GOP's Kalus faces fraud claims in Illinois suit

PROVIDENCE – Republican candidate for governor Ashley Kalus faces allegations she bounced a paycheck and cheated the chief operating officer of Adhereon, an Illinois-based company that sought to market breast-implant devices, out of a $125,000 salary and even more in stock.

A lawsuit filed in Chicago pits Kalus and her husband, plastic surgeon Dr. Jeffrey Weinzweig, against Adhereon's former COO, Kelley Folino, who was Kalus' boss when they both worked for Illinois Gov. Bruce Rauner.

It accuses the Weinzweigs of "common law fraud" and essentially torpedoing Adhereon as part of a "squeeze-out plan" to avoid cutting Folino in on the assets she helped market.

"Company is broke. End of story. End of company. End of friendship," Kalus allegedly wrote Folino on March 14, 2018, before the dispute escalated into the breach-of-contract lawsuit.

As recently as March 31, 2022, Kalus identified herself as the CEO of Adhereon and her husband as the CEO of the related Novaplast in a filing with the Rhode Island Ethics Commission.

What happened?

"The suit is meritless," Kalus campaign spokesman Matt Hanrahan wrote in response to a Journal request for comment. "This case has been dismissed twice previously, and a motion to dismiss will be filed shortly to again knock out the plaintiff's recently filed amended complaint."

Scott Lucas, attorney for Folino, notes that the first time the case was dismissed it was at Folino's request, to change venue.

In an Aug. 1 filing while Kalus was campaigning for governor of Rhode Island, her lawyers in Chicago wrote that Folino's lawsuit is "littered with generic, vague, and conclusory allegations" against "Ashley, Jeffrey, Novaplast and. ... [Weinzweig's] JW Plastic Surgery."

They also argued that the Weinzweigs – Ashley and Jeffrey – cannot be held personally liable for the alleged breach of a "supposed oral contract for equity" because "Adhereon was never properly organized and thus did not exist."

A judge at least partially agreed, dismissing the lawsuit, but Folino has filed an amended complaint.

On Monday, Kalus' lawyer filed this response to Folino's latest bid for a hearing on a hearing on why Kalus should not be held in contempt.

"Thus, Folino has made clear her intent to impact the governor's race in Rhode Island with the July 21 order, which Folino now thinks can be used against the treasurer of Ashley's campaign to "freeze any assets," Kalus' response said.

"Folino is completely out of control, and this Court should take steps to ensure that she is not able to do any permanent damage to this Court, Ashley's campaign, or the voters of Rhode Island."

The history

The legal dispute revolves around plastic surgery and bone reconstruction technology Weinzweig developed years earlier while working at the University of Massachusetts at Lowell.

After getting a master's degree, Kalus joined her husband in Illinois, where he was launching a new plastic-surgery practice.

She also got involved in politics and worked on Republican Rauner's campaign, as did Folino.

When Rauner took office in 2015, he hired Folino as deputy chief of staff and Kalus as director of public engagement. The two women became friends.

In 2016, Kalus left state government and, according to the lawsuit, "aggressively recruited" Folino to go into business together helping commercialize breast-implant devices developed by Weinzweig and selling "branded silicone-based products and materials used for treatment of scars."

The startup company formed to do the work was Adhereon, and on Aug. 1, 2017, after Folino's employment with the Illinois Department of Commerce ended, "and in reliance on promises and inducements Ashley made on Adhereon's behalf," the lawsuit says, "Kelley decided not to pursue other employment opportunities and began working full-time on Adhereon's development."

The business agreement between Folino and the Weinzweigs was verbal and never codified in a written contract.

Folino was initially going to have the role of CEO, but that was changed to COO and co-founder, according to the complaint, which said she was to be paid 26.6% of Adhereon's common stock and, once a certain number of scar treatments were sold, a $125,000-per year salary.

But after Kalus and Folino worked together through 2017 to get Adhereon off the ground, by early 2018 things had begun to unravel.

As Folino was trying to schedule meetings to have stock issued in February 2018, a $7,000 paycheck to Folino, just the second she had received from Adhereon, bounced, according to the lawsuit.

Then on March 13, Kalus wrote "the company is in worse shape than expected ... reality is we can't pay salaries nor are we in a position to personally loan the company any more money," according to the complaint. "I know this might not be what you expected."

The next day, Folino and Kalus met for breakfast and Kalus said Adhereon was insolvent. "Ashley stormed out after Kelley reminded her Kelley had earned equity in the company and was entitled to her promised salary," the complaint said.

After Folino was cut off from the company email server, Kalus texted: "Company is broke. End of story. End of company. End of friendship."

"The Weinzweigs' actions were designed and intended by the Weinzweigs to squeeze Kelley out of Adhereon by ... excluding Kelley from participating as a member of management and as a shareholder of Adhereon and ... causing Kelley financial distress through the denial of her past and future wages and her share of the value and distributions of Adhereon," the complaint said.

Folino sued for breach of contract in May of 2018, and the case has been twisting and turning since.

The Illinois secretary of state's corporate database lists Adhereon as dissolved.

The Weinzweigs have argued there are virtually no assets left in Adhereon and the commercialization licenses for the UMass-developed patents are held by Novaplast, which they control.

This summer Judge Allen Price Walker denied a request by Folino to place the assets of Adhereon into receivership, but ordered the Weinzweigs not to transfer any assets "other than in the ordinary course of business operations."

Folino is currently chief of staff at the Paulson Institute, a think tank founded by former U.S. Treasury Secretary Henry Paulson.

panderson@providencejournal.com

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On Twitter: @PatrickAnderso_