Shortly after Hogan was brought in as a 1/3 owner of Turbine Asset Holdings, LLC (“TAH”), he began helping TAH with business opportunities using his contacts and expertise. [1] One of those business opportunity involved Pratt & Whitney (“Pratt”), which was expected to be a very significant inventory management opportunity worth at least $80MM of a net profit. Hogan led the daily discussions and planning with Pratt and kept Glassman informed of the progress. Meanwhile, Glassman started contacting banks to finance the deal. In August 2015, Glassman and Hogan made presentations and sent relevant materials to Credit Suisse and Deutsch Bank, two potential lenders, identifying both AerReach (Hogan’s company) and TAH as the entities pursuing funding. Since Hogan did not hear back from Credit Suisse, he looked to Glassman for guidance because Credit Suisse was Glassman’s contact, and he continued to work to close the deal over the next few months. In October 2015, Hogan called a joint meeting between Pratt, Deutsche Bank, and Glassman at Pratt’s office in Dallas in an attempt to seal the deal. But shortly before the meeting, Pratt asked Hogan not to attend the meeting and to let Glassman lead the negotiation. He noted the sensitive nature of the deal and Hogan’s prior employment at Pratt. Hogan agreed to not attend the meeting. Hogan was told the meeting was a failure because Deutsche Bank had declined to finance the deal. Hogan insisted Glassman look elsewhere for funding sources, including Credit Suisse, but Glassman remained silent.
In the meantime, the complaint alleges that Glassman and Stanford, through another entity they formed separately, were secretly working with Credit Suisse on the same deal. According to the complaint, utilizing the exact same information and work product developed by the AerReach and TAH partnership, Stanford and Glassman submitted a proposal to Pratt to fund the deal through Credit Suisse, deliberately concealing their actions from Hogan. In addition, the complaint states, Glassman kept sending Hogan text and email messages, in insincere attempts to console and deceive him, such as “[w]e are going to make this happen” and “[t]here will be other deals . . . you are my partner and we’re brothers.” In December 2015, Stanford and Glassman closed the deal with Pratt and Credit Suisse without ever informing Hogan.
Hogan found out that he had been cut out of the deal and confronted Stanford and Glassman. According to the complaint, Glassman did not respond to his “brother’s” question. Hogan sued Stanford, Glassman, TAH, and TAHG, among others, claiming breach of joint venture/partnership/joint enterprise agreement, breach of fiduciary duty, tortious interference with prospective business relations and with an existing contract, and fraud and fraudulent inducement.
You may ask, what could Hogan have done to avoid the situation? Well, it is hard to think of anything that could have prevented such a deliberate, targeted, and shameless scheme to defraud, especially when it was done by someone Hogan trusted. But Hogan could have used some due diligence to learn more about TAH, its affiliates (e.g., AHG), and any related party transactions. He could have insisted on a more detailed limited liability company agreement than the one-page amendment that he was given to sign. He could have had the LLC agreement spell out the exact business of the LLC and what types of activities were business opportunities of the LLC. Although it would have been difficult for Hogan to demand all of those items, given the nature of their relationship at that time, Hogan could have sought the help of a professional attorney to negotiate on his behalf.
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This posting is intended to be a tool to familiarize readers with some of the issues discussed herein. This is not meant to be a comprehensive discussion and additional details should be discussed with your attorneys, accountants, consultants, bankers and other business planners who can provide advice for your circumstances. This article should not be treated as legal advice to any person or entity. Freeimages.com/Photographer aki fukaki.
About the Author
Shawn McBride — R. Shawn McBride is the Managing Member of The R. Shawn McBride Law Firm, PLLC. Shawn works successful, private business owners in their growth and missions to make a company that stands the test of time. You can email R. Shawn McBride or call 407-517-0064.
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