Microsoft co-founder Paul Allen is not only fighting cancer and the struggles of his biggest investment, Charter Communications, but he’s also sparring with two former investment managers over their compensation.
Allen on Monday filed legal motions in King County Superior Court to dismiss an arbitration award granting at least $20 million to two investment managers he fired in October 2008.
David Capobianco and Navin Thukkarm were managers in the private equity group of Allen’s Vulcan holding company.
Their compensation included a percentage of the profit they generated for Vulcan, which was paid out over time. A final 20 percent of the payout came when investments had an exit, such as a sale.
At issue in the case is their share of the profit made from Vulcan’s investment in energy company Plains All American. Their lawyer said Allen made $1 billion on the venture and then dismissed the entire investment staff before they received their full share, cutting off their profit-sharing plan.
Vulcan is arguing, in part, that the two managers weren’t eligible for the last 20 percent of their share because there hadn’t been an exit at the time they left. But a panel of three arbitrators unanimously granted the award, starting with an initial decision last July.
Vulcan is challenging the panel’s decision, arguing that the process was compromised because the arbitrator chosen by the claimants had met with them in late 2008, before being named to the panel.
“It’s really inexplicable how those sorts of contacts with the claimants were not reported,” Vulcan spokesman Dave Postman said.
The arbitrator in question, Art Harrigan, is a prominent Seattle lawyer who represented Craig McCaw in the formation of Nextel Partners, the Port of Seattle in airport noise battles, and King County when it sued to block the Seahawks from moving to California (before the team was owned by Allen).
Harrigan couldn’t be reached for comment, but Richard Yarmuth, the lawyer for Capobianco and Thukkarm, said nothing untoward happened.
Vulcan’s lawyers already tried and failed in making the same argument to an arbitration judge, Terry Lukens, Yarmuth said.
“Sometimes people don’t accept losing very graciously,” he said.
Lukens decided in January that Allen’s motion to disqualify Harrigan “is based on an unproven supposition that something untoward must have happened during the pre-selection meetings with candidate Harrigan. There are no facts presented to support this supposition.”
Lukens conclusion: “There is no evidence of bias or improper influence in the final, unanimous Award.”
In Monday’s filings, Vulcan’s lawyers are asking the Superior Court to overrule Lukens and dismiss the award, arguing that their side was denied a fair process.
Yarmuth simultaneously filed a motion Monday asking the court to uphold the award, saying the arbitration panel concluded that Vulcan breached its profit-sharing agreement with the employees.
Vulcan’s side is also challenging the arbitrators’ decision that Vulcan improperly changed its compensation plan by firing the investment group staff and rehiring four of them.
It contends the employees were at-will workers who could be fired.
(Note: This post is updated to include the content of the story that ran in print)