Democratic gubernatorial candidate Shri Thanedar on Wednesday denied accusations that he fraudulently misled the buyer of a majority stake in his chemical-testing company, which a lawsuit alleges resulted in an inflated sale price of $33.6 million last year.
The lawsuit, filed Tuesday in federal court by Avomeen LLC, accuses Thanedar of making fraudulent and misleading misrepresentations about his business' financial practices and the nature and amount of its monthly revenues and earnings. It was part of a scheme in the months leading up to the final deal in November to show a company with stable and growing revenues when in reality, they were "inflated and highly variable," Avomeen alleges.
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"I patently deny every claim contained in this document and intend to fight it," Thanedar said in a statement. "Because this is a pending legal matter, I am prohibited from saying more at this time."
Thanedar has said he sold majority control of Avomeen Analytical Services, which he founded in Ann Arbor, for at least $20 million. The lawsuit says the buyer — whose majority owner is the private equity fund High Street Capital in Chicago — paid a pre-adjustment price of $33.6 million, and Thanedar retained a minority interest while netting about $20 million.
Thanedar, a political newcomer, has almost entirely self-funded his run to "disrupt" a Democratic primary whose viable candidates include former legislative leader Gretchen Whitmer and former Detroit health director Abdul El-Sayed. As of Oct. 20, Thanedar had given nearly $6 million to his campaign committee and spent $281,000 of it.
The lawsuit alleges that a "significant portion" of the reported revenue in one month involved projects that were not actually finished until subsequent months. It estimates that more than 40 percent of the revenue booked in another month should have been recorded later in 2016 or even in 2017.
Thanedar, according to the accusations, controlled the information flow to the buyer, told his employees to adjust and relax the company's approach to recognizing revenue, and instructed them to not correct errors in presentations made to prospective buyers.
If Thanedar had provided truthful information, High Street Capital would not have closed the deal or would have paid "significantly less," the lawsuit alleges.
Thanedar moved back to Michigan in 2010 and started Avomeen after living more than two dozen years in Missouri, where he bought a small three-person lab and grew it to a 450-employee business only to lose the company, Chemir, to receivership and see his multimillion-dollar home foreclosed upon.
After selling the stake in Avomeen, he made news by giving $1.5 million in bonuses to roughly 50 employees. He remained as interim CEO until February.
The lawsuit seeks compensatory and punitive damages along with costs and attorney's fees.
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