Employees of the third-party logistics provider have claimed in a letter to U.S. Securities and Exchange Commission they were pressured to buy stock in CEVA, which then lost all their value in a restructuring, according to a report from The Loadstar.
CEVA employees have asked the U.S. Securities and Exchange Commission to investigate their claims that the company pressured them to buy stock that became worthless in a subsequent restructuring by ownership, according to a report from The Loadstar.
In a letter seen by The Loadstar, employees of the third-party logistics provider claim the executive board of CEVA’s ownership group, Apollo Global Management, “and other self-dealing individuals” displayed “significant abuse of fiduciary responsibilities” in its actions.
“The claims for fraudulent transfers, breach of fiduciary duties and unjust enrichment are overwhelming,” they wrote, adding that they are petitioning the SEC “because individual shareholders do not have the resources to go against Apollo.”
According to the letter, during the process of merging Eagle Global Logistics into the CEVA operations after Apollo’s purchase, employees were “pressured to roll over their proceeds from the sale into Apollo-controlled CEVA under threat of losing their jobs.”
A lawsuit currently being argued in a New York bankruptcy court alleges that CEVA subsidiaries, as well as directors Mark Beith and Gareth Turner, engaged in “a massive constructive and intentional fraudulent transfer, as well as a breach of fiduciary duty” following the liquidation of CEVA Investments Ltd. The CIL shares, owned primarily by CEVA staff as well as former TNT and EGL staff and other investors, lost all value in the liquidation.
“Now, with the swap completed, the former employee shareholders are out millions of dollars, despite the fact that Apollo is using its position of strength…to engage in a highly profitable IPO,” the employees said in their letter to the SEC. “Through these corporate shenanigans, culminating in the upcoming IPO, the management will take in millions while the shareholders, who built the company that made the profits, are left out in the cold.”
The actual value of the lost CIL shares is also at question in the suit, which means the value of the claim can’t be quantified either. According to court documents, two hedge fund investors in CIL have been subpoenaed to disclose documents showing their valuation of the company, but have refused to produce them, which CEVA defense attorneys have called “brazen discovery violations.”
Kasowitz, Benson, Torres and Friedman LLP, the lawfirm representing CEVA’s creditors, however, has said the “underlying data that is used to value the business, is and has always been, in the CEVA defendants’ hands,” therefore, it is the defense that should produce the valuation. According to the claimants, CEVA’s attempts to force them to produce a valuation are “baseless and tactical.”
Partner and head of Kasowitz’s Creditors’ Rights and Bankruptcy Practice Group David M. Friedman did not respond immediately to a request for comment on the SEC letter.
Report: CEVA employees call for SEC investigation
