justice © Aprescindere
© Aprescindere

CEVA employees who claim they were pressured to invest in the company and then lost their equity when owner Apollo restructured, have asked the US Securities and Exchange Commission (SEC) to investigate.

They claim, in a letter, seen by The Loadstar, that Apollo Global Management’s board “and other self-dealing individuals” showed “significant abuse of fiduciary responsibilities”.

The letter says: “The claims for fraudulent transfers, breach of fiduciary duties and unjust enrichment are overwhelming.”

The group has turned to the SEC, “because individual shareholders do not have the resources to go against Apollo”.

The letter claims that when Apollo bought Eagle Global Logistics (EGL), and folded it into CEVA, managers and employees were “pressured to roll over their proceeds from the sale into Apollo-controlled CEVA under threat of losing their jobs”.

It adds: “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.

“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 December-dated letter, from law firm Hillis Clark Martin & Peterson, also points out that although the case is currently in court, “a brief glance at the docket sheet…will show what happens when a lawsuit is filed involving the Apollo entities”.

The bankruptcy court case has indeed garnered a great deal of documents and letters, with 97 pages filed last month alone. Apollo, CEVA and its advisers have produced more than 65,000 documents.

The parties have until February 5 to complete their “fact discovery”.

CEVA subsidiaries, as well as directors Mark Beith and Gareth Turner, are alleged by the creditors to have carried out “a massive constructive and intentional fraudulent transfer, as well as a breach of fiduciary duty” following the liquidation of CIL. The shares in CIL, owned by CEVA staff and former TNT and EGL staff as well as other investors, lost all value with the liquidation.

However, the value of the shares –  thus the claim – is currently uncertain.  Two hedge fund investors in CIL, Cyrus and Allen, have been subpoenaed to disclose documents showing their valuation of the company, but they have refused to produce them – what the CEVA lawyers have claimed is “brazen discovery violations”.

Lawyers for CEVA are also arguing that the claimants too must put a dollar value on their loss. But the trustee representing the creditors has pointed out that not only is CEVA a complex company operating in more than 100 countries, but that the “underlying data that is used to value the business, is and has always been, in the CEVA defendants’ hands”, and that  CEVA’s attempts to force them to produce a valuation are “baseless and tactical”.

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