GrafTech Proxy Battle Becomes Bitter
ALBANY, N.Y. (CN) - A former director of a public company who says he became "collateral damage" in a bitter proxy fight wants a New York court's help in repairing his reputation.
Michael C. Nahl of Albany served 14 years on the board of directors of GrafTech International, a suburban Cleveland manufacturer of graphite electrodes and other carbon-based products. He left the board last year.
Nahl claims he was maligned in written materials GrafTech issued before its annual shareholders' meeting, which was scheduled for Wednesday.
"In the proxy statement, GrafTech defames and disparages Mr. Nahl by falsely accusing him of corruption, dishonesty, conflict-of-interest, and breaches of fiduciary duty in discharging his duties as a director of GrafTech," Nahl says in a complaint in Albany County Supreme Court.
Nahl says he was targeted by GrafTech's board because of his support for another former director, Nathan Milikowsky, who also left the board last year.
Milikowsky, a co-founder and executive in two companies acquired by GrafTech in 2010, wants to return to the board, bringing with him two other independent directors to help steer the company in a new direction.
The dissidents, calling themselves "Save GrafTech," filed a competing proxy statement with the U.S. Securities and Exchange Commission that asks GrafTech shareholders to elect them at the annual meeting.
They contend the incumbent board "failed to take timely steps needed to alter GrafTech's downward trajectory as sales declined, operations suffered and customer relationships eroded," according to a letter Milikowsky wrote to shareholders and filed with the SEC.
Nahl, who spent his career as a corporate executive, alleges in his complaint that the incumbent board's desire to win the proxy battle led to an effort to smear Milikowsky - and to defame him in the process.
He says the proxy filed by GrafTech details an "undisclosed arrangement" in which Milikowsky solicited a risk-free investment from "another director (who was chair of the Audit Committee)" that subsequently led that director to become "a supporter of Nathan Milikowsky's agenda."
Although the director is not identified by name, Nahl says the description fits him, since he served as chairman of GrafTech's audit committee for more than a decade. "[A]ny reader of GrafTech's public filings would readily understand [it] to refer to Mr. Nahl," the complaint states.
Nahl says he did make an outside investment through Milikowsky in a holding company that in turn invested in a medical technology firm, but nothing in GrafTech's board rules required its disclosure.
The investment cost him his board seat, according to the complaint. Nahl says he agreed to retire from the board in May 2013 when he was told he would not be re-nominated because of the investment.
Prior to filing suit, Nahl says he tried talking informally to GrafTech about amending its proxy. When that proved fruitless, he made a formal demand in writing "for the false statements in the proxy statement to be retracted."
But GrafTech refused, he contends.
"Defendant GrafTech published these statements with reckless disregard for the truth," Nahl claims. "As a result of the false and defamatory statements published by defendant GrafTech, Mr. Nahl's reputation as an ethical and honest fiduciary and board member has been impugned."
Nahl retired in 2009 as executive vice president and chief financial officer of Albany International Corp., an engineered fabrics and composites manufacturer, where he worked for nearly three decades.
His LinkedIn profile describes him as an "independent investment management professional."
Nahl currently serves as a director of two public companies, Trans World Entertainment Corp. in Albany, parent of the FYE music, video and games retail chain, and Lindsay Corp., an irrigation systems manufacturer in Omaha.
Nahl's complaint claims that because of the GrafTech proxy, "Mr. Nahl's prospects for future service on corporate boards of directors and future business opportunities have been adversely affected in an amount yet to be determined."
Nahl also wants "to vindicate his rights and reputation," according to the complaint. He seeks actual, presumed and punitive damages, along with costs and fees.
GrafTech responded to Nahl's complaint in a statement posted to its website and filed with the SEC: "GrafTech believes that the lawsuit is entirely without merit and intends to defend itself vigorously. GrafTech looks forward to a review of the facts by the court."
Nahl is represented by William Keniry of Tabner Ryan and Keniry in Albany, assisted by Thomas Clare and Elizabeth Locke of Clare Locke in Alexandria, Va., a boutique law firm for "clients facing high-profile reputational attacks," according to its website.