Charles Missler, the former Helionetics Inc. chairman accused of conflict of interest in a $7-million-plus lawsuit filed by his ex-employer, said Thursday that the charges are "ludicrous" and offer yet more evidence that the Irvine defense electronics maker is "incapable of getting its act together."
The suit claims that during Missler's tenure at Helionetics, an outside investment company that he controlled purchased a small defense electronics maker that Helionetics had once considered buying. The suit alleges that the small company, Resdel Industries in Arcadia, would have been valuable to Helionetics and that Missler, who left Helionetics in December after a lengthy and public power struggle with its largest shareholder, violated his promise keep his private investments from interfering with Helionetics' operations.
$5-Million Loss Reported
The lawsuit is the latest installment in Helionetics' topsy-turvy existence. In recent years, board-room bickering, revolving-door management and worries about its checkered Wall Street image have siphoned off much of the company's energies and, insiders admit, caused its profits to decline.
The suit against Missler was filed Wednesday, the same day that the company announced it had suffered a $5-million loss in its second quarter, largely the result of write-downs of discontinued and unprofitable operations.
Wilson Talley, Helionetics' chairman, said the suit stemmed from a review of the company's operations undertaken by a special subcommittee of the board following Missler's resignation last December and was not connected with Missler's prolonged dispute with Bernard Katz, Helionetics' major shareholder. Talley said the subcommittee is continuing to look at other potential conflict-of-interest situations during Missler's tenure.
In his first public response to the suit, Missler offered his view of how Resdel Industries came to be purchased by MDC, an investment corporation in which he holds a 60% stake. And he contended that the suit was "contrived as an attempt to mask the problems" at Helionetics.
According to Missler, MDC executives first learned of Resdel last August through the smaller company's bankers, who were looking for an investment partner for the money-losing and cash-starved company. A week later, Missler said, Resdel "was brought to my attention" as a potential acquisition for Helionetics.
Missler said Helionetics executives, himself included, evaluated Resdel and decided not to pursue a purchase because the small company had no cash, was losing money and was forecasting continued losses. Helionetics, Missler said, was looking for potential acquisitions that could give it additional operating cash and profits.
"It made no sense for Helionetics to buy Resdel," Missler said. "It didn't meet our criteria."
Purchased for $200,000
However, Missler said, Resdel was just the type of company that MDC executives, with a track record of reviving ailing companies, were looking to acquire. He said MDC bought the company for $200,000 in cash and a promise to spend another $1 million to bolster the company's operations.
Since MDC acquired Resdel in December, Missler said, the company has become profitable, has generated a $20-million order backlog and has seen its stock price soar from 50 cents to about $4 per share. "Helionetics is just angry that they don't own it now that it's doing well," Missler said.
However, Missler acknowledged that the timing of MDC's purchase "could have been handled better" and volunteered that he tried to settle the dispute over Resdel with Helionetics."