In a bitter brawl, Arcturus details ex-CEO's alleged misconducts in lawsuit and open letter
The drawn out fight between Arcturus Therapeutics $ARCT and its ex-CEO Joseph Payne has taken a nasty turn: Arcturus is now seeking damages and injunctive relief in a lawsuit.
Late Tuesday, almost two months after Payne was kicked out of the company, the RNA biotech is detailing his “multiple” alleged misconducts. Those include operating a “lucrative side business during business hours” and attempting to transfer Arcturus’ IP for no apparent reason during his tenure, in addition to orchestrating a move to block Arcturus’ routine auditing activity. It followed up Wednesday with a strongly worded open letter to shareholders on Wednesday, in hopes that they would take the board’s side when the time comes to vote on the directors.
Some of these allegations, the company writes, came to light in an investigation following his termination — which, in case you haven’t heard, was mainly due to the company’s widely broadcast claim that Payne breached his “fiduciary duties to Arcturus” in late January.
We have uncovered multiple instances where Mr. Payne attempted to deceive, manipulate and lie to our shareholders, partners and other stakeholders.
According to the complaint, in the days leading up to his firing, Payne came up with a deal to transfer “substantial amounts” of Arcturus’ IP in cancer vaccines to Providence Therapeutics, where his “lifelong personal friend and occasional business partner” Bradley Sorenson was CEO. He tried to force the board into authorizing the transfer, without articulating a business reason for doing so.
As for the side business, Arcturus says he recruited at least two Arcturus employees to help him sell chemical products to corporate buyers, violating his employment agreement. This “undisclosed, unauthorized” gig played out for nearly three years, taking “substantial time and energy” away from his CEO role (which he reportedly leveraged in negotiations for his vendor business).
Payne took the first public swing in the battle royal, claiming that four board members conspired on his ouster. But then Arcturus hit back with its own statement, even as it complied with Payne’s request to vote on new board members. That vote won’t take place until an special shareholder meeting May, but the board — especially the four whom Payne wanted out — is eager to pull investors to their side by showing them the “real Joe Payne.” The lengthy open letter repeats earlier claims that Payne exploited Arcturus, putting his own interests over shareholders’. It also featured a new attack: Payne was a “weak CEO” who showed poor judgment and, upon learning that there were problems with Arcturus’ partnerships, neither fixed them nor reported to the board.
And in a sign of just how antagonistic both parties have gotten, the board made sure to include this line in the letter:
Following repeated requests from Arcturus and our attorneys, we recently received back from Payne his Company-issued-and-paid-for cell phone, more than two months following his termination. The device had been reset to its factory settings, a move by Payne that deleted all information contained on the phone. This raises the question of ‘what else is Payne hiding from Arcturus and its shareholders?’
The fight will now play out in the superior court in San Diego, where Arcturus is based.