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Brier Dudley's blog

Brier Dudley offers a critical look at technology and business issues affecting the Northwest.

April 6, 2010 at 4:26 PM

Paul Allen loses fight to block $20 million employee payments

A judge today rejected Paul Allen’s move to block payments that two former investment managers were to receive under a profit-sharing deal.

A spokesman for Allen immediately said there will be an appeal.

Allen’s Vulcan holding company has tried for more than a year to block the payment of more than $20 million to David Capobianco and Navin Thukkaram, managers who were fired in October 2008.

An arbitration panel sided with the former employees, starting with an initial decision last July.

On March 8, Vulcan appealed, arguing that Allen was denied a fair process because one of the arbitrators contacted the employees’ attorneys before the arbitration began.

Today, King County Superior Court Judge Paris Kallas denied that appeal and upheld the arbitration decision in favor of the employees. The ruling denied Vulcan’s motion to vacate the arbitration awards and granted the employees’ motion to confirm the award.

Kallas wrote that “there is no evidence before the court of inappropriate conduct during the pre-appointment contact.” She said the contact was justified considering the complexity, dollars involved and high profile of the case.

Capobianco, a former co-founder and co-head of Vulcan Capital’s private equity team, said in a statement via a spokesman that he and Thukkaram are “relieved and very happy with the court’s ruling.”

“We are extremely proud of the more than $1.5 billion in profits we made for Vulcan and Mr. Allen,” he said. “With this chapter now behind us, we look forward to employing our successful strategies for new investors and enterprises.”

Allen spokesman David Postman said Vulcan will now take its case to the state Court of Appeals. Vulcan considers the questions it raised about conduct during arbitration to be unanswered.

“There’s a lot of that we still don’t know about this,” Postman said. “We’re disappointed obviously that the judge didn’t see it this way. From the start the attorneys were saying this could be the outcome at Superior Court and we would have to get a panel of judges. We hope that a panel of judges at the Court of Appeals will uphold what we believe are important standards in alternative dispute that were transgressed in this case.”

The dispute involves profit made in Vulcan’s investment in an energy company, Plains All American. A lawyer for Capobianco and Thukkaram 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 argued that the two managers weren’t eligible for the last 20 percent of their share because there hadn’t been an exit event at the time they left. But the panel of three arbitrators unanimously granted the award.

Vulcan challenged the panel’s decision, contending the process was compromised because the arbitrator chosen by the claimants had met with them in late 2008, before being named to the panel. In today’s decision, Judge Kallas rejected that claim.

Comments | More in | Topics: arbitration, Billionaire techies, paul allen

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