Callidus Capital Corp. is suing a former employee over allegations of misconduct related to loans to three companies that include claims of forged letters and artificially inflated financial results.
Toronto-based Callidus lends money to companies that are unable to borrow from traditional lenders such as banks, and has approximately $1.2-billion outstanding on 28 loans. In early February, Craig Boyer, the company's former chief underwriter, sued Callidus in the Ontario Superior Court of Justice over vacation pay, health benefits and stock options that he said he is owed after being "constructively terminated" last August.
Mr. Boyer's claim, which has not been heard in court, alleges that Callidus is a "poisoned workplace" where chief executive officer Newton Glassman sets out a management style that includes "hyper-aggressive positions with third parties and employees, berating and belittling employees by e-mail and verbally and on occasion, physical abuse."
Callidus, which is in the midst exploring whether it should go private, responded Monday with a counterclaim that stated Mr. Boyer quit his job, and that the company treats employees "fairly and with dignity." Callidus is claiming $150-million in damages from Mr. Boyer, alleging that the former executive "deliberately misled" the company's internal credit committee on loans made to three companies.
The lawsuit claims that Mr. Boyer directed management of Xchange Technology Group LLC (XTG) to "artificially inflate EBITDA" and therefore "deliberately misled Callidus" over XTG's financial results. XTG is a Morrisville, N.C.-based company that resells IT products and services.
Callidus also alleges that Mr. Boyer "failed to conduct adequate due diligence" at Gray Aqua Group, a salmon farming operation in Atlantic Canada. Callidus wrote off $37.4-million on loans to Gray Aqua last year after repeated problems with disease and parasites, and the assets were recently purchased by a rival fish farm.
The final part of the claim is that Mr. Boyer allowed Horizontal Well Drillers, a U.S.-based oil fields services company with contracts to drill in Venezuela, to "create a letter on forged Callidus letterhead purporting to make financial commitments on behalf of Callidus." This letter was allegedly sent to the Venezuelan government because Horizontal asked Mr. Boyer to "provide a commitment from Callidus" to show to Venezuelan officials.
None of the claims have been heard in court.
The two sides agree that Mr. Boyer announced in 2015 that he planned to retire at the end of 2016 for person and health-related reasons. Peter Griffin, a lawyer at Lenczner Slaght Royce Smith Griffin LLP who is representing Mr. Boyer, said Tuesday in an e-mailed statement: "Craig Boyer was a long-standing employee of Callidus Capital Corporation who left for the reasons indicated in his statement of claim. He has simply endeavoured to recover his vacation pay and other compensation entitlements and is met with a $150-million counterclaim."
Callidus is controlled by private equity fund Catalyst Capital Group Inc., which Mr. Glassman founded in 2002. Callidus was spun out as a public company in 2014 and is no stranger to controversy. In 2015, short sellers took a run at the company following critical research reports from hedge fund West Face Capital Inc. and Veritas Investment Research Corp. Callidus subsequently sued both firms and that litigation is ongoing.
Callidus subsequently introduced share buybacks and saw its stock price rise. This past October, Callidus announced Goldman Sachs & Co. had been hired to advise on a potential privitization of the company. This past month, Callidus announced that 17 potential bidders showed an interest, and that the process was expected to completed by the end of the second quarter of this year.
Callidus has consistently marketed itself as a skilled lender: The company's most recent investor presentation, from May, 2016, shows Callidus has made a total of 101 loans since 2006, had 17 go through some form of restructuring, and only lost money on four of loans.
Dan Gagnier, a spokesman for Callidus, said in a written statement: "The issues and amounts referenced in the counter claim against Mr. Boyer have been reflected in Callidus' historical financial statements and other disclosures. Callidus' business continued to perform exceedingly well despite the actions of Mr. Boyer, as reflected in our earnings results. Mr. Boyer initiated baseless legal proceedings and we are committed to taking appropriate action to protect the interests of our shareholders."