TORONTO – Stock in soil treatment company Bennett Environmental Inc. (TSX:BEV) fell Tuesday as a years-old legal battle between the company and its founder again moved back into the courts.
On the Toronto Stock Exchange, Bennett Environmental shares closed down eight cents or about four per cent at $1.66 on volume of some 400,000 shares traded, more than 10 times their daily average.
In the latest legal salvo, BEI founder and ex-CEO John Bennett filed a suit late last week against the Oakville, Ont.,-based company seeking $50 million in damages. The suit relates to regulatory rulings against the company, Bennett and several other executives involving public disclosures over a soil treatment contract in the United States back in 2003.
In an interview Tuesday, Bennett said he has also filed a complaint with the Ontario Securities Commission over the disparaging way the company acknowledged the latest legal action on Monday.
“The company believes that the new lawsuit, as with past lawsuits involving Mr. Bennett as plaintiff, is without merit and intends to defend it vigorously,” Bennett Environmental said in a statement.
Bennett complained that made it look like he lost previous legal clashes when, he says the courts have consistently ruled in his favour.
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In a prior suit, Bennett sought to have the company pay legal expenses and other costs associated in defending regulatory actions in the U.S. soil treatment case. Bennett won the case, as well as subsequent appeals by the company.
In an email, Bennett’s lawyer said the original trial judge concluded that BEI had failed to establish that Bennett had acted “in bad faith or unlawfully” and ordered it to indemnify him.
On Tuesday, Bennett said he has received some of the money under the original ruling but that he was still owed some $1 million.
Meanwhile, he described his current legal action as a countersuit, since the company sue him “six or seven years” ago for some $10 million, but hasn’t followed up.
“That was a frivolous lawsuit. . . .They’ve been trying to dry me out, to take all my funds off me so I couldn’t defend myself. They almost did it, but not quite.”
Bennett, who characterizes himself as someone who was frozen out of his own company and effectively made a fall guy in the U.S. soil treatment case, said it was only through a court ruling 18 months ago that he was able to get his hand on company books and other records involving the case.
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“Finally we have all the witnesses and the evidence sworn that we need so it was time to launch the suit,” he said.
At the root of it all is a case brought by the U.S. Securities and Exchange Commission alleging that in 2003 and 2004, a number of company executives, including then-CEO Bennett, caused BEI to issue press releases and make SEC filings that misrepresented and exaggerated a contract that it extolled as “the largest in the company’s history” with a value of “$200 million.”
“In reality, the contract had a guaranteed value of less than $250,000, was later cancelled by (U.S.) the Army Corps of Engineers, reinstated on a limited basis, and then resolicited under materially different terms,” according to the SEC website.
Although Bennett and the other executives never conceded any wrongdoing, they agreed to various penalties. In Bennett’s case that involved an SEC fine equivalent to C$120,000. The OSC also imposed a $300,000 fine on him.
Bennett said Tuesday he had been “persuaded by company lawyers to plead guilty, pay the fine and get it over with because the insurance would pay $300,00 fine.”
“So, that was very bad advice. They’ve held that against me ever since,” he said, adding that the issuing press releases at the heart of the case had never been his responsibility.
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