Springdale-based nanotechnology company NanoMech looks to expand an investigation into former CEO Jim Phillips and require him to turn over documents related to “various financial wrongdoings” he committed that led the company to file for bankruptcy, according to the company’s June 26 filing.
The investigation is part of the ongoing bankruptcy case in U.S. Bankruptcy Court for the District of Delaware. NanoMech filed April 15 for Chapter 11 bankruptcy, which allows for a reorganization of the company’s debt.
NanoMech notes several instances in which others have asked the company to investigate Phillips, including the lawsuits Michaelson Capital Partners and Daniel Carroll previously filed against NanoMech. NanoMech hired financial consultant Treliant to investigate Phillips’ transactions with the company and found that Phillips used more than $750,000 of the company’s assets for personal expenses, the filing shows.
“These expenses include trips for Phillips and his wife, Barbara, to the Paris Air Show, as well as trips to Dallas and Indianapolis to see automobile races,” according to court documents. The company also is investigating whether Phillips used company assets for renovations for Phillips’ home and “extravagant, unnecessary electronic equipment, such as flat-screen TVs,” for his home and to pay for legal fees and other expenses “that had no relation to Phillips’ position as CEO.”
Also, Phillips in 2015 started to lease 4,615 square feet of office space in the Rolex Building in Dallas, and the space included seven offices and “expensive furniture and extravagant artwork — some of which is now missing,” according to the filing. The cost to lease the space along with the furnishings was nearly $1 million, and the space was used for two NanoMech employees.
Before Phillips left the company, he gave himself a more than $500,000 severance package, which left the company without any money in which to operate, according to the filing. The company asked that Phillips provide the documents within 10 days of the judge granting the motion.
In a separate filing, NanoMech looks to expand its contract with Treliant to allow it to continue to review NanoMech’s books and records and to determine instances of fraud or of financial issues. NanoMech hired Treliant on May 22, and NanoMech wants to extend the contract through July 31.
Recently, U.S. Bankruptcy Judge John Dorsey denied Carroll’s motion to end the automatic stay in the case he filed against NanoMech in the U.S. District Court, Western District of Arkansas in Fayetteville. The case was related to claims the company has not made payments on a $1 million loan issued June 28, 2018. Carroll on Feb. 21 demanded payment of $1.06 million after NanoMech failed to make payments on $7 million in loans Michaelson Capital provided to NanoMech in April 2018.
In a case filed Feb. 4 in the Supreme Court of New York, Justice Andrew Borrok approved a judgment to require NanoMech to pay $8.91 million at an annual rate of 9%. Michaelson Capital had sued NanoMech for not paying on the $7 million in loans.
When reached by telephone Tuesday, Phillips refuted all the claims against him regarding spending the company’s money for personal expenses and noted the other claims, such as furnishing the Dallas office with expensive art, were untrue. He also explained his background with the company and how he was proud of his achievements.
He said the only issue he had while with the company was that some shareholders wouldn’t allow for the company to receive additional rounds of funding. Phillips said he’s willing to defend himself in court if needed.