the board owe to the Company and shareholders. See Treadway Companies, Inc. v. Care Corp., 490 F. Supp. 668 (S.D.N.Y. 1980) (“Officers and directors of a corporation owe a fiduciary duty to all shareholders, minority and majority, and may not use their powers to further their own interests to the detriment of any of the shareholders.”); Cede & Co. v. Technicolor, 634 A.2d 345, 360, (Del. 1993); see also Ams. Mining Corp. v. Theriault, 51 A.3d 1213, 1239 (Del. 2012) (burden on controlling shareholder to establish “entire fairness” of transaction involving potential self-dealing).

Mr. Tadlock once again demands that you and the rest of the board (or former board, as the case may be) sit down with him to answer questions about the self-interested and fraudulent transactions that have destroyed the Company and left its shareholders with valueless stock. We also demand access to the documents that the board has cited in an effort to justify its self-dealing and conflict of interest transactions. For example, in an effort to lend credence to the fire sale of Company assets, the Company’s Form 6-K filed on November 2016 states that the sale of the Ships “was approved by a Special Committee consisting of the Company’s four independent directors. The Special Committee determined that the proposed purchase price represents fair market value for the assets and liabilities transferred to the new entities, based on vessel valuations and an independent fairness opinion.” See Box Ships Form 6-K, filed Nov. 30, 2016. Neither the vessel valuations nor the independent fairness opinion have been provided to the Company’s shareholders. Nor have you identified the profits that Allseas made off of the ships transferred to Allseas. Mr. Tadlock demands copies of those documents and information in advance of the meeting.

You have plundered the Company’s assets, decimated the stock value, and ensured that there is nothing left of the Company to rebuild, despite your laughable representations that the Company would reemerge in the market. The damages to the Company and the shareholders grow with each passing day.

Sincerely,


Elizabeth Timmermans