NEW YORK, Dec. 9, 2015 /PRNewswire/ -- Grandparents.com, Inc. (OTCQB: GPCM), its shareholders and dedicated staff are INNOCENT VICTIMS of alleged fraud and misconduct reported against its Chief Executive Officer, Steve Leber, and Chief Operating Officer, Lee Lazarus. Mr. Leber is the well-known rock promoter who brought the Rolling Stones to the U.S. and Mr. Lazarus is a New York attorney who previously practiced at Proskauer Rose LLP.
By way of this press release, the undersigned seeks to:
- Shed light on alleged fraud and other claims of intentional misconduct that have been filed with the board of directors of the company against Mr. Leber and Mr. Lazarus.
- Remove Mr. Leber and Mr. Lazarus as directors and officers because, in the opinion of the undersigned, they are unfit to run a public company and the company has little chance at any path to success without ethical and professional management.
- Identify that Mr. Leber and Mr. Lazarus engineered amendments to the Company's bylaws to make it difficult, if not virtually impossible, for shareholders to remove them.
The extensive and serious allegations against Mr. Leber include misappropriation, fraudulent alteration of corporate warrants, insider trading, securities fraud, failure to disclose material information in SEC filings, and numerous conflicts of interest and breaches of fiduciary duty. Furthermore, while purportedly working under an Employment Agreement requiring his full-time attention to the business, Mr. Leber has been accused of continuously operating private businesses from the company's offices on company time. Mr. Leber has also been accused with routinely using a company-paid American Express Card as a piggy bank for his personal expenses. He has also been accused of claiming he is a Florida resident although he works full-time in the Company's New York office and resides in Manhattan most of the year. In September 2015, Mr. Leber awarded his son, Jordan Leber, a two-year contract as a consultant to the company at a rate of $125,000 each year. This related-party transaction was undertaken without independent review of Jordan Leber's responsibilities and duties. Furthermore, Jordan Leber has for several years operated and continues to operate his own full-time business from the public company's offices -- free of rent and other occupancy charges. The allegations against Mr. Leber also include retaliation, harassment, bullying and threatening company executives.
Misleading the Public in SEC Filings
On November 23, 2015, Grandparents.com, Inc. filed a Form 10-Q with the United States Securities & Exchange Commission certified by company Chairman Steve Leber as both Chief Executive Officer (CEO) and Principal Financial and Accounting Officer. The CEO was appointed by the board of directors as Principal Financial and Accounting Officer on November 20, 2015, after the CFO indicated to Mr. Leber and Mr. Lazarus that he could not execute the CFO certification required by law for the 10-Q filing, unless they responded to questions the CFO had posed to them relating to various disclosure matters, including material allegations of fraud and other misconduct filed with the board against them by two former senior level officers of the company. The CFO and these two former officers have submitted formal complaints to the board, and the law firm of Blank Rome LLP was engaged by a non-executive committee of the board as special counsel to investigate allegations of fraud, misappropriation, self-dealing and misconduct against Mr. Leber as CEO, and allegations of fraud and other misconduct against Mr. Lazarus as COO. While special counsel has not submitted a final written report, they have provided verbal interim reports and continue their investigation based on mounting evidence from various sources.
Furthermore, the CFO was unable to execute the 10-Q certification because Mr. Leber and Mr. Lazarus blocked his access to online corporate documents for over two months prior to the filing. Despite repeated requests, answers to material questions from the CFO and access to the corporate files were not provided to the CFO.
Mr. Leber's and Mr. Lazarus' lack of transparency and refusal to respond to the CFO precluded his ability to execute a required management representation letter to the auditors and to certify the 10-Q as required by law. In the opinion of the undersigned, Mr. Leber retaliated by suspending the CFO on November 23, 2015, the day the 10-Q had to be filed. He was then appointed as Principal Financial and Accounting Officer in an engineered effort to bypass the CFO and to proceed with the certification and filing of the 10-Q without having to respond to the CFO's questions.
