US investor sues Powermat for unlawful management

Ran Poliakine

J. Christopher Burch filed a claim in the Tel Aviv District Court against the smartphone charger developer and its CEO.

The dreadful financial situation of Israeli company Powermat, which develops technology that allows smartphone users to wirelessly charge their devices (by placing them on a special charging mat), is a result of failing management at the company headed by founder and CEO Ran Poliakine, who manages the company improperly and unlawfully, in breach of his duty as an executive officer, by treating the company as his own, providing favors to his close associates, mixing together various businesses and companies he controls and the company, and taking advantage of company resources and the company's employees, says a Powermat investor and board member in a claim submitted to the Economic Department of the Tel Aviv District Court against Powermat and Poliakine this morning.

The plaintiff is US billionaire J. Christopher Burch, an active investor, fundraiser and entrepreneur, who has been on Powermats board of directors since 2007, and is a shareholder.

The claim, filed by Amnon Shiboleth, Elad Greiner, and Racheli Zilberberg from Shibolet & Co., further states that extremely suspicious actions were made by Poliakine in conjunction with some of the companys board members, and entities with which they are affiliated, without reporting their personal involvement to the companys board of directors before approving the deals, as they are required to do by law, and by presenting incomplete and false data to the companys board of directors. This, says the claim, seems to have been in order to enable them to collect personal profits, at the expense of the company and its shareholders wellbeing, by causing significant financial losses to the company.

False forecast

According to the plaintiff, in 2007, a short time before the company was incorporated, he came in as a major investor, after have been persuaded to do so by Poliakine. Between December, 2007, and January, 2010, according to the claim, Burch invested $6.6 million. These investments were made on the basis of forecasts presented to him and other investors, which emphasized the vast business potential of the company, and estimated extremely high sales volumes.

According to the claim, in December 2009, Poliakine and the companys management made a forecast presentation to Burch and other investors, according to which the company expected $117 million in sales in 2010, which was expected to increase to $417 million by 2012.

Later, the claim states, in April 2010, Poliakine and Powermat management produced more forecasts that were presented to the board of directors, according to which sales were to total more than $160 million in 2010, and to grow to more than $366 million in 2012.

The claim further states that in 2011, Poliakine and company management presented another forecast to the board of directors and potential investors, which came from a report put together by Barclays Capital, according to which the companys revenue was expected to be in the hundreds of millions of dollars annually, for a cumulative total of more than a billion dollars over a three-year period.

According to Burch, based on these forecasts, he invested the large sum of $6.6 million in the company. However, the claim states, Despite the companys promising forecasts and despite the fact that company is in possession of groundbreaking technology, the companys financial reports indicate that the company deviated from forecasts by more than 90% annually, and that the company is not making any money (and certainly not the vast amounts, totaling millions of dollars that it was expected to earn), rather, the company wrote off at least $200 million in investments, and lost millions of dollars each year.

Burch points a finger at Poliakine and three board members, who, according to Burch colluded with Poliakine to carry out illegal activities, and to line their own pockets. (Because the board members are not named in the claim, we will not mention them here by name.)

A commercially unjustifiable deal

As an example of Poliakines improper management, and the collaboration of some of the board members, Burch points to the deal the company carried out with HoMedics, under which, according to Burch, rights to an unprofitable venture in which he was a partner were bought, in exchange for the huge sum of $54 million, with no commercial justification whatsoever. According to the claim, some board members were involved in the deal, without disclosing all its details to the rest of the board members.

The claim further states that after the completion of the deal, Powermat recorded HoMedics inventory on its books at 100% of its value, despite the fact that it was not tradable inventory. Within three months, the company reduced the value of the inventory on its books by 95%. From the start, the whole HoMedics deal raises many doubts and complex concerns that touch on, not only the nature of the deal and the manner in which it came together, but also its results, and the most important questions, which is: did the company benefit from this deal, or did it grant inflated rights, in excess of the value of capital invested in it, without getting a thing in return, and even suffering a loss, says the claim.

In light of these claims, Burch is asking that the court appoint an auditor, to carry out forensic accounting, and to fully examine all the information, documents and account details for all actions, investments, loans and financial transactions that took place at the company from January 2007, both for the HoMedics deal, and others that the plaintiff listed as suspicious in the claim.

Birch further asks that the court to instruct Powermat and Poliakine to hand over all the information, documents, and accounts of all the actions, investments, loans and financial transactions.

Powermat said in response: The company has not yet received the suit and we will respond to it formally only after we have studied it. Even without having seen the claim, it is important to know that the plaintiff is an active investor the field of takeovers, and this claim is straight out of Burchs playbook. The company has institutional investors that are internationally known. These companies express full confidence in Powermat and its managers.

Published by Globes [online], Israel business news - www.globes-online.com - on October 6, 2014

Copyright of Globes Publisher Itonut (1983) Ltd. 2014

 
Ran Poliakine
Ran Poliakine
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