Monday, September 25, 2023
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Defense Contractor’s ‘War of the Roses’ Pruned

MANHATTAN (CN) - Reflecting on the "sad denouement" of a multimillion Iraq-reconstruction contract, a federal judge chided two West Point graduates for their "litigation bonanza rivaling Warren Adler's 'The War of the Roses.'"

Thomas Charron founded the business in question, Sallyport Global Holdings, in 2003, with seven years of active duty and a master's of business administration under his belt, according to the ruling published Wednesday.

John DeBlasio, a longtime General Electric executive with extensive military contacts through his 21 years of active and reserve service, came on board the next year.

The fledgling startup soon became a massive enterprise "providing mission-critical logistical support to government operations abroad and generating annual revenues in the tens of millions of dollars," the ruling states.

Because Charron and DeBlasio's personal interactions were less successful, however, DeBlasio bought out his partner in December 2010.

In addition to $40.7 million for Charron's shares, the deal included a "windfall clause" hinged on DeBlasio's successful sale of the company within one year at a sufficient price.

After DC Capital bought Sallyport for $64.5 million in mid-2011, Charron argued that the clause entitled him to 20 percent of the sale.

DeBlasio appeared to have bested his former partner, however, because the price tag was "half a million dollars shy of the Windfall Provision in the Charron stock purchase agreement," according to the ruling.

Two years of litigation, and a three-week bench trial later, U.S. District Judge William Pauley ordered both men on Wednesday to take out their checkbooks

Though Pauley found that DeBlasio and DC Capital "were well within their rights to ensure that the transaction did not trigger the windfall-protection clause," he was less comfortable with DeBlasio's failure to inform Charron that the DC Capital transaction was on the table in 2010.

The decision goes on to value DeBlasio's proceeds from the DC Capital transaction at $79.9 million.

Charron is entitled to 20 percent of that amount, for a total of more than $15.7 million, Pauley found.

Before closing the book on the case, however, the judge slammed Charron for hiding that his extraction of an extra $227,364.22 from the company coffers.

Though Pauley called Charron's "self-help" from the Sallyport account "beyond the pale," he stopped short of finding "felonious intent."

"Charron's unilateral and secret withdrawals were unorthodox even in an environment lax in recognizing corporate formalities," the decision states.

Pauley concluded that Charron must pay more than $227,000 back.

"This business divorce should never have spilled into a federal courtroom," he concluded.

Lawyers for the parties did not respond to a request for comment by press time.

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