BXI Trade Exchange Inc. files seven-count complaint against ITEX Corp.
Publicly traded ITEX is named defendant in counts seeking a minimum of $6 million, plus attorneys' fees and costs.
ITEX, a small-cap NASDAQ listing, is also currently under investigation by the enforcement division of the Securities & Exchange Commission and the U.S. Internal Revenue Service.
The SEC has already uncovered insider trading violations, and ITEX has reserved $1.2 million in taxes on profits ITEX previously reported as non-taxable. Both investigations continue.
Company stock prices have fallen from a high of over 12-1/2 last February to a current trading range of 3-1/2 to 4.
In the suit filed in Multnomah County (Portland), Ore., ITEX itself; the founder of ITEX, Terry L. Neal, currently a major shareholder and paid consultant to ITEX; Michael T. Baer, formerly president and member of ITEX's board of directors, and currently an employee; and ITEX officer and corporate attorney Donovan Snyder, an Oregon and Utah Bar member, are all named defendants.
Joel P. Sens, a consultant to ITEX, and David Lawson, an East Coast associate of Sens, are named in all seven counts of the suit, with damages of $3 million, plus unspecified amounts for Breach of Fiduciary Relationship, Breach of Contract, contractual indemnification, attorneys' fees and costs.
In short, ITEX and its consultant and employees, together with Sens and Lawson, are charged with conspiring to secretly gain control of BXI and its trade exchange, ITEX's main competitor in an industry characterized by small, local exchanges, and violating Unfair Trade Practice Laws in the effort.
After numerous attempts, from 1991 to mid-1995, when ITEX tried to buy or merge with BXI, it was plain that BXI would not be acquired by or merge with ITEX.
"We looked at it, but BXI has much stronger currency and significantly more clients and a much better reputation in the barter economy than ITEX," said BXI President Saul N. Yarmak. "There was simply no advantage, whatsoever, to BXI associating with ITEX."
Having been rebuffed, directly, ITEX and its associates joined with Sens and Lawson and conspired to secretly acquire 50% of BXI. They openly bragged of having duped Yarmak and BXI, even planning to attempt to acquire majority control of BXI.
During depositions being taken in the lawsuit first arising out of the acts of the conspirators, filed by a shell company called SLI Inc., but fully sponsored and financed by ITEX, BXI learned of the plan and the participants. Only then did the conspiracy, fraud and violation of Oregon Statutes against Unfair Trade Practices, ORS 646.608(c) and (k), become apparent.
"The mere possibility that BXI might be associated with ITEX has decreased the value of BXI and caused loss of business and clients," said Yarmak.
"BXI, now recognizing it has been threatened by conspiracy, fraud and Unlawful Trade Practices, intends to pursue every legal remedy open to us," he said.
"For years, ITEX has intentionally represented that its trade credits and assets purchased in trade credits are as valuable as an equal amount of U.S. currency, to build up its assets and attract investors," said Yarmak, "even when they knew many holders of ITEX credits would gladly exchange them for half as many BXI credits and often as little as $0.20 in U.S. currency."
"Apparently they decided the prize (owning at least part of BXI) was worth the risk of sneaking around and violating common law and statutes. We'll know soon whether they were right," said Yarmak.
Interestingly, Sens and Lawson are charged with violations of the very contract they drew up to purchase the BXI interest. They are charged with various breaches of that contact and procuring the contract by fraudulent representations.
Additionally, Sens, who was a member of the BXI board of directors and an executive vice president of the company during much of the period of the fraud and conspiracy, is called to answer for his Breach of Fiduciary Responsibility to the company he supposedly served, and for Usurpation of Corporate Opportunity (basically earning a profit that should have gone to the company).
"Perhaps ITEX was in such bad condition, they had to have us to keep their boat on the water. Who knows? But we do not intend to be used to bail the deepening water in their hull," said Yarmak. -0-
Note to Editors: Copies of the lawsuit as filed are available via fax by calling Norma Heberer, named below as the contact for this news release.
CONTACT: BXI Trade Exchange Inc., Burbank
Norma Heberer, 818/563-4966
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|Date:||Feb 14, 1997|
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