Founder of Recruitment Outfit Ousted by Court Order.

The founder and chairman of executive search firm Cornerstone Board Services Inc. has been fired under a court order for allegedly stealing company assets, as well as misrepresenting the firm to its clients.

C. William Guy, 54, of Studio City, was also removed as chief executive and as a director of the firm's board of directors, which consisted only of Guy and his former business partner Timothy Goodwin. He was replaced as chairman by Goodwin. David Charlson, who recently joined Cornerstone, has been named president.

The Glendale-based recruitment firm, while only employing eight L.A.-area recruiters, according to a survey submitted to the Business Journal last month, is part of an international consortium that handles senior-level assignments for Fortune 500 clients. At the time of his removal last week, Guy was working on three executive search projects -- for Litton Industries Inc., Cisco Systems Inc. and Catholic Healthcare West, according to court records.

Goodwin said that the recruitment firm went to court on March 29 to have Guy removed from the company and have an independent professional director appointed by the court.

Superior Court Judge Laura A. Matz ruled in favor of Cornerstone and ordered the removal of Guy. In her ruling, Matz wrote that "Guy's conduct has paralyzed the board's ability to conduct regular business and manage the affairs of Cornerstone."

Additionally, the court ordered the appointment of James Caskey as professional director. Caskey declined to comment on the company's current situation.

"The ruling to remove me from the board and replace me with a professional director was wrong," said Guy. "The decision was made in the judge's chambers, and we weren't even there to defend ourselves. She didn't rule on guilt or innocence; all she did was appoint a third director."

Under California law, a professional director can be appointed by the court when a corporation has an even number of directors who are equally divided and cannot agree as to the management of its affairs.

However, Guy claims that the appointment was illegal because, according to an affidavit, he and his son control 55 percent of the voting stock, while his former partner controls only 45 percent.

"My client is being forced to pursue litigation to protect himself and to protect the assets of Cornerstone," said Guy's attorney Michael Haywood. "We expect this case to be resolved in the courts within the next few weeks."

Operates consortium

Founded in 1995, Cornerstone is a member of a consortium of 100 independent companies operating under the name Cornerstone International Group.

Goodwin claims that Guy took two computers, a fax machine, a laser printer, research directories and corporate records from the firm.

"He also took off with $8,500 from a corporate checking account that already had checks written against it," Goodwin said.

Goodwin said his former business partner had no right to the money, but that the company hasn't decided whether it will press charges against him.

The company also claims that, after being unable to obtain corporate funds from Goodwin, he demanded that Charlson draw $500 from his corporate credit card and turn the funds over to Guy to pay his personal expenses.

"The board needed to take these steps to protect the company, its shareholders and employees," said Goodwin. "We are expecting him to fight the board's decision, but he no longer has any say in how the company operates."

According to court records, Guy is alleged to have demanded payment of corporate funds for personal expenses, contacted clients and advised them that Cornerstone was in the midst of a shareholder fight, and contacted other clients and advised them that accounts receivable should be paid directly to him.

"As a result of Guy's unilateral and illegal actions, (Cornerstone) cannot continue its operations under the present circumstances and is in severe financial jeopardy," Goodwin states in court documents. "In light of Guy's past, any future overtures on (Cornerstone's) part to reach an informal resolution would be futile."

Meanwhile, Guy and his attorney have filed court documents alleging that his former partner fraudulently completed a $50,000 loan application with U.S. Bank, declaring himself as a 90 percent shareholder in and chief executive of Cornerstone. Goodwin declined to comment on the loan.

Dissolution considered

Prior to the current problems, according to Goodwin's affidavit, both men had agreed that Cornerstone would be dissolved and its creditors paid. They also agreed that proceeds would remain with the company and would be used in the dissolution to satisfy the claims of Cornerstone's creditors, with any remaining funds being divided equally between both partners.

Guy then announced he was leaving the company, claiming to be the sole owner and refusing to contact the company or otherwise execute the necessary dissolution papers, according to court records.

Despite the original plans to close the troubled company, Goodwin now says he's confident that Cornerstone can remain in business and move forward.