Legal battles are continuing between the Rockwell Medical Board of Directors and two senior executives who were fired earlier this year.
Legal battles are continuing between the Rockwell Medical Board of Directors and two senior executives who were fired earlier this year. The two executives were fired over claims of mismanagement of the company, the board said.
In May the board of directors announced it had terminated Robert Chioini, its president and chief executive officer, as well as Chief Financial Officer Thomas Klema. The two ousted employees contend their firings were unlawful and have filed lawsuits against the company.
In May Chioini filed an 8-K report with the U.S. Securities and Exchange Commission contesting the validity of the board meeting where he and Klema were fired. In June Chioini and Klema allege the company violated rules established by the SEC, as well as Michigan whistleblower laws, Crain’s Detroit Business reported. Chioini and Klema allege that right before their termination, the board was informed of a whistleblower complaint, Crain’s reported, citing the lawsuit. The ousted executives are seeking back pay, coverage of their legal fees and reinstatement of their company positions. Chioini, the former CEO has suggested that he was fired because he was supportive of an independent investigation into allegations made by some shareholders against members of the board. What those allegations may be was not disclosed. Prior to his firing, Chioini said he called for a special meeting of the board of directors to address a shareholder letter that requests an independent investigation into allegations of breaches of “fiduciary duties and other possible violations of securities and other laws” by various directors. Instead, the board terminated him. That termination was supported by financial planning firm Richmond Brothers, Inc., which owns nearly 11 percent of Rockwell and was behind the move to get Wolin on the board.
The lawsuit filed by Klema and Chioini names Rockwell board members Chairman Benjamin Wolin, John Cooper, Robin Smith, Mark Ravich and Lisa Colleran s defendants. The members of the board named in the lawsuit are the ones who supported the firing of the executives.
Then on July 2, Rockwell filed a counter lawsuit against the former company executives. The lawsuit also names board member Ron Boyd and former board member Patrick Bagley. The lawsuit filed by the company continues to allege mismanagement of the company by the two executives and board members. Rockwell said in a statement about the lawsuit that Chioini, Klema, Boyd and Bagley promoted “self-enrichment and poor corporate governance at the expense of Rockwell Medical’s shareholders, employees and patients in need of the Company’s life-changing drug, Triferic.” The company charged that the number of legal challenges to their firing are attempts to “paralyze” the company’s “ability to operate.”
Some of that mismanagement was alluded to by the board in a statement issued by the board at the end of June. The board said that Plante & Moran, PLLC resigned as auditor for the company on June 20. In its letter to Rockwell, Plante & Moran pointed to several areas of concern, including an issue that the former company management (Chioini and Klema, presumably) “did not make them aware of an email received from CMS’s Center for Medicare and Medicaid Innovation on March 27 regarding Rockwell Medical’s pursuit of Triferic special reimbursement status.”
Crain’s noted that Rockwell had counted on that reimbursement status as a way to boost revenue and shareholder stock prices.
Ben Wolin, Rockwell’s board chairman, said in a statement the current board is continuing to make progress on pitting the company “on stable footing, including identifying and hiring a new CEO and CFO, engaging a new audit firm and implementing our new Triferic commercialization strategy.”
“We recognize how both upsetting and confusing these events resulting from the harmful actions taken by Chioini, Klema, Boyd and Bagley must be for our investors. We will continue to vigorously defend the Company and take actions that are in the best interest of the company and all our stakeholders,” Wolin added.
The Rockwell board said it created a Special Transition Committee to run the company until a new CEO is appointed. The board launched a formal search process. The committee includes three members, Wolin and board members Lisa Colleran and John Cooper.
It’s a convoluted case and there are likely to be more claims and counterclaims made in the coming weeks. Shares of the Rockwell have been in decline for some time. The stock closed at $4.42 per share on July 5 and was down again on July 6.
