Former SGIS Shareholders File Lawsuit Seeking Over $75 Million from Salient Federal Solutions

Salient accused of breach of contract and conspiracy in effort to acquire SGIS for "grossly inadequate" compensation

ALEXANDRIA, Va., Dec. 14, 2011 /PRNewswire-USNewswire/ -- The co-founders and former shareholders of SGIS, a technology-based government contracting firm, announced today that they have filed a lawsuit against Salient Federal Solutions, Inc. seeking over $25 million in compensatory damages, plus statutory and punitive damages, collectively totaling over $75 million, related to the sale of SGIS to Salient last year.  The plaintiffs allege that the leadership at Salient, including Ted Dunn, S. Brandford Antle, and Ray Oleson, along with private equity firm Frontenac Company LLC, engaged in a "classic flimflam" designed to acquire a highly successful and rapidly growing firm for grossly inadequate consideration. 

Two of the plaintiffs, Hany Girgis and Vince Virga, founded SGIS in 2002 out of their own homes using personal savings.  By June 2010, they had built the company into a significant government contracting firm with approximately 675 employees, 14 offices around the country, and more than $125 million in annual revenue.  SGIS provided technology-based contracting services to the U.S. Department of Defense, the U.S. Department of Homeland Security, the U.S. intelligence community, NASA, and the U.S. Department of Justice. 

"We were able to build a major, nationwide contracting firm in only eight years by sticking to our core values and working hard to do the right thing for our customers and employees," said Hany Girgis, Founder and former CEO of SGIS.  "It's unfortunate that our dealings with the new ownership have forced us to file a lawsuit, but we are confident the legal process will provide for a just resolution to the dispute."

"We made significant sacrifices to build SGIS from the ground up and couldn't be more proud of the organization we created," said Vince Virga, former President at SGIS.  "When the defendants purchased SGIS, Salient acquired not only a rapidly growing company with an outstanding reputation and some of the best customers in the industry, but one of the finest teams ever assembled.  Selling the company we worked so hard to build was the most difficult decision of our lives.  You hate to think that you chose the wrong group to carry on the SGIS legacy."

In the complaint, filed in U.S. District Court for the Eastern District of Virginia, the plaintiffs outline how Salient and Frontenac reneged on their initial offer to purchase SGIS and induced the plaintiffs to follow through with the sale using the promise of a contingent performance payment the defendants never intended to make.  Specifically, the complaint alleges that Salient and its leadership:

• Reneged on their initial "all cash" offer to purchase SGIS after the plaintiffs had turned down offers from other potential buyers;
• Conspired with private equity firm Frontenac to entice the plaintiffs to sell SGIS by proposing a multi-million dollar contingent performance payment, commonly referred to as an "earn out," that Salient never intended to pay;
• Made material misrepresentations and omissions during the parties' extensive discussions regarding the performance payment and its proper calculation;
• Knowingly employed multiple improper business tactics and accounting manipulations designed to reduce the performance payment to the plaintiffs to zero, even though the company experienced significant growth during the performance payment period;
• Asserted several meritless rationalizations for their failure to make the performance payment;
• Committed tactical breaches of their contractual obligations and stonewalled plaintiffs' repeated requests for information; and
• Refused to engage in good faith efforts to resolve the dispute over the performance payment obligations.

The plaintiffs are seeking payment of all damages due to Salient's breach of contract, estimated at over $25 million, treble damages under Virginia's anti-conspiracy statute, and punitive damages.

The case is styled Girgis, et al. v. Salient Solutions, et al., U.S. District Court, Eastern District of Virginia.

SOURCE Hany Girgis and Vince Virga