How is this not a fraud?
Below are shareholder claims in the lawsuit against Douglas Rink from his time as CEO of Fortran Industries. Rink resigned April 19, 2018.
Plaintiffs allege that Fortran’s chief executive officer and chairman, Douglas Rink (“Rink”), has engaged in “mismanaging Fortran and misappropriating, misapplying, and improperly using Fortran’s property and assets[.]” (Compl. ¶ 20.)Plaintiffs specifically claim, among other things, that Rink used Fortran’s funds or assets for his own benefit, issued common and preferred shares to himself without shareholder approval, failed to pay Fortran’s debts when they were due and owing, failed to conduct necessary audits, and failed to hold any board or shareholder meetings.
The Qualified Plaintiffs have supported their Requests with a certified transcript of a recorded telephone conversation in which Fortran’s CFO candidly discussed his view that Rink had potentially engaged in illegal activities as Fortran’s CEO and caused Fortran to engage in improper and potentially illegal transactions.
Based on the Court’s review of the record, the Court further concludes that the Qualified Plaintiffs have offered sufficient evidence to show that they have a good faith belief, supported by evidence, that CEO Rink has engaged in substantial wrongdoing, including self-dealing, corporate mismanagement, corporate waste, and other breaches of his fiduciary duties to Fortran.
Although the Qualified Plaintiffs clarified Request 12 in their brief in support of the Inspection Demand by identifying certain specific transactions—the purchase of property in Conover, North Carolina through the issuance of a Fortran debenture, the placement of Rink Media LLC vehicles on a B&L Telephone, LLC(“B&L”) insurance account, and the retention of proceeds of certain B&L vehicles after they were sold—our courts are clear that the Court’s assessment of “reasonable particularity” must focus on the Qualified Plaintiffs’ actual demand, not on any subsequent court filings.