After reviewing the 10-Q as filed, the CFO complained that his suspension was retaliatory conduct by Mr. Leber and a subterfuge for Mr. Leber and Mr. Lazarus to be able to avoid disclosing in the 10-Q that serious allegations of fraud and a pattern of misconduct were made against them. As filed, the 10-Q did not mention any of these material allegations. Instead, it simply stated, "the Company's Chief Financial Officer and two former officers made allegations of corporate governance deficiencies at the Company." (Emphasis added)
The opinion of the undersigned is that this statement was made to intentionally mislead and hide the truth from the public. Further, in their effort to avoid mentioning in the 10-Q that they, in fact, were the subjects of the investigation, Mr. Leber and Mr. Lazarus made it appear that it was the CFO that was somehow culpable and under investigation, and hence the 10-Q was written in a way that the reader would infer that this was why he was suspended. The 10-Q for the third quarter of 2015 states:
"Recently, the Company's Chief Financial Officer and two former officers made allegations of corporate governance deficiencies at the Company. While management believes that such allegations are without merit, the Company's board of directors has formed a special committee of independent directors to conduct an investigation. The special committee has engaged independent legal counsel to conduct the investigation, which, as of the date of this Quarterly Report, has not issued its written report but the independent legal counsel has reported to the special committee that there was no intentional misconduct by any officer or director of the Company. The Company's Chief Executive Officer, Steven E. Leber, has been appointed as the Company's principal financial and accounting officer in place of the Company's Chief Financial Officer as of November 20, 2015 and executed the certifications filed as exhibits to this Quarterly Report on Form 10-Q as the Company's principal financial officer, and the Chief Financial Officer has been suspended, with pay, effective November 23, 2015, pending the outcome of the investigation."
Contrary to the 10-Q, the allegations made against the CEO and COO were not complaints about general corporate governance deficiencies of the company. Nevertheless, Mr. Leber has refused to amend the 10-Q and disclose the true facts, as well as to apologize to the CFO for wantonly and maliciously tarnishing his good name and reputation in order to avoid disclosing that Mr. Leber and Mr. Lazarus were the persons accused of wrongdoing, not the CFO. The fact that the CFO believed he was unable to make the certification was material information, and Mr. Leber should have publicly disclosed the reasons for the CFO's inability to certify the 10-Q and properly explain why he was actually suspended rather than falsely making it appear the CFO was charged with wrongdoing.
Prior demands for amendment of the 10-Q were made by the undersigned for Mr. Leber to correct the misleading information included in the above paragraph of the 10-Q, to no avail.
Subsequent Attempt to Perpetuate Their Tenure on the Board
On December 8, 2015, prior to Blank Rome LLP completing their investigation and submitting a formal written report to the non-executive board members, Mr. Leber, Mr. Lazarus and two members of the board friendly and aligned with Mr. Leber voted to amend the Company's bylaws to make it difficult, if not virtually impossible, for the shareholders to remove existing directors, and nullified a bylaw allowing shareholders to call special meetings. These amendments, in the opinion of the undersigned, constitute an act of self-dealing and breach of the duty of loyalty to the company and its shareholders by those directors who voted for the amendments. Directors Steve Leber, Lee Lazarus, Robert Cohen and Louis Karol voted for the amendments. Director Mel Harris objected to the amendments. Several shareholders had previously demanded, including in private letters and publicly by way of a press release, that the company hold an annual shareholder meeting. Mr. Leber has refused to hold annual shareholder meetings since he joined the company in February 2012.
The bylaw amendments are a bold second attempt at creating roadblocks for shareholders to remove Mr. Leber and Mr. Lazarus. The first occurred secretly in July 2015 in connection with an $8 million Credit Agreement executed by Vincent J. Dowling, Jr., on behalf of an entity affiliated with Dowling Capital Partners. After a final draft of the agreement was approved by the board on June 30, 2015, Mr. Leber and Mr. Lazarus unilaterally changed the final version of the credit agreement, without the prior express approval or knowledge of the board, to provide that in the event Mr. Leber and Mr. Lazarus were no longer board members, it would constitute an event of default under the Credit Agreement, with the potential of accelerating the entire amount of the $8 million debt. The 8-K filed for the transaction neglected to mention this material provision.
A summary explanation of the bylaw amendments is found in the 8-K filed on December 8, 2015:
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SOURCE Joseph Bernstein