A tangled web has been woven at Michigan-based Rockwell Medical. The board of directors has fired the chief executive officer and chief financial officer.
A tangled web has been woven at Michigan-based Rockwell Medical . The board of directors has fired the chief executive officer and chief financial officer. However, the ousted executives contend their firings were unlawful and also raised the specter of financial hijinks among some members of the board.
On Tuesday the board of directors announced it had terminated Robert Chioini, its president and CEO.
Chioini has countered that the termination was not valid because the meeting where that vote occurred was called for the sole purpose of discussing allegations of misbehavior made against some members of the board by a bloc of shareholders. Chioini’s complaint was supported by CFO Thomas Klema, who was also ousted by the board. Chioini said as the rightful CEO he has ordered Klema to remain in his position.
“The CEO continues to serve as the CEO consistent with the terms of his employment agreement. The internal investigation is proceeding under direction of the two non-conflicted independent directors Patrick Bagley and Ronald Boyd who have retained qualified and highly experienced counsel to conduct the investigation,” Chioini said in a statement.
On Tuesday, the day before Chioini issued his statement, Rockwell’s Chairman of the Board Ben Wolin issued a statement about the termination of Chioini. The Wolin-led board said the termination occurred following a “thorough review” of the company, including a management evaluation. Wolin said the leadership change is necessary in order to enhance the company’s “ability to execute on its plans for growth and best position it for future success.” Additionally, the board said that Chioini resigned his position as a member of the board and will not stand for re-election as the company’s 2018 annual shareholder’s meeting. Wolin added that the company maintains its focus on the potential of its renal drug therapies.
The Rockwell board said it created a Special Transition Committee to run the company until a new CEO is appointed. The board launched a formal search process. The committee includes three members, Wolin, and board members Lisa Colleran and John Cooper.
However, while the board has announced its termination of Chioini, the CEO has countered that he was fired because he was supportive of an independent investigation into allegations made by some shareholders against members of the board. What those allegations may be was not disclosed. As a result of the allegations, Chioini called a special meeting of the board to address a shareholder letter that requests an independent investigation into allegations of breaches of “fiduciary duties and other possible violations of securities and other laws” by various directors. The meeting, Chioini said in his own statement was called for the sole purpose of discussing the allegations and inform the board of steps that “the non-conflicted independent directors have taken to retain counsel” and initiate an independent investigation.
Chioini claimed that the board voted during that meeting to terminate him, but legally they were unable to do so because the meeting was called for the sole purpose of those allegations.
The Wolin-led board issued another 8-K filing to the U.S. Securities and Exchange Commission noting that the assertions Chioini and Klema brought up about allegations of fiscal malfeasance have nothing to do with the CEO’s termination.
This morning financial planning firm Richmond Brothers, Inc., which owns nearly 11 percent of Rockwell and was behind the move to get Wolin on the board, issued its own statement in support of the termination of Chioini and Klema. In a filing with the SEC David Richmond the Rockwell board of directors came to the right conclusion that Chioini is not the right man to lead the company.
“In our view, this board understands the complexities of running a public drug company and the need to attract top talent to execute on the vision of Rockwell becoming a leader in delivering iron to patients worldwide. We believe Mr. Chioini’s departure is an important step to delivering transformational changes at the Company – we look forward to seeing additional improvements at the Company under this Board’s stewardship,” Richmond said in the filing.
So, the question now is who is really in charge at Rockwell? Is the Special Transition Committee? Is it Chioini? The matter will certainly come to a lawsuit, or more than one. In the meantime, the Nasdaq Exchange has halted trading of Rockwell Medical’s stock until the leadership issue has been sorted.
Board disputes are not unheard of. About 10 years ago four members of the board of directors at ARIAD Pharmaceuticals resigned en masse over allegations that the CEO engaged in “grossly inappropriate” actions in pushing through a merger. Ariad’s CEO Harvey Berger later resigned in 2015 following a proxy battle with Sarissa Capital Management.
