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Attorneys for Democratic gubernatorial hopeful Shri Thanedar have denied allegations in a federal business fraud lawsuit that he misrepresented his former company’s earnings and value when he sold it in 2016.

In a 51-page response to a November complaint from a parent company for Avomeen Holdings, Thanedar’s lawyers reiterated what he told The Detroit News and other media outlets in November: The Ann Arbor businessman didn’t make “fraudulent and misleading” claims through which he earned $20 million in selling his former company.

“The allegations of wrongdoing by Mr. Thanedar in the principal Complaint are false and denied by him in their entirety,” according to the legal response.

High Street Capital, parent company for Avomeen Holdings, bought a controlling stake in the Avomeen chemical testing business and sued Thanedar in November in the U.S. District Court in Detroit. It alleged that he was dishonest about his former company’s monthly income and personally directed employees to make it appear as if revenue growth was more stable than it really was.

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Thanedar’s legal team countered that High Street Capital made “numerous managerial missteps” this past June and argued that revenues between June and December 2017 “are anticipated to significantly exceed those for the same period in any of its previous years of operations.”

Thanedar formally launched his campaign for governor in June and has committed nearly $6 million of his personal fortune to the race as he looks to make up ground on early Democratic frontrunner Gretchen Whitmer of East Lansing.

Former Detroit Public Health Department Director Abdul El Sayed and former Xerox Gobal Vice President Bill Cobbs are also among those running against Thanedar in the 2018 Democratic primary.

The lawsuit alleged that the 62-year-old businessman told employees that the sale and related employee bonuses would be jeopardized if the company did not meet monthly revenue targets. Thanedar is also accused of telling record keepers to back date invoices so revenue could be recognized in prior months to make the company’s income stream appear more stable than it was.

The lawsuit alleges Thanedar violated the federal Securities Exchange Act of 1934, the Michigan Uniform Securities Act, the Deleware Securities Act, common law fraud and breach of contract

High Street Capital, a Chicago-based private equity firm, agreed to pay a “pre-adjustment” price of $33.6 million for a “membership interest” in Avomeen, according to a purchase agreement disclosed in federal court. Attorneys say Thanedar retained a minority interest in the company but received sale proceeds of about $20 million.

“Rather than focus on the steps necessary to increase revenues in a competitive industry, Avomeen Holdings and High Street Capital chose to blame the company’s difficulties on Mr. Thanedar,” according to Thanedar’s attorneys from the Clinton Township-based Matecun, Thomas & Olson, PLC.

“As part of this scapegoating of Mr. Thanedar, Avomeen Holdings breached its obligations under the parties’ agreements by, among other things, failing to make deferred payments to him, interfering with his right to collect escrowed funds, disparaging him to third parties and terminating him from the company’s board.”

Avomeen Holdings attempted to rescind the purchase agreement and all related transactions in April, according to the suit. Thanedar and the Chemreal LLC company he created during the sale “refused that demand,” attorneys said.

Purchasers are seeking a jury trial and an unknown financial award in the case, requesting compensatory and punitive financial damages, attorney fees and any other relief.

mgersetein@detroitnews.com

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