BioVeris Corp. announced yesterday that it settled two lawsuits against Jacob N. Wohlstadter, its chief executive's son, whom the company had accused of spending millions of dollars on cars and real estate to sabotage a joint venture he ran so he could purchase it for a bargain price.
The company had been seeking to block the younger Wohlstadter from buying its share in the joint venture, Meso Scale Diagnostics. It had asked a Delaware court to dissolve the joint venture, which Jacob Wohlstadter controls, and to appoint a trustee to liquidate its assets.
But yesterday BioVeris appeared to give the younger Wohlstadter what he wanted. The company said it has paid Meso Scale Diagnostics $5 million, including a $2 million credit toward purchase of BioVeris's interest in the company.
Lawyers for the parties would not comment on the apparent turnabout yesterday. The principals could not be reached for comment.
Wohlstadter has said in court papers that he never held title to cars and real estate purchased with company funds and that he reimbursed the joint venture for disputed expenditures.
The agreement announced yesterday "settles all other outstanding disputes" between all the parties, according to a BioVeris news release.
"Entering into the agreement . . . allows us to file our annual report, proceed with the sale of our interest in [Meso Scale Diagnostics] and avoid the cost and distractions of protracted litigation," a committee of the company's board of directors said in the release.
The statement said BioVeris would sell its shares in Meso Scale Diagnostics for fair market value less "an agreed-upon discount," but did not specify what that would amount to.
Meso Scale Diagnostics was set up nine years ago to design testing technology for drug development companies, a project of Jacob Wohlstadter's. BioVeris has invested $115 million in the company and in return received 31 percent of its voting shares plus preferred shares that give it a claim on future profit. But the company has never made a profit.
Through a series of events triggered by new accounting rules, BioVeris directors and their auditors became concerned that Jacob Wohlstadter was spending money from the joint venture on luxury cars and real estate.
In June, BioVeris went to court. It accused Wohlstadter of breach of contract and fiduciary duty for refusing to turn over audited financial statements for the joint venture, which BioVeris needed to file its annual 10-K report with the Securities and Exchange Commission.
The SEC also initiated an informal inquiry into the joint venture.
As part of the settlement agreement, BioVeris's representative on Meso Scale Diagnostics' board of managers resigned, the company's news release said. Also, the joint venture agreed to turn over financial reports, and BioVeris said it would submit its 10-K in a few days. The company's stock closed 15 cents higher, at $6.84 per share yesterday.
