Ironclad Performance Wear’s official committee of equity security holders filed with the U.S. Bankruptcy Court a complaint against Jeffrey Cordes and William Aisenberg (former C.E.O. and C.F.O., respectively).
According to the complaint, “Having driven Ironclad to financial catastrophe through mismanagement and misconduct, Cordes and Aisenberg now demand their reward – six-month’ severance. They predicate their proofs of claim on recent amendments to their employment agreements, which they induced through fraud and bad faith just months before they quit while under investigation for their misconduct. Cordes and Aisenberg came to Ironclad in 2014 with bold promises to turn the company around. Then and throughout their tenure, they assured company shareholders and the Board of Directors that their initiatives would improve Ironclad’s sales and earnings dramatically. But when their efforts failed, they resorted to cooking the books. In the end, two employees blew the whistle. The company’s Audit Committee investigated and, with the help of accountants and counsel, uncovered numerous accounting irregularities.”
In addition, “When Cordes and Aisenberg were asked to clarify these transactions, they had no plausible explanation and abruptly resigned. The company then determined that it would need to restate its financial statements. The anticipated and required restatements triggered defaults under various debt covenants, bringing enormous pressure from Ironclad’s creditors and ultimately compelling this voluntary bankruptcy filing. In the bankruptcy, Ironclad had no choice but to sell its operating business, which it did, in what became essentially a salvage operation. Ironclad’s shareholders suffered severe losses. They incurred the substantial cost of investigating Cordes and Aisenberg; they incurred the cost of restating financials; they incurred the vast expenses of a bankruptcy filing and proceeding. And then they were forced to sell off the company’s assets in a distressed scenario, rather than from strength. Total damages are likely to exceed $10 million dollars. That Cordes and Aisenberg are not entitled to severance is axiomatic.”
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