RI’s Trial of the Century? Alex and Ani, LA Star Attorney and Allegations of Shareholder Fraud
Tuesday, March 07, 2017
Michael Mota, a former executive at an Alex and Ani subsidiary, is accusing Alex and Ani and top executives, including Carolyn Rafaelian, of everything from manipulation of billing to avoid taxes, intimidation, threats, and taking employees' personal properties.
SEE SLIDESHOW BELOW -- READ THE MOTA COMPLAINTS AND COUNTER CLAIMS BELOW
In an unrelated case, Alex and Ani’s former Acting Chief Operating Officer, David Medeiros, claims that Alex and Ani's Rafaelian and the company were guilty of a range of indiscretions including shareholder fraud, and anti-military rants.
As GoLocal first reported on Monday, Mark J. Geragos has represented the late Michael Jackson, Winona Ryder, Nicole Richie, and singer Chris Brown, and is now serving as counsel for Alex and Ani in the two lawsuits.
According to Geragos’ website, “Geragos is the only lawyer besides Johnnie Cochran ever named "Lawyer of the Year" in both Criminal and Civil arenas. California Law Business Magazine named Geragos "One of the 100 Most Influential Attorneys in California" three years in a row, and Geragos has repeatedly been voted by his peers as one of Los Angeles' SuperLawyers.
In contrast, Mota and Medeiros share the same Rhode Island attorney -- Mike Kelly.
The two cases are scheduled to be heard by Superior Court Judge Michael Silverstein. Recently, he oversaw the civil cases relating to 38 Studios.
Of notable concern was the fact that Rafaelian directed Seven Swords employees to disregard or otherwise destroy invoices for work performed on behalf of Rafaelian’s personal ventures. Plaintiff had previously complained to Rafaelian, Feroce and David Rozen, CFO for Alex and Ani, that the provision of services by Seven Swords to Rafaelian for her personal benefit, without compensation to Seven Swords, was draining the finances and resources of Seven Swords.
Correspondingly, Rafaelian directed Seven Swords to use its own equipment, employees and materials for the benefit of Rafaelian’s personal ventures and properties. Seven Swords incurred substantial expenses of over Five Hundred Thousand Dollars ($500,000.00) in connection with work performed on behalf of Rafaelian’s personal ventures, such as Belcourt, Carolyn’s castle, Sakonnet Vineyards, Teas and Javas and her many personal residences.
The failure of Rafaelian to acknowledge the substantial amount of services provided to her personal ventures by Seven Swords, and Rafaelian’s directives to cancel any and all invoices related to the services rendered, was a deliberate attempt to avoid payment of State and Federal income taxes.
These irregularities and unlawful practices were conducted without full disclosure to Alex and Ani stockholders and/or investors, and in violation of several State and Federal tax codes and laws governing corporations.
Justifiably alarmed by these irregularities and unlawful practices, Mr. Mota repeatedly expressed his concerns and reported the violations directly to his supervisors and Alex and Ani’s general counsel, and Mr. Mota also disclosed his intent to report these unlawful activities to an appropriate public entity if remedial action was not taken.
Throughout his employment with Seven Swords, Mr. Mota breached his fiduciary duty of loyalty and committed corporate waste by either making or approving considerable expenditures on Seven Swords’ corporate credit card, which were far in excess of the range of what any reasonable person would deem reasonable, and which served no corporate purpose. Such expenditures include more than $32,000 in dining expenses in an 18-month period, part of which are $9,000 in expenses at local restaurants without any supporting receipts or explanation as to the reason for the expenditure.
Defendants are without knowledge or information sufficient to form a belief as to the truth of Mr. Mota’s allegation, however, in the event Mr. Mota’s allegations are true, then he breached his fiduciary duty by self-dealing insofar as he stood on both sides of the transaction, expecting to derive a substantial personal financial benefit from it. At no time during his employment with Seven Swords did Mr. Mota disclose to any supervisor or the Seven Swords board that he was to receive a substantial financial benefit pursuant to the proposed transaction, including $100,000 upon the commencement of his employment with GoGo Media, substantial stock in GoGo Media within one year, and 1,000,000 shares of GoGo Media stock after the completion of one year of employment.
No trial date has been set. A call placed to Geragos was not returned.
READ ALL THE COMPLAINTS AND COUNTERSUITS BELOW
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