LOADTEK INSTRUMENTS LTD
POWTEK LTD
ADX ELECTRONICS

DISPUTE EXPLANATION by Antony Dean 21-11-99
RE: "MARTIN ELTON'S THEFT OF ASSETS"
(DRAFT 21-11-99)

 

IN A NUTSHELL

Martin Elton has taken over $13000 (nearly US$7000) of tangible assets and stock from Loadtek, and is using this for his own business, which is in direct competition with Loadtek. Martin Elton is still a 50% shareholder and director of Loadtek. I have requested that he returns the stock, and he will not. He refuses to return or even pay for this stock - which is criminal.

He says there is no problem. He says it has all been divided up and that I have agreed to sell it to him for effectively nothing. There is some truth in this, however he has stretched it far too far.

How he can take approximately half the tangible assets from Loadtek, while retaining his 50% shareholding is beyond me. To make matters worse, he thinks the situation can only be resolved if I sell my shares to him!

 

MORE DETAIL

Background...

We had already decided that major changes were needed to Loadtek's structure. After much negotiation, Martin agreed to a cross-licensing deal where we would each have licence to use each others' unpaid work in return for a shareholding in each other's "loads" business units.

The general deal was that since Loadtek had not paid for the design and all the work we had put in, then it had a value essentially of its assets only. So all we had to do was work out who wanted what, then I could sell my shares to Martin (except for 5% for the cross licensing deal) where the share price was simply the tangible assets value of the company. As part of that deal, I was to buy nearly half the tangible assets (mostly useless) from Loadtek to make it easier for Martin to buy me out. This may sound stupid on my part, but he didn't have the cash, and I was prepared to cut my losses to some extent to get out of business with him.

Over a series of meetings we physically divided up the stock, holding 'virtual auctions' to agree on the value of each item. I meticulously kept a spreadsheet detailing the dates and agreed value each item because he appeared to be too busy. I even prepared "kits" for him to continue manufacturing with. I put in a LOT of work.

From parasite to predator...

However, Martin pulled out of this whole deal at the 11th hour. He simply emailed me stating that he wanted a clean break, indicated that he would set up another business to make our product, and that what had happened in the past was not an issue. This was the defining moment when my impression of him turned from "keen" to "con", and I let him know (email TBD).

Meanwhile he had been incessantly emailing me, asking if I had sent the "figures" to our accountant. I did, and Martin now uses that to justify his actions and confuse the facts wherever possible.

His behaviour may sound very slippery, you may even think it paints the picture of a proficient con-man, but I don't think so. My feeling is that he simply realised later rather than sooner that he was not getting away with everything scott-free, panicked, pulled out, and chose instead to believe that he can do whatever he wants. In fact the only explanation he has ever given me is that he doesn't "want to spend hours and hours on an agreement". (Yep, I went into business with this guy.)

An insane situation...

The fact is that I don't have to buy half of Loadtek's assets. My intention was purely designed to help Martin out in his purchase of Loadtek, with the deal he had already agreed to over the phone - which he invalidated. I had no intention to allow him to set up in competition to Loadtek and ignore ownership of assets and IP. The spreadsheet in question (link TBD) even details the financial side of the proposed agreement that he rejected.

I can see how it would be difficult for me to bring action against Martin to retrieve the intellectual property he has effectively stolen. Such cases are very complex and expensive. But I would have thought that the blatant theft of assets would be more clear cut. However, it seems he can even get away with this - legal action is too expensive to warrant the $13000 returned, it is too much for small claims action, and the Police do not want to be used as levers in civil matters while there is the chance of civil resolution (understandably so).

As I see it, Martin has three options:

He has trapped himself with his own dodgy dealings. One point for natural justice.

But is he a criminal?

He has been withholding stock from Loadtek, and is refusing to return it, or pay for it. That stock was never intended for sale to his competing company which did not exist at the time. As time progresses, it is becoming clear that he is in fact acting criminally.

The police are now interested, however they do warn that once it can be shown that Martin has committed an offence, that he will probably not be able to back out of it. If he's done it, he will be charged, convicted and punished. I suppose if someone literally can't tell the difference between theft and "borrowing" then they deserve to go to jail.

My opinion is that he is now acting on the wrong side of the law, and that he risks conviction if he continues along his chosen path.

Why would he risk all?

I don't know. He has his own company, with which he is successfully ripping me off.

Even though this is not directly relevant, I have to offer some sort of explanation (even if just to myself). Perhaps he has advice that hanging on to Loadtek would allow him to eventually take over ownership of my work. That is very questionable as Loadtek did not pay for this work, and I have accurate records of what I did (design notes, timesheets, photos etc). Perhaps he thinks it would give him rights to the results of those who were paid. But why would he reject my "very reasonable offer" to continue with Loadtek if it was that important? I must admit to having similar designs on Loadtek now - but I did by FAR most of the work, and Martin has now stripped it dry, so I don't feel too bad about that at all.

But if he doesn't really understand the advice, particularly if he has 'interpreted' it to his own benefit, I can see him hanging on blindly, which appears to be the case right now.