Allezoe Medical Holdings (OTC:ALZM) said board member and secretary Hyman White broke its internal rules and possibly state and federal laws when he wrote an affidavit supporting the un-named plaintiff in a lawsuit filed against Allezoe.
The medical device maker, which just completed a reverse merger of Organ Transport Systems after just 1 year, said White wrote the affidavit “in consultation with plaintiff and plaintiff’s legal counsel, and possibly other senior management of Organ Transport Systems Inc., but without prior disclosure to or consent from management, the board of directors or legal counsel for the company,” according to a regulatory filing.
“This appears to be a breach of Mr. White’s fiduciary obligation to the company and his duties and responsibilities under our code of ethics and guidelines for corporate governance. This conduct also may constitute a violation of his agreed undertaking and obligation to the company, as a publicly reporting and trading company, to act in good faith and without conflicts of interest,” according to the filing. “In addition … it appears that Mr. White’s conduct could also constitute a violation of federal and state securities laws, including the Sarbanes-Oxley Act. To the extent that the audit committee receives evidence or concludes that the latter is the case, then that evidence and the related facts would have to be forwarded to the appropriate authorities for consideration of any further action they may wish to take.”
White founded Organ Transport Systems, which the company’s website still calls “Allezoe’s flagship holding in the medical technology sector.” Allezoe bought OTS from Healthcare of Today a year ago, but reversed course and sold it back this month.
Allezoe said the basis of the lawsuit, with which it hasn’t yet been served, “although not very clear, appears to relate to a promissory note issued by Healthcare of Today Inc. to the plaintiff in the case, which note is identical with a promissory note issued to Mr. White and to other officers and directors of Organ Transport Systems Inc.”
“It also appears that statements made by Mr. White in his affidavit appear to be knowingly false and adverse to the interests of the company,” according to the filing, which notes that the lawsuit appears to claim that shareholders of OTS “should now be considered shareholders” of Allezoe.
“The basis for this unusual claim is not clear, but seems to be based on the fact that Healthcare of Today Inc. later (February 2011) transferred the shares of OTS it acquired from the OTS shareholders in June 2010, to [Allezoe], as a result of which OTS became a wholly-owned subsidiary of [Allezoe],” the company said.
Allezoe said its audit committee is launching a probe into the affair, which will also look into “the facts relating to an earlier attempt to bind the company to onerous employment contracts, with expensive and unwarranted ‘golden parachute’ provisions for Mr. White and other management of Organ Transport Systems Inc. then serving also as officers or directors of [Allezoe].”
The investigation will also consider “the potential use of corporate funds other than for the best interests of the company,” “the possible disclosure of corporate information to unauthorized third parties, including former creditors or shareholders of OTS, stock marketing entities, blog sites and similar stock promoters and manipulators” and whether White or any other officers or directors of OTS had a hand in “instigating, promoting, or aiding and abetting the filing and prosecution of the lawsuit for Mr. White’s own personal benefit or the personal benefit of other officers or directors of OTS,” according to the filing.