Visalus prohibited from voiding equity shareholders’ legal rights
Despite representing affiliates who invested in Visalus’ “Founders Equity Incentive Plan” were accepted and qualified for two years, the company recently sough to back-pedal on its representations and agreements.
The dirty move appears to be a direct response to a round of document subpoenas, served on Visalus and a top affiliate by the Colorado Securities Division.
The securities investigation was instigated by a complaint filed by Caprece Byrd, a current Visalus affiliate.
In a separate lawsuit filed approximately two weeks later, Byrd alleges she and over a thousand other Visalus affiliates were lured by Visalus corporate into a fraudulent investment scheme.
In the two weeks between the subpoena serving and Byrd’s lawsuit being filed, Visalus corporate scrambled to organize a shareholder meeting.
At the meeting attendees were told they’d be ‘getting “legal documents” to “kind of formalize” their status as shareholders‘.
This despite some of the affiliates on the call having been told for nearly two years prior that they were already qualified as shareholders in Visalus’ Founders Equity Incentive Plan.
On August 31st, three weeks after Byrd’s securities fraud filing, counsel for Visalus sent out an “Amended and Restated Founders Equity Incentive Plan” and “Performance Agreement”.
In order to maintain their previously qualified (and fully paid up) equity shareholder positions, Visalus affiliates were told they had to sign the new documents.
Clauses of note in the new agreement documents, that at no time were previously disclosed to Visalus affiliates who coughed up thousands to be qualified equity shareholders, included:
- stipulation that Visalus’ Founders Equity Incentive Plan doesn’t actually sell stock
- a requirement that all equity shareholders maintain active affiliate status into 2020 to continue to qualify as shareholders
- Visalus granted the right to increase or decrease the total number of shares offered in the plan
- Visalus granted the right to forfeit affiliate shares if it terminates a Visalus equity shareholder affiliate for any reason
- mandatory arbitration through a jurisdiction of Visalus’ choosing
Byrd sees the agreement as an attempt to undermine her proposed class-action lawsuit.
Through her attorneys, Byrd argues potential class members will
now believe that the only way they will ever see their investment, is to sign any document placed in front of them.
In addition to there being no mention of Byrd’s lawsuit or the potential signing away of legal rights if equity shareholders sign the new agreements, Visalus also omitted a recommendation that equity shareholders seek legal advice prior to signing the document.
In an emergency motion filed on September 13th, Byrd requested the court
- prohibit Visalus from further contacting potential class members with respect to their participation in Founders Equity Incentive Plan, without prior approval from the court
- require Visalus to file all court-approved communications for public record
- order Visalus to identify all recipients of the new agreements
- order Visalus to contact each equity shareholder via email to inform them of the ‘pending Complaint affecting their legal rights in the acquisition and ownership of ViSalus equity‘
- refer Visalus’ attorney, Adam Morgan, to the ‘Attorney Grievance Commission in connection with his ex parte communications with represented parties‘
- appoint Byrd’s attorneys as interim class counsel
On September 15th Judge Leitman granted the emergency motion through a stipulated order.
The order halts and already signed agreements executed after September 14th and prohibits Visalus from sending any further legal agreements to equity shareholders.
Without deciding whether agreements signed on September 12th or 13th are “valid and enforceable”, it is noted that the order does not apply to agreements signed on these dates.
Visalus has been given till September 28th to file a response, after which the motion will be revisited.
As mentioned at the start of this article, Visalus corporate has been representing to equity shareholders for two years that they were fully qualified for dividend payouts beginning April, 2017.
Those payments never happened, and how they defend their actions in court through this response will certainly be interesting to go through.
Update 9th January 2018 – Following a hearing held on December 8th, the September stipulated order has been dissolved.
The emergency motion requesting a Protective Order and Appointment of Interim Class Counsel was also denied.
A reason for the denial is not given in the order itself. It states only that the decision was made ‘for the reasons stated on-the-record at the December 8, 2017, hearing‘.
The case continues, with the last significant filing a reply to the plaintiff’s response to Visalus’ Motion to Dismiss.