A U.S. District Court judge yesterday enjoined the former chairman of Source Telecomputing Corp. from profiting from the sale of a majority interest in the company to Reader's Digest until the court decides whether to rule on who owns the company's major asset.
Judge Richard B. Kellam of the Eastern District of Virginia in effect kept an earlier court order that temporarily barred former Source Telecomputing chairman Jack Taub from making further changes in the company's ownership or from benefitting from the Reader' Digest sale.
But at the request of a former business partner of Taub, Kellam also broadened the order to cover Digital Broadcasting Corp., a predecessor of Source Telecomputing. The judge also made it clear that he intends the order to prevent Taub from drawing his $80,000-a-year salary from Source Telecomputing for the time being and to prevent Reader's Digest funds from being used to pay off debts either to companies in which Taub has an interest or for which he may be liable.
Taub's attorney revealed during the hearing that Taub has resigned his corporate positions with Source Telecomputing although he will continue to work for the company under contract.
Reader's Digest acquired a majority interest in Source Telecomputing Sept. 23 for $3 million, acquiring in the process a home computer network called The Source, which has been hailed as a major new product potentially as lucrative as the development of the telephone or television.
At the time of the sale, Taub was embroiled in litigation with former business associate William Von Meister over the ownership of Digital Broadcasting Corp., the company which originally marketed The Source.
Taub contends that he bought Von Meister's 31 percent interest in DBC, rescuing a badly managed and foundering company. Von Meister claims the sale never was completed and that Taub wrongfully diverted DBC's assets, including The Source.
In effect, Kellam's order put the Reader's Digest deal on hold until the judge rules on the issues involved in the claims and counterclaims between Taub and Von Meister.
Before a hearing on the injunction yesterday, Kellam heard final arguments in the underlying Taub-Von Meister case, including a dispute over the ownership of DBC, the manner in which The Source ended up in the hands of Source Telecomputing and whether the court should decide who really owns The Source.
"What we have here is a conflict between the idea man and the money man," said attorney Michael Nussbaum, arguing on Von Meister's behalf. There was no dispute during the trial that Von Meister developed the concept of The Source, he said. "Today, Mr. Von Meister is out, and Mr. Taub is in," he said. "Not only is Mr. Von Meister out, but Mr. Taub and now Reader' Digest have control of that asset which Mr. Von Meister developed."
Nussbaum said that, although Von Meister drew up an agreement to sell his stock and accepted a check for the amount agreed to, he canceled that sale before Taub signed the agreements.
Taub's attorney, Peter K. Stackhouse, portrayed his client as the wronged party, pouring money into a rathole of a company on the basis of false claims by Von Meister about how well the company was doing financially. f
Stackhouse said that other witnesses had corroborated Taub's testimony that he in fact signed the stock sale agreement completing the transaction. Even if Taub had not, Stackhouse said, Von Meister completed the transaction when he accepted the check for his stock in DBC.
Stackhouse argued that the issue of who owns The Source should be resolved in another lawsuit, while Nussbaum contended that Kellam should decide the issue.
Yet another complication in the ownership of The Source is the federal government's interest. DBC defaulted on a loan guaranteed by the Commerce Department, owing approximately $3 million. The Commerce Department has said it has a security interest in The Source.
Commerce officials refused to talk in detail about the agreement in part out of fear that publicity might scare off the Reader's Digest and render The Source a valueless asset.