The MeVC saga continues. On July 30, Millennium Partners, a New York hedge fund, amended a previously filed lawsuit so that it now alleges that two of four current directors of MeVC Draper Fisher Jurvetson Fund I Inc. (NYSE: MVC) gained their board seats through “proxy statements which were materially false and misleading.”
The lawsuit asks the court the court to invalidate the elections of board members John Grillos and Larry Gerhard and asks the court to order new elections for those board seats, as well as a fifth seat vacated in June by MeVC co-founder Peter Freudenthal. A MeVC spokesperson says MeVC has no plans to fill Freudenthal’s seat or hold a special shareholder meeting for any other reason.
The suit claims that while the 2001 and 2002 proxies state that MeVC director Gerhard was the chief executive of EVineyard Inc., they failed to disclose that Grillos, CEO of MeVC, served as a director of Evineyard-a relationship in which they each oversaw each other.
The suit further claims that MeVC failed to disclose a material relationship between Grillos and Osprey Ventures. The suit cites Osprey literature stating that Grillos “works closely with the Osprey Ventures General Partner to provide deal flow and early-stage investments for the fund,” and it states that Osprey was a prior-round investor in two MeVC portfolio companies.
MeVC’s board responded to what it described as “publicity-seeking litigation” with a two paragraph statement when the suit became public. “It is in our shareholders’ best interests to contest this vigorously-and we will,” the board’s release states.
It goes on to say that the board “is pursuing a disciplined, orderly program to build value for MeVC shareholders.”
Robert Knapp, managing director of Millennium, responded to MeVC’s release as it came up for the first time on his computer. “Wait. We’re on the wires,” he said. Then, after reading the release aloud, he said: “How is that [director independence] not pertinent to shareholders?”
Since March, Knapp has claimed that his goals for the fund include at least a partial return of its uninvested capital, a new fee structure and new managers.
He says top-notch parties have expressed interest in taking over management. “Our recommendation to the board has been to change its investor agreement,” Knapp says. He says he has suggested removing its focus on technology companies and its limits to equity investing. He says it should become a traditional business development corporation, paying a regular dividend.
Contact Charles Fellers