Ex-COO's Disloyalty Sinks Options Bid
A former officer of a patent holding company forfeited his right to exercise stock options he claimed were worth $100 million because he actively undermined the company during his time there, a Suffolk County Commercial Division judge has ruled.
Supreme Court Justice Emily Pines (See Profile) ruled on Oct. 30, following a trial in Trimarco v. Data Treasury, 30324/03, that the employee, Michael Trimarco, breached his implied covenant of good faith and fair dealing while working as chief operating officer of Data Treasury Corp., a company that holds patents on electronic check imaging.
The complicated legal dispute has its roots in the late 1990s, when Trimarco reconnected with someone he had known in middle school on Long Island, Keith DeLucia.
Trimarco had gone to Cornell University and then Harvard Business School. He began his career as a trader at Lehman Brothers, though he ended up being ordered to pay Lehman almost $50,000 after an arbitration.
DeLucia did not graduate from high school, and served a short prison sentence for aiding a robbery. He went on to get his GED and go into the car wash business.
When the two men met again, Trimarco was working for a company he helped found, called Vitallink, which provided telecommunications and data handling services to small businesses. DeLucia allegedly told Trimarco that, through his contacts in the car wash business, he could provide hundreds of customers for Vitallink. DeLucia started worked for Vitallink.
At that time, Trimarco and DeLucia discussed expanding their business to include a technology called Card Present over Internet Protocol, or CPIP, which allows credit card transactions over the Internet.
Vitallink ultimately folded, but Trimarco and DeLucia continued to pursue the CPIP idea. In 2002, DeLucia proposed creating a new company, from the merger of three existing companies, that would implement CPIP.
That plan never came to fruition. Instead, both men ended up working for Data Treasury, where DeLucia had contacts. Data Treasury was then based in Long Island, though it has since moved to Texas. The company held intellectual property related to electronic check reading, which DeLucia and Trimarco believed to be valuable, but was in financial difficulties.
DeLucia became CEO of Data Treasury. Trimarco was brought on initially as a consultant, and later became COO and a director of the company. In December 2002, Trimarco was given stock options granting him the right to buy 1.5 million shares of Data Treasury stock over the next 10 years.