Famed Texas Company AmeriTex Faces Lawsuit for Allegedly Falsifying Projections and Breaching Its Obligations to Equity Holder
Dallas, TX … October 3, 2024 – Brewer, Attorneys & Counselors announced today that its client, a former C-Suite executive of AmeriTex Holding, LLC (“AmeriTex”), the parent of AmeriTex Pipe & Products, filed claims against the company, its CEO Kevin Thompson, and director Thomas Murphy, alleging that key executives conspired to contrive financial information to avoid paying him “fair value” for his stake in the company. The filing also names the national accounting firm Marcum LLP and the law firm Kelly Hart & Hallman – both of which allegedly played a role in the claimed conspiracy.
Filed in the 456th Judicial District of Guadalupe County, Texas, on October 3, 2024, the claims lay bare the inner workings of a scheme to deny the executive, Christopher Podlasek, financial benefits to which he is entitled by creating phony projections which understate the multi-billion value of AmeriTex. According to the filing, defendants “manufactured a set of false financial projections (that wildly diverged from the projections AmeriTex recently used in the ordinary course of its business) to avoid paying Podlasek for his 1.5% equity interest.”
Founded in 2009, AmeriTex manufacturers water drainage products used in commercial construction and public works projects. The company rose to prominence as the largest player in Texas’ reinforced concrete pipe industry – which is key to the state’s exploding infrastructure needs and accounts for more than $1.2 billion in economic output. According to the company, its three campus operations are larger than all its competitors’ storage areas combined.
The lawsuit claims that the phony financial projections were created at the same time AmeriTex presented differing, bullish forecasts to the most significant credit rating agencies in the world, including S&P and Moody’s, multinational financial institutions Bank of America and U.S. Bancorp, and institutional investors when it raised $530 million in an October 2023 high yield bond offering. Months later, AmeriTex used the same bullish outlook to secure a new $155 million credit facility from Bank of America.
“Our client believes he was victimized by a scheme to avoid paying him ‘fair value’ for his stake in the company he helped build,” says William A. Brewer III, partner at Brewer and counsel to Mr. Podlasek. “Apparently, AmeriTex and its principals seek to keep financial benefits to which they are not entitled. Lost in the story of this Texas company is the way it attempted to devalue its worth and what it owes a former member of the company. It’s a disturbing tale for those in Texas who have witnessed AmeriTex secure state-funded projects, dominate key markets, and realize astronomical growth.”
The legal claims allege that AmeriTex recruited Podlasek to be Chief Financial Officer during a time of fiscal turmoil – to help it stabilize its back office and finance function, raise capital, and open new facilities. He did so successfully. During Podlasek’s tenure, AmeriTex grew its annual revenue from approximately $100 million to over $320 million. It also secured massive projects and embarked upon new markets – earning a glowing endorsement from Texas Governor Greg Abbott.
The New York Times Reports on Brewer Trial Win
July 29, 2024 – The New York Times reported today on the National Rifle Association of America’s (NRA) trial outcome in Manhattan, calling the verdict a “win” that represents “the beginning of the end of a four-year-old case” brought by the New York Attorney General (NYAG). As reported in the article, “Judge Lets NRA Keep Its Independence but Pushes for Reforms,” the NYAG was seeking the appointment of a court-appointed monitor over the NRA.
As reported, “…Justice Joel M. Cohen of Manhattan Supreme Court said he wanted further assurances that the NRA would reform its governance practices.” The Times reports, “The NRA has held off the most severe regulatory outcomes. Even before the trial, it persuaded Justice Cohen to reject Ms. James’s attempt to dissolve the group, which she referred to as a ‘terrorist organization’ when she was running for office. And on Monday, the NRA beat back her effort to impose a court-appointed monitor who would have had broad authority over its finances and practices.”
William A. Brewer III, the NRA’s lead outside counsel, said Monday’s developments “validate the NRA’s reform efforts and commitment to good governance — and recognize the First Amendment stakes of this case.”
Read more here.
New York Sun Editorial Highlights NRA Legal Success
August 1, 2024 – The New York Sun published an editorial today, “New York’s Gift to the NRA,” that chronicles the “volley of victories” achieved by Brewer client, the NRA. The editorial reports that a New York judge “rebuffed the effort by Attorney General Letitia James to impose a ‘monitor’ on the NRA, which she’d earlier sought to dissolve.”
