Former CFO Sues T. Boone Pickens' Son

AUSTIN (CN) - The son of corporate raider T. Boone Pickens "funneled" tens of millions of dollars from commercial space company Astrotech while mismanaging the company so badly its share price dropped by 89 percent, the former CFO claims in court.
     John Porter sued Astrotech CEO Thomas B. Pickens III and five other company directors in a derivative complaint in Travis County Court.
     "Astrotech once traded as high as $146 per share in the mid-1990s," the complaint states. "Since 2007, when Mr. Pickens became CEO, the company has incurred net losses each year and has lost a staggering eighty-nine percent of its market value."
     Porter claims the losses are due to Pickens' breach of fiduciary duties, self-dealing, misappropriation of corporate assets and usurpation of corporate opportunities.
     He says the company has been warned of delisting at least three times by the NASDAQ Global Market, due to its shares consistently trading below $1 per share. "Mr. Pickens hand-picked the director defendants for loyalty to himself, and they rubber-stamped Mr. Pickens' actions under circumstances that would have alerted reasonable directors to the need to make additional inquiries," the complaint states. "The director defendants failed to supervise the company's operations, and looked the other way while Mr. Pickens funneled tens of millions of dollars out of the company for his own benefit."
     Austin-based Astrotech, founded as Spacehab in 1984, provides commercial space products to NASA, the Department of Defense, international space agencies and commercial clients. It provides pre-launch processing for satellites and other spacecraft, space hardware design and manufacturing and microgravity commercial drug development services, according to its website.
     The company's Spacehab modules flew on 22 Space Shuttle missions. It performed eight resupply missions to the International Space Station and seven to the Russian space station Mir, according to publicly available company press statements.
     In his complaint, Porter said the company's core operating unit is Astrotech Space Operations, which generates "virtually all" of the company's revenue. Its other unit, Spacetech, is a technology incubator for commercialization of space-industry technologies. Spacetech is composed of two subsidiaries, 1st Detect and Astrogenetix.
     Porter claims Pickens made the company give two loans to its subsidiaries in 2010 - $1 million to 1st Detect and $2.5 million to Astrogenetix.
     "The purported loans were nothing more than fraudulent transfers from the company to the subsidiaries," the complaint states. "The loans were unsecured, bore no interest and failed to provide for repayment. The director defendants approved the loans notwithstanding their complete lack of security or terms for repayment. The director defendants instead, as is their practice, rubber-stamped Mr. Pickens's decision to transfer $2.5 million to the subsidiaries without considering whether the transaction was in the best interests of the company.
     "Mr. Pickens has since caused the company to transfer an additional $6.5 million in company funds, representing nearly all of the company's profits, to the subsidiaries without even going to the trouble of drawing up the paperwork for a sham loan or seeking approval from the board (the 'unauthorized transfers'). Because of Mr. Pickens' significant ownership in the subsidiaries, the unauthorized transfers represented a clear conflict of interest on Mr. Pickens' part and required approval by an independent committee of the board."
     Porter claims that despite being one of the highest paid CEOs in Austin, Pickens has billed the company for more than $100,000 for inappropriate personal expenses, in breach of company policy and his own employment agreement, "in return for which the company has received nothing of value."
     "Every month, Mr. Pickens charges tens of thousands of dollars to his company credit cards," the complaint states. "Mr. Pickens' prodigious spending includes thousands of dollars for clothing, sports car tires and flights all over the world, including a $20,000 trip to a TED conference in California that had nothing to do with the aerospace industry."
     Pickens also made inappropriate use of company assets for the benefit of his friends, Porter says.
     "Mr. Pickens' golfing companion Michael Samouce has a lease for an office at the company's headquarters in the Frost Bank building in Austin, Texas, but has never paid rent," the complaint states. "Every month, the company booked a receivable from Mr. Samouce and wrote it off the same day. Mr. Pickens boasted that he never paid for rounds of golf at Austin Country Club because Mr. Samouce paid for all of his outings in exchange for free use of the company's offices."
     Porter claims that during his tenure as CFO he repeatedly brought these issues to the directors' attention but that no action was taken, other than a resolution urging Pickens to comply with company policy.
     In December 2012, Astrotech was awarded a $16 million contract to provide commercial payload processing services at Vandenberg Air Force Base in California. Running through December 2017, the deal allows the company to compete for NASA missions planned for launch from the base, the company said in a statement.
     Porter seeks damages for breach of fiduciary duty, waste and usurpation of corporate opportunity. He is represented by William Reid with Reid Collins in Austin.