Eugenia VI Venture Holdings filed suit in April against MapleWood Partners Founder and Managing Principal Robert Glaser in what has became the latest in a series of lawsuits that have grown from the Florida buyout firm’s ill-fated investment in AMC Computer Corp.
Eugenia claims it was the victim of fraud, while Glaser says the suit is a tactical maneuver meant to strengthen other lawsuits.
A copy of the latest lawsuit was provided to Thomson Financial (publisher of VCJ). On April 24, Glaser says that he and his attorneys were given a draft of the suit and told it would be filed if other lawsuits pertaining to the Eugenia/AMC matter were not settled to the plaintiff’s satisfaction.
“I refused to be blackmailed or intimidated,” says Glaser, who adds that he has filed countersuits against Eugenia charging defamation of character and tortuous interference. “It’s unfortunate to be in this litigation. This is not how I enjoy spending my time.”
The lawsuit against Glaser—filed April 18 in the U.S. District Court in New York—accuses him of using fraud to secure loans for AMC. The suit seeks unspecified compensatory and punitive damages. The suit says that AMC owes Eugenia about $7 million, according to their credit agreement.
Glaser says Eugenia’s losses are significantly smaller than MapleWood’s losses on the AMC deal and that MapleWood behaved responsibly on everyone’s behalf. He estimates that that disputes over the AMC investment have resulted in Eugenia launching about 10 different suits, involving 15 different defendants.
“Eugenia is owed a lot of money and is pursuing those people who owe it,” says Mitchell Karlan, a partner with the law firm Gibson Dunn & Crutcher, which is representing Eugenia. Karlan denies that the lawsuit is a legal tactic and says it is based on information that came to light during the discovery process of the other lawsuits.
In August 2000, MapleWood acquired AMC, a New York-based supplier of high-end computer equipment, software and IT services, in a transaction valued at more than $100 million. GE Capital and Key Corporate Capital provided financing for the deal.
In the fall 2002, a capital restructuring of AMC turned MapleWood from a majority shareholder to a minority shareholder. After the capital restructuring, a dispute of the appropriateness of loans to AMC from Eugenia resulted in Eugenia filing lawsuits against members of AMC and MapleWood’s management, including Glaser. Those cases are still pending.
The new suit claims that Glaser exercised control over the company and disregarded standard accounting and managerial practices and that he purposely withheld key information regarding the finances of AMC. Among the suit’s allegations are that Glaser concealed the results of a meeting between MapleWood and GE in which GE complained about AMC’s accounting practices.
Eugenia attorney Karlan also represents limited partner Casita in its lawsuit against MapleWood. Casita filed a lawsuit against MapleWood seeking to stop it from being stripped of its investor rights after it missed a capital call (see VCJ, May 2006). That suit alleges that the capital call is invalid because the funding would be used to defend MapleWood and its partners against other lawsuits in the AMC Computer matter. That case has stalled over a dispute involving Gibson Dunn & Crutcher and other attorneys representing Casita.
Many legal observers watching the situation unfold believe that the case most likely is headed for an out-of-court settlement. But Karlan was skeptical about such a resolution.
He expects that the cases involving Eugenia, AMC and MapleWood will be combined under one trial.
The AMC acquisition was one of the first investments from the MapleWood Equity Partners fund. Coral Gables, Fla.-based MapleWood Partners closed its inaugural fund, MapleWood Equity Partners, in 2000 with $135 million. LPs in MapleWood Equity Partners include BancBoston Investments, Bank of America Capital Corp., CIBC Capital Corp., the University of Chicago Endowment, Travelers Insurance Co., Phoenix Home Life, GE Capital and Key Corporate Capital.