Vernon Hill asked PetPlan bosses to lie: Courtroom drama unfolds as ousted founders fight for control
But Hill didn't explain, in Fans Not Customers: How to Create Growth Companies in a
Hill's moves to push the married co-CEOs out -- which included ordering the company's replacement chief executive and its general counsel to say things that weren't true, the two men testified -- came to light, in a rare chronicle of private-company maneuvering, during a trial late last month in
Hill, who controls banks in
Hill invested in the Ashtons' company (now based in
But by 2017, the business romance between Hill and the Ashtons had faded, and the firm, which sells
Impatient with a slowdown in both
But when Hill tried to force through changes in Fetch's profit-splitting agreement demanded by its insurance provider,
In court, Hill's allies portrayed the Ashtons as a visionary couple, less suited to running a maturing company.
"When I got there it was pretty apparent that the business had outgrown them, and it had been mismanaged," testified Fetch's new chief executive,
Guyardo, a digital marketing specialist whose resume includes Discovery television, Kmart, DirecTV and Home Shopping Network, took charge at the end of January.
Guyardo said he'd been forced to address such pressing issues as a high claims-losses ratio -- confirmed by XL officials -- along with expired state licenses, a "very cheap" information technology system that threatened to "break " the company, the lack of a business plan, failure to track consumer metrics, and a failure to pay promised compensation to chief technology officer
Claims by a small group of
He said
The Ashtons opposed the change, but the company implemented it anyway, Guyardo said. Company reports show claims losses are down and sales are up since the founders were replaced.
As recently as Easter Sunday -- the night before the trial started -- Guyardo said he, Hill and other outside investors tried to convince the Ashtons to support the changes XL demanded, which would cut payments to
But the Ashtons continued to maintain that they had the expertise to win a better deal. "We felt like we were being bullied," testified
Questioned by the Ashtons' lawyers, led by
Guyardo also admitted he lied to XL officials, on Hill's instructions, when as a
"You lied to XL so
"Yes," said Guyardo. "It's the first time I have told a lie in my professional history," he added. "And I regret having said it."
The company's longtime general counsel,
Hill testified that Borghese gave him a "legal opinion" that if the Ashtons opposed policies that benefited the company in order to benefit themselves personally, their vote against the new insurance deal could be disregarded.
But Borghese testified he didn't really believe that -- because the Ashtons owned about a third of the company, its shareholder-rights agreement, which Borghese helped write, really did give them the right to block the change.
Still, because Hill kept demanding it, Borghese gave Hill the justification he asked for. In court, Borghese maintained this wasn't a true corporate legal opinion -- just a prepared "argument" he gave Hill because the chairman kept telling Borghese to "circumvent" what the agreement actually said.
Borghese later resigned. And then he apologized to the Ashtons, confessing what he'd done, in a meeting at the
"When
"No," said Borghese.
Did Fetch, the company he worked for, suffer because the Ashtons were "squeezed" out and their shareholders' agreement breached? asked Stronach.
"Fetch lost enormous value as a result of the departure of the Ashtons," and they were right to demand a better bargain than XL offered, agreed Borghese. The Ashtons were "grossly, unfairly squeezed out of their own company."
At the end of the trial, the judge,
She added that company documents filed late in the process showed Fetch's breach of the Ashtons' rights was "blatant and known."
She noted she had already agreed to consider the Ashtons' motion for Hill's side to pay the couple's legal fees because Hill in his pretrial deposition had refused some questions, read a note from one of his lawyers despite claiming he didn't (it was captured on video), and walked out before his deposition was over, all of which the Ashton side said violated Chancery rules.
She stopped short of saying she would rule for the Ashtons, but underlined that Hill's lawyers should "relay to your clients" all these points "as they look down the road and perceive issues that lie ahead of them." That puts pressure on Hill's side to pay them to make the litigation and their claims on the company they founded go away.
At least until McCormick rules,
The Ashtons are already considering a possible next business. Maybe based on pet food,
Meanwhile, Fetch is hiring for its staff of 200, and writing more
"Fetch has always had a gigantic upside," Hill said in a statement after the trial. "It has a bright future, if it has an underwriting agreement that's stable, and makes sense."
He added: "Disagreements between founders and majority shareholders are unfortunate, but often inevitable.
"We are extremely pleased with our new CEO,
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