LINKEDIN 14 COMMENTMORE

Lansing — A new federal lawsuit alleges Michigan gubernatorial candidate Shri Thanedar made “fraudulent and misleading” claims to inflate the value  of a company he sold last year in a deal that netted him roughly $20 million.

Attorneys for Avomeen Holdings, whose parent company purchased a controlling stake in the Avomeen chemical testing business in November, sued Thanedar on Tuesday in U.S. District Court in Detroit.

The 26-page complaint alleges the Ann Arbor Democrat and entrepreneur misrepresented his company’s monthly income streams and personally directed employees to smooth over volatile revenue growth in the months leading up to the sale.

In a text message to The Detroit News, Thanedar said he had reviewed the complaint and disputed the allegations.

“I patently deny every claim contained in this document and intend to fight it,” he wrote. “Because this is a pending legal matter, I am prohibited from saying more at this time.”

Thanedar declined further comment in a subsequent phone call.

High Street Capital, a Chicago-based private equity firm, agreed to pay a “pre-adjustment” price of $33.6 million for a “membership interest” in Avomeen, according to a purchase agreement disclosed in federal court. Attorneys say Thanedar retained a minority interest in the company but received sale proceeds of approximately $20 million.

Thanedar formally launched his campaign for governor in June and has committed nearly $6 million of his own personal fortune to the race as he looks to make up ground on early Democratic frontrunner Gretchen Whitmer of East Lansing and other declared candidates.

The 62-year-old Indian-born American has touted his business acumen and success at Avomeen, which he helped found after returning to Ann Arbor from Missouri in 2010.

Thanedar was named 2016 Entrepreneur of the Year by multinational finance giant Ernst and Young and made local headlines late last year after giving his employees a collective $1.5 million in holiday bonuses.

But the lawsuit alleges Thanedar instructed employees to adjust and relax the company’s approach to recognizing revenue. He specifically told employees that the sale – and their corresponding transaction bonuses – would be jeopardized if the company did not meet monthly revenue targets, according to the complaint.

The entrepreneur is also accused of instructing bookkeeping staff to back date invoices so revenue could be recognized in prior months to suggest a more stable income stream.

“In the end, Thanedar’s scheme successfully, but fraudulently, induced (the) purchaser to close the transaction and pay a higher amount for (the) seller’s interest than it was worth,” attorneys claim.

The lawsuit alleges Thanedar violated the federal Securities Exchange Act of 1934, the Michigan Uniform Securities Act, the Deleware Securities Act, common law fraud and breach of contract.

Avomeen Holdings, whose majority owner is High Street Capital, attempted to rescind the purchase agreement and all related transactions in April, according to the suit. Thanedar and the Chemreal LLC company he created during the sale “refused that demand,” attorneys said.

Purchasers are seeking a jury trial and an unknown financial award in the case, requesting compensatory and punitive financial damages, attorney fees and any other relief the court deems proper.

The company is represented by attorneys from the Hickey Hauck Bishoff and Jeffers firm in Detroit and Perkins Coie LLP in Chicago.

It’s not the first legal dispute for Thanedar, who made and lost a fortune in Missouri after coming to the University of Michigan as a post-doctorate scholar in 1982.

The St. Louis Post-Dispatch reported he bought and built up a chemical analysis firm there, eventually purchasing a Ferrari and constructing a 13,000-square-foot mansion.

But the Great Recession and financial industry crash hit his company and acquisitions hard, reportedly prompting a lender to take him to court, where a bankruptcy judge appointed a receiver to sell the business.

Thanedar founded Avomeen in 2010 in Ann Arbor, where his son had attended the University of Michigan. By 2015, it was pulling in $8.5 million a year in revenue, according to an Inc. Magazine ranking of the country’s fastest-growing private companies.

joosting@detroitnews.com

LINKEDIN 14 COMMENTMORE
Read or Share this story: http://detne.ws/2jpNBc5