LAS VEGAS (CN) – Investors say Freedom Wireless cheated them of their $9 million investment entitling them to a share in the tens of millions, “if not hundreds of millions” of dollars the company won through patent-enforcement lawsuits. The plaintiffs say Freedom also changed the deal after it was made, backdating a reduction in investors’ royalties to cheat them again.
In 1998, Freedom Wireless held a valuable, prepaid cellular phone-related patent, but “lacked the litigation war chest it would take to enforce its rights under the patent.”
So the wireless company sold $1,000 units to investors in exchange for the promise of .003 percent of the money the company won through patent-enforcement lawsuits.
From 2005 and 2007, Freedom Wireless has won tens of millions – “if not hundreds of millions” – of dollars in royalties, according to the lawsuit in Clark County Court.
But investors say they haven’t been paid, and that Freedom Wireless has refused to provide any meaningful accounting of royalties received and owed.
They say the company has even gone so far as to amend the terms of the original deal by reducing investors’ royalties by more than two-thirds, from .003 percent to .0008054 percent.
Freedom then backdated the effective date of the reduced rate “in order to curb by millions of dollars in royalties already owed,” according to the complaint.
Shareholders who voted against the amendment were “told one salient fact … : there would be no future payments to any investor who voted against the amendment,” the lawsuit states.
Plaintiffs Steven Klein, William Brooksbank, Donavon Johnson, Kevin Burk, Jack Whistler and Joseph Mannix are represented by Don Springmeyer.