The editorial also comments on the NRA’s recent unanimous victory before the U.S. Supreme Court – in response to a financial “blacklisting campaign” undertaken by former New York state financial regulator Maria Vullo.
The Sun writes, “These victories couldn’t be more timely” as America nears the upcoming election.
Brewer Client NRA Emerges From Trial Proceedings Without Monitor, Positioned for Future
July 29, 2024 – Brewer client the National Rifle Association of America (NRA) today commented on the conclusion of trial proceedings in New York Attorney General (NYAG) Letitia James’ lawsuit against the Association – announcing it emerged from the proceedings without the appointment of a monitor and remains positioned for a bright future.
Four years ago, the NYAG filed a “dissolution lawsuit” against the NRA – a case that sought to shut down the Association and seize its assets. Today, New York State Supreme Court Justice Joel M. Cohen in Manhattan rejected the NYAG’s demands for a compliance monitor and instead recommended the NRA and NYAG confer to consent to further governance reforms. In accordance with the court’s direction, the NRA will suggest additional reforms in furtherance of its ongoing commitment to good governance.
The NYAG sought something vastly different: a “monitor” that would have been an invasive and crippling remedy with financial oversight, access to employees and records, and an open line of communication with the NYAG. That proposal was rejected by the court.
“Key facts and a chorus of voices established that the relief sought by the NYAG was unwarranted,” says NRA counsel William A. Brewer III. “The NRA organized its defense around an important reality: there was no evidence the NRA Board of Directors condoned the violations in question; instead, the board acted when it became aware of deviations from its own controls. That said, the Association takes seriously its commitment to stay in strict compliance with all controls.”
Joining Brewer in representing the NRA were partners Sarah B. Rogers, Svetlana M. Eisenberg, and Noah B. Peters.
Read reporting on the court's ruling from Courthouse News, Law360, and The New York Times.
Courthouse News: NRA Expert Accuses State of Political Prosecution at NY Bench Trial
July 25, 2024 – Courthouse News reports that a non-profit governance expert for Brewer's client, the National Rifle Association of America (NRA), "lambasted the New York attorney general on Thursday [July 25, 2024] for requesting a court-appointed monitor to supervise the group’s ongoing compliance efforts."
“A monitor in this situation is crazy, unprecedented,” expert Daniel Kurtz testified Thursday during phase two trial proceedings in NYAG v. NRA. “I’ve never seen anything like this happen.”
Currently a partner at Fox Rothschild LLP, Kurtz previously served as Assistant Attorney General-in-Charge of the Charities Bureau in the New York State Attorney General's office.
According to the Courthouse News reporting, during his testimony, Kurtz "accused the state of targeting the NRA for political reasons and asking for unreasonable relief."
“I see New York State both persecuting and prosecuting the NRA,” Kurtz said of this case, acknowledging the NRA is “politically unpopular” in New York.
Per documents filed in the case, the NYAG's office is requesting that the judge overseeing the bench trial appoint a monitor to oversee the NRA for a period of three years. Kurtz argued that such an appointment would result in both employees and members leaving the NRA in droves.
Kurtz testified, “There’s never been a situation, to my knowledge, in which a monitor has been appointed to reform the ‘nonprofit governance’ of an organization” – equating New York’s pursuit of the NRA to McCarthyism and the Second Red Scare of the 1940s and 1950s.
As the report states, the NRA argued in court his week that the organization is on the right track, noting that it has recently hired a chief compliance officer and established new internal protocols.
Read the report here.
Third Lawsuit Claims Biote CEO, Chairman, Aided by Law Firm, Conspired to Direct BioTE Holdings, LLC into SPAC Transaction to Enrich Themselves
July 16, 2024 – A third lawsuit filed by Brewer, Attorneys & Counselors alleges that company executives from Irving-based Biote Corp. – aided by the Cooley LLP law firm – breached their duties to plaintiffs by channeling the hormone therapy company into a value-destructive special purpose acquisition company (“SPAC”) transaction.
The lawsuit was filed by co-trustees of The Yosaki Trust and The Mioko Trust, Russell J. Miller and Mary Miller, on July 12, 2024, in the Court of Chancery of the State of Delaware.
