Lawsuit Seeks to Void Stock Transaction
The chairman of an affiliate of Phoenix Group International has filed a lawsuit alleging that the Irvine technology investment company illegally attempted to squeeze him out of a potentially lucrative deal to sell personal computers to the Soviet Union.
Michael Kolsy, chairman of American PC Corp. in Irvine, alleges in his suit that Phoenix illegally tried to dilute his one-third ownership interest in American PC in a financial transaction that involved a debt-for-stock conversion.
Phoenix, a company headed by Charles Missler, holds a 51% stake in American PC.
Besides the Phoenix Group and American PC, the suit also names as defendants Missler, Rossiter and Ruggles Holding Corp., a Phoenix affiliate; and American PC officers John French and Gordon Harris.
Kolsy’s suit claims that, shortly before Phoenix announced on Sept. 11 a deal to sell computers to the Soviets, the defendants unlawfully sought to gain control of American PC by converting certain debt obligations of American PC into shares of stock in the company.
Kolsy claims that the transaction had the effect of diluting the value of his American PC shares “to a minuscule amount” and would prevent him from benefiting from the Soviet joint venture.
The suit, filed in Orange County Superior Court in October, seeks to have the September stock transaction declared invalid and also seeks $5.5 million in damages.
Bruce Rossiter, Phoenix’s executive vice president for legal affairs, on Wednesday called Kolsy’s claims “frivolous and without merit.” He declined to comment further.
In September, Soviet officials announced that Phoenix had been picked to supply schools in the Soviet Union with personal computers and to help set up a Soviet factory to produce PCs.
The Soviets said Phoenix was to provide up to 6 million PCs in a joint venture with Soviet organizations.
After the deal was announced, however, some industry and trade experts expressed considerable skepticism about whether Phoenix could actually pull off the computer deal.
A main reason for the skepticism was that American PC, which is to supply the equipment to the Soviets, has little experience building personal computers.
