Arcturus Therapeutics Initiates Lawsuit Against Joseph E. Payne to Protect the Interests of Arcturus Shareholders
Complaint Details Extensive Misconduct by Mr. Payne during Tenure as CEO
Cites Mr. Payne’s Self-Dealing and Inappropriate Business Conflicts of Interest
As detailed in the complaint, the Company alleges multiple examples of Mr. Payne’s misconduct, including a number that have come to light as a result of an ongoing investigation following Mr. Payne’s termination for cause, including:
- Misrepresenting material information and attempting to transfer a substantial amount of Arcturus’ intellectual property for no consideration: the primary reason for Payne’s termination was his breach of fiduciary duties to Arcturus in late
January 2018. Mr. Payne’s breach related to his attempted transfer of substantial amounts of Arcturus’ intellectual property for no consideration and for no articulable business reason to Providence Therapeutics, a company with little to no expertise in the highly technical field of cancer vaccines, and to its CEO, Bradley Sorenson, an Arcturus investor and Payne’s lifelong personal friend and occasional business partner. On at least two occasions, Mr. Payne attempted to force the private company board of Arcturus Therapeutics Inc.(ATI), and after the completion of the merger with Alcobra, the Arcturus Board to approve this amendment to an existing agreement between the Company and Providence Therapeutics.
- Operating an undisclosed, unauthorized, and lucrative side business during business hours: Mr. Payne operated an undisclosed, unauthorized and lucrative side business in which he acted as a vendor selling large quantities of chemical products, including a substance called Ionophore, to various corporate buyers, in violation of his employment agreement. Mr. Payne recruited at least two ATI employees in his scheme, and may have even used his position as CEO to negotiate more favorable terms for these personal transactions. Payne devoted substantial time and energy to this side business during normal business hours over the nearly three years during which he pursued it.
- Retaliating against the Board and engaging in a campaign to convince other shareholders to arbitrarily reject the Company’s independent auditor: Despite his continuing fiduciary duties as a Company Director, Mr. Payne has charted a course of interference and sabotage fueled by spite. Following his termination, Mr. Payne’s actions resulted in the rejection of one of the most routine, yet essential resolutions for a public company: the ratification of the appointment of its independent auditors. After voting to support the proposal in his fiduciary role as a member of Arcturus’ Board, Mr. Payne then inexplicably voted his shares against the proposal, which, together with the votes of his known associates, resulted in the rejection of this proposal. This action left the Company in a potentially precarious situation with respect to meeting its public company reporting obligations. The failure to appoint an independent auditor can have severe consequences for the Company and its shareholders, including potential delisting from the NASDAQ Exchange, as well as possible sanctions by the
Securities and Exchange Commission.
The Executive Committee of our Board is unanimous in its belief that Mr. Payne demonstrated poor judgment and made poor decisions during his tenure and continues to have significant concerns regarding his apparent collusion and self-dealing.
We have uncovered multiple instances where Mr. Payne attempted to deceive, manipulate and lie to our shareholders, partners and other stakeholders. In fact, following repeated requests from Arcturus and our attorneys, we recently received his Company-issued cell phone, more than two months following his termination. The device had been reset to its factory settings.
Mr. Payne’s misconduct and breach of fiduciary duties necessitated his termination and we believe this lawsuit is necessary to protect Arcturus’ rights and interests, as well as the interests of our shareholders and our other stakeholders. We will continue to take all appropriate steps in this regard.
The Company is conducting an ongoing investigation of Mr. Payne and his associates, and may take further legal action.
A full copy of the complaint will be available on Arcturus’ website.
|If investors have any questions, please contact the Company’s proxy solicitor:
509 Madison Avenue
New York, NY 10022
Stockholders Call Toll Free: (800) 662-5200
Additional Information and Where to Find It
In connection with the meeting, Arcturus will make available to its shareholders of record a proxy statement describing the time and place for, and other logistical information related to, the meeting and the proposal to be voted upon at the meeting, along with a WHITE proxy card enabling them to submit their votes on that proposal. Arcturus will also be furnishing copies of the proxy statement and WHITE proxy card to the
The full text of the proposed resolution for the meeting, together with the form of the WHITE proxy card, may also be viewed beginning on
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Source: Arcturus Therapeutics, Inc.