Jacob N. Wohlstadter used funds from a joint venture to buy or place deposits on 10 luxury cars, including a $136,000 BMW roadster, and a $4.2 million condominium in the new Time Warner building in Manhattan, according to affidavits in a lawsuit filed against him by BioVeris Corp., the Gaithersburg company his father heads.
The documents, filed in state court in Delaware, provide new details of alleged improper spending by the younger Wohlstadter, who is president of Meso Scale Diagnostics. His company is developing testing technology with BioVeris, formerly known as Igen International Inc. His father, Samuel J. Wohlstadter, is BioVeris's chairman and chief executive.
Jacob Wohlstadter contends that the purchases he made remained the property of the joint venture.
"The company at all times has had title to all this real and personal property," Wohlstadter said in an affidavit that provided his first public defense. "In other words, company funds were never used to purchase property in my name." He also said he has taken steps to "reverse these transactions" so that "there will be no negative financial impact to MSD."
BioVeris executives said in affidavits that Wohlstadter told them he bought the cars as a perk for company employees and the real estate because it was a good investment for the company.
The Delaware Court of Chancery yesterday granted a motion filed by BioVeris to bar Wohlstadter from spending more than $10,000 without approval of the joint venture's two-person management board, of which he is a member.
The court also blocked Wohlstadter from removing the second member of the joint venture's board, BioVeris president and chief operating officer Richard J. Massey. Wohlstadter is trying to push Massey off the board, according to BioVeris's lawsuit.
Wohlstadter, who lives in Potomac, and his father did not respond to phone calls yesterday. Attorneys for both declined to comment.
But in sworn affidavits filed with the Delaware state court last week, the younger Wohlstadter and two top BioVeris executives offer the most detailed account to date of the cars and properties Wohlstadter allegedly bought using the joint venture's funds.
According to an affidavit by BioVeris's chief financial officer, George V. Migausky, Wohlstadter said that he purchased the luxury cars for senior personnel at the joint venture "in lieu of a stock or option plan or similar benefits" and that they could use the cars regularly, "but not for commuting."
Between February 2003 and March 2004, according to Migausky's affidavit, Wohlstadter used company money to purchase at least eight cars -- five BMWs, a Dodge Viper, a Land Rover and an Isuzu sport-utility vehicle -- for about $700,000. In addition, he placed a $166,000 deposit on two Ferraris, which were expected to be purchased when delivered by the beginning of 2005, Migausky said.
Wohlstadter also directed his company to create a temperature- and humidity-controlled garage to store the fleet of cars, Migausky said.
In April, Migausky said, Wohlstadter directed the joint venture or a subsidiary to buy land next to Wohlstadter's house in Potomac for $1.7 million. He also directed the purchase of two condominiums in New York City's Upper West Side -- the $4.2 million apartment in the Time Warner building and a $385,000 apartment on West 50th Street. In January, the joint venture made a $630,000 deposit on the Time Warner property.
Wohlstadter said real estate investments offered a potentially higher rate of return than Treasury bills or money market accounts, Migausky said in his statement. Wohlstadter said the real estate was not for personal use, Migausky added.
The BioVeris executive said Wohlstadter violated a "standard operating procedure" requiring approval of the company's board of managers -- Wohlstadter and Massey -- for any purchase more than $10,000. Migausky said Wohlstadter contended the threshold was $100,000. Wohlstadter said in his affidavit that he knew of no $10,000 threshold and that the company's move to require such approval "handcuffs MSD from acting in the ordinary course of business."
In his affidavit, Massey, the BioVeris president, said he had no knowledge of Wohlstadter's use of funds from the joint venture to buy or place deposits on cars.
But Massey said that around August 2003, Wohlstadter expressed interest in investing the joint venture's funds in New York City real estate. Massey responded that he could not authorize such a purchase, according to his statement.