Pereira files countersuit

Published 5:14 pm Friday, October 14, 2016

The defendants being sued by Meredian Holdings Group and its affiliated companies filed a countersuit to MHG’s lawsuit Wednesday, denying the majority of the allegations and describing former CEO Paul Pereira’s side of the story during his two-and-a-half-year tenure with the company.

The countersuit provides an answer to each of the 223 paragraphs of allegations against Periera, his wife, Rachael, and his companies that conducted business with MHG from June 2013 to December 2015. The vast majority of the claims are denied, excluding basic facts such as when meetings took place, and proof is demanded by Periera and his counsel.

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The countersuit argues that Pereira, his wife and his associated companies are owed damages upwards of $600,000 for the alleged mistreatments brought on by MHG and its board of directors.

“I was brought into MHG to fix what was an almost bankrupt company, turn it around, and build shareholder value,” Pereira said. “That is what I did, and to this day I am still

perplexed at why a dispute arose after I had performed; or in reality, what is the true underlying basis of the dispute, as the company’s position in the lawsuit seems superfluous.”

“My primary concern continues to remain with the shareholders of MHG, and while I hope that there will be a solution that will preserve the value I brought about through the turnaround plan. Unfortunately, the company and the shareholders can only be damaged through this litigation.”

“We believe that Meredian will prevail on its claims against Mr. Pereira, and that Mr. Pereira’s countersuit is without merit,” said Leanne C. Mehrman, an attorney for MHG. “Beyond that, we cannot comment on pending litigation.”

The Counterclaim

MHG’s lawsuit claims Pereira mispresented himself to the company’s board and executive committee. The complaint accused him of fraud, conspiracy and says he contributed to damaging MHG.

The countersuit alleges MHG’s predecessors, Meredian and Danimer, of heading in the wrong direction financially, spending upwards of $60 million with no revenue to show, only “overbuilt infrastructure sitting idle.”

One of the problems plaguing both companies was the amount of “insider” control, where family and close friends were given generous compensation packages and stock deals, the countersuit claims. The document refers to individuals Tim Smith, Greg Calhoun, John Dowdy, Ralph Powell and Dick Ivey as “The Bainbridge Five”, a group with much of the insider control.

Upon Pereira meeting them, The Bainbridge Five allegedly were interested in having him work for Meredian and Danimer and decided the next step was for him to tour the facility and meet the boards and shareholders.

During Pereira’s initial meetings with Meredian and Danimer boards of directors and shareholders, he proposed abandoning building large plants and moved toward licensing strategy. One shareholder is claimed to have offered another $1 million of investment after Pereira’s presentation if he was hired.

Within two weeks of making his presentations, Pereira, Meredian and Danimer entered into a binding Memorandum of Understanding on Aug. 2, 2013. Pereira was appointed executive director of both companies and tasked with turning them around. His compensation included: a 20 –percent non-dilutable interest in both companies, $35,000 per month, 5 percent of any capital infusions to the companies and 2-4 percent of any royalties secured through licensing agreements.

After a background check, Pereira was officially and fully employed as executive director of Meredian and Danimer. The countersuit claims the board never requested Pereira’s resume.

From Aug. 1 to Sept. 17, 2013, Pereira stayed at the guest cottage at Southwind Plantation, owned by board member Smith. Pereira was in the process of relocating to Bainbridge with his wife, Rachael, and son, Charles, who both stayed at the cottage for a period of time, the countersuit states.

One evening during his stay at Southwind Plantation, Pereira was given an evening drive around the property by Smith. The countersuit states the two initially made small talk, but Smith stopped the car just outside the hunting grounds and explained that Pereira would be giving 25 percent of his compensation from Danimer and Meredian to the Bainbridge Five and another 5 percent to Sonny Redmond, the individual who introduced Pereira to the two companies. Smith allegedly said that Meredian and Danimer belonged to the Bainbridge Five, and this was the way that business was conducted in Bainbridge.

Pereira allegedly resisted, arguing this was not a part of the Memorandum of Understanding, and even offered to give Redmond 5 percent of his first month’s salary, but Smith is accused of making clear this was not negotiable.

The countersuit states, “Smith gestured to the hunting ground and said, ‘See those woods over there, well in the South, we take people out there that don’t understand our way and behave good.’”

The document states that Pereira agreed to the 30 percent demand out of duress.

When Pereira began working, the countersuit says he became aware of the true state of the company, and that “tremendous misinformation” was provided to him. This includes:

– Dowdy and Whittaker having clients invest into MHG without any SEC filings, knowing very well many were not qualified to be an “accredited investor”

– Company books and records being deficient; no approved budget because the companies never were able to prepare formal account.

– Improper deals between Smith, Calhoun and First National Bank of Decatur County (which included members of the Bainbridge Five on its board of directors).

One allegation claims Meredian and Danimer held a “grand opening” event where the companies falsified their production. Boxes with the company name on it were lined up “as if there was product to be delivered, and had a conveyor belt showing fake product going to nowhere behind a curtain,” the countersuit reads.

Despite these issues, the countersuit states Pereira worked every day for two years, for 80 hours per week, despite his contract only requiring him to work two weeks a month. During this time, Pereira allegedly pursued and successfully merged all entities and removed $110 million of shareholder liability, rebranded the company MHG and gave it a global presence.

In April 2014, MHG entered into a new three-year agreement with Alton for Pereira and his Alton companies’ services, bumping the monthly compensation from $35,000 to $50,000.

By February 2015, the MHG board passed a unanimous vote of confidence in Pereira and discussed another contract extension, the countersuit states.

In June 2015, the company Intrexon made a bid to purchase MHG for $118.8 million, the response claims. One month later, Intrexon increased that offer to $148 million.

By July 2015, the countersuit states MHG’s attitude toward Pereira took a sudden shift, and lists three events that allegedly explain why:

– In July 2015, upon Smith’s urging, Stuart Pratt joined the board of directions and almost instantly began talking about becoming chairman of MHG. Pratt hand-selected the new CEO of MHG after Pereira left, the countersuit reads.

– In August 2015, MHG Chief Financial Officer Jad Dowdy, son of board member John Dowdy, got into an argument with Pereira at a meeting. Jad Dowdy’s performance had allegedly fallen below Pereira’s expectations, and their differences came to the point where Jad Dowdy “hot-headedly threatened Pereira, ‘Either you resign or I will’,” the countersuit reads. Two days later, Jad Dowdy was placed on administrative leave.

– On August 31, 2015, Pereira allegedly told the Bainbridge Five that he would no longer honor the 30 percent extortion deal and would bring it before the board. Four days later, Pereira was allegedly placed on administrative leave due to concerns about inaccuracies on his resume and several other “related trumped-up complaints,” the countersuit reads.

After the MHG board hired an investigator to look into Pereira’s misconduct, Pratt allegedly threatened Pereira to settle for “pennies”, or else release the investigator’s report that would “irreparably” harm Pereira’s reputation, according to the countersuit. Pratt is alleged to say in a phone call that whether the report’s findings were true or false, Pereira didn’t need such rumors circulating.

Pereira was terminated by the MHG board on Nov. 3, 2015. The MHG board allegedly refused to pay Pereira’s stock or pay him any money he was owed.

Pereira’s companies include Alton Group, LLC, Alton Consulting Group, LLC, Alton Group, Inc., Alton Bio, LLC, Alton Bio I, LLC. His wife, Rachael Periera, and her graphic design company House of Miami, LLC, are also defendants in MHG’s lawsuit.

The MHG lawsuit can be read in full here and Pereira’s counter-suit can be found here