The suit was brought against Biote CEO Teresa “Terry” Weber, Executive Chairman Marc Beer, Mary Elizabeth Conlon, Haymaker Sponsor III LLC, Steven J. Heyer, and Cooley LLP. Haymaker was the SPAC company that acted as the sponsor of the transaction and Cooley acted as outside counsel. The complaint states that the Cooley firm acted in aiding and abetting defendants’ breaches of their fiduciary duties.
The lawsuit alleges that “The Insider Defendants conspired to close this disastrous transaction to divert approximately $70 million of merger consideration to themselves and gain control of an enterprise they did not build. Plaintiffs respectfully request that the Court order Defendants to disgorge their ill-gotten gains.”
The filing follows a recent settlement with shareholder Marci Donovitz over similar issues.
As explained in the filing, a SPAC – also known as a “blank check company”—is a shell company set up by a sponsor that goes public without an operating business to raise funds, but with a plan to find a target private company with an operating business with which it would merge within a fixed period, usually two years.
“Our clients believe this case reveals a startling fact – company insiders worked with a blank check company and a law firm to enrich themselves and dilute the ownership interest of others,” says William A. Brewer III, partner at Brewer, Attorneys & Counselors, and counsel to plaintiffs.
The lawsuit alleges that plaintiffs’ ownership was diluted and devalued by the transaction, which enriched defendants at the expense of the legacy owners – plaintiffs bring the action to recover damages caused by the “disloyal fiduciaries, and those who aided them.”
As publicly reported, Biote was a recent defendant in a separate lawsuit filed by Biote founder and Brewer client Dr. Gary Donovitz regarding the SPAC deal. As reported, in February 2024, Biote disclosed it agreed to buy back nearly $77 million of Dr. Donovitz’s stock to settle the matter. In July 2024, it was reported that Biote reached a $60 million settlement with another shareholder Marci Donovitz, also a Brewer client.
The New York Times: The NRA Is Facing a Court Fight for Control of Its Future
July 14, 2024 – The New York Times reports that Brewer client the National Rifle Association of America (NRA) is preparing to return to a Manhattan courtroom in connection with a lawsuit filed by the New York Attorney General's office – and that the "stakes this time will be far higher."
The Times reports that "the NRA's leadership, not the group itself, was most at risk heading into the earlier phase of the trial. In the second phase, scheduled to begin on Monday in State Supreme Court, a judge will decide whether the group needs outside monitoring, a step that would curb its independence, at least temporarily, and that it stridently opposes."
“Every witness with personal knowledge of the internal workings of the association today concurs that further state intrusion poses a grave, needless threat to the NRA’s recovery,” the association said in a recent legal filing, adding that the first part of the trial had aired events from its “distant past.”
The reporting included comment from the NRA's lead counsel, William A. Brewer III, who acknowledged that "there was misconduct by former vendors and insiders" but said there was "no evidence it continues today. Not a shred."
To read the full report, click here.
Bloomberg Law and The Dallas Morning News Report on $60 Million Shareholder Settlement with Biote
July 8, 2024 – Bloomberg Law and The Dallas Morning News report that Biote reached a $60 million settlement with Brewer, Attorneys & Counselors client and Biote shareholder Marci Donovitz in a lawsuit over its merger with a special purpose acquisition company, also known as a “SPAC” or “blank check company.”
Bloomberg Law reported that Donovitz alleged her shares in the hormone therapy company were diluted by the deal. The article reported that the company will buy back her shares over a three-year period, with $30 million paid upfront. Bloomberg reports that the lawsuit filed in Delaware Chancery Court alleged that Biote company insiders benefited from the transaction with Haymaker Acquisition Corp. III that delivered almost no cash to the company.
“This settlement validates our client’s claim that the transaction was a scheme to enrich a few company ‘insiders’ – and reward them with financial and managerial benefits to which they were not entitled,” William A. Brewer III, a partner at the Brewer firm, said in a statement quoted in the media reports.
The Morning News report noted that as part of the settlement, Biote will be forced to repurchase all 8.3 million of Donovitz’s shares at $7.23 each.
The Morning News article observes that SPACs were once a very popular way for companies to go public but have faced scrutiny from the Securities and Exchange Commission in recent years.
Read the Bloomberg Law report here and The Dallas Morning News report here.