81. Plaintiff brings this action derivatively in the right and for the benefit of JBI to redress injuries suffered, and to be suffered, by JBI as a direct result of the breaches of fiduciary duty by the Individual Defendants. JBI is named as a nominal defendant solely in a derivative capacity.
82. Plaintiff will adequately and fairly represent the interests of JBI in enforcing and prosecuting its rights.
83. At the time this action was initiated, the Board was comprised of four directors: defendants Bordynuik, Smith, Wesson, and Bagai. Plaintiff did not make any demand on the Board to institute this action because such a demand would have been a futile, wasteful and useless act.
84. Demand in this action is governed by the laws of Nevada, the state of JBI’s incorporation.
85. Plaintiffs did not make any demand on the Board to institute this action because such a demand would have been a futile, wasteful and useless act, since the entire Board would be incapable of evaluating such a demand in a disinterested and independent manner for several reasons:
a) First, a pre-suit demand is excused because at most only half of the Board is even arguably disinterested and independent. Both defendants Bordynuik and Smith are long time executive officers and directors of JBI, whose primary livelihoods are bound up in the Company. In 2010, Smith was paid a salary of $100,000, as well as a share-based award valued at $555,000. Defendant Bordynuik reportedly only received $6,923 in compensation in 2010, but on December 9, 2009 Bordynuik returned twelve million of his common shares to the Company's treasury and was issued one million non-convertible preferred shares, with 100 to 1 voting rights and no dividend income. On November 29, 2011, Bordynuik disposed of 3,000,000 shares of JBI, at a value of $4,050,000. Even with this large scale sale of JBI shares, Bordynuik still holds over 5,000,000 shares of JBI. In addition, Bordynuik is the controlling shareholder which means he controls the board of directors he himself picked and every aspect of JBI, including how much he pays himself out of invested funds.
b) Plaintiff did not make any demand on the JBI Board to institute this action because such a demand would have been a futile, wasteful and useless act, since a majority of the Board – comprised of defendants Bordynuik, Smith, and Wesson – signed off on and published the incorrect valuation figures for the Media Credits contained in the 10-K even though they knew or should have known that the valuation of the Media Credits did not conform to GAAP. Accordingly, there is a substantial likelihood that defendants Bordynuik, Smith, and Wesson will be held liable in connection with the complained of activities.
c) Plaintiff did not make any demand on the defendant Wesson to institute this action because such a demand would have been a futile, wasteful and useless act, given there is a substantial likelihood that defendant Wesson will be held liable in connection with the complained of activities. Defendant Wesson was a member of the Audit Committee during the time period that the Company improperly accounted for the Media Credits, yet Wesson took no steps to prevent the improper accounting from occurring or being publicized in an effort to raise funds for JBI. This is not surprising given that upon his appointment to JBI’s Board of Directors, Wesson said, “since I have come to know John Bordynuik, and the company he has created, I have been continually impressed by the scope of vision, the integrity and potential inherent in this company. I consider it a great honor to be asked to serve on the Board of Directors, and shall endeavor to fully represent the values exhibited by the CEO, promoting both the best interests of the Company and the best interests of the shareholders. The coming months shall prove to be exhilarating, as the Company moves on many fronts to expand its operations, and I am truly excited to be a part of JBI at this time.”
d) Moreover, current JBI Board members Bordynuik, Smith, Wesson, and Bagai, as well as former JBI Board members Bradshaw, Goldberg, and Fairbairn, issued false and misleading proxy statements to JBI shareholders in 2010 and 2011. These proxy statements failed to disclose that the JBI Board had not implemented internal controls for JBI’s compliance with GAAP. These false and misleading proxy statements breached the JBI Board’s fiduciary duty of loyalty (and candor). Accordingly, a presuit demand upon the JBI Board is excused on this basis as well.
e) Demand on defendant Bagai to institute this action would have been a futile, wasteful and useless act because he cannot possibly be disinterested and independent. On April 28, 2010, Bagai, then just a JBI shareholder, stated, “I just attended the first JBI Global shareholder’s meeting in Niagara Falls, where John Bordynuik gave a brilliant presentation on converting plastic to oil efficiently and economically. JBI will help solve the global plastic waste problem, and I recommend everyone look. The enormous potential of this company, the character of the CEO, and his ability to inspire others is awesome.” Not surprisingly, given defendant Bordynuik’s desire to surround himself with sycophants, two days later, Bagai was appointed to the Board.
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