Okay, we have our first player! Step on up RC! Now that I am able to do so, I am happy to answer questions about this case. All of the documents I'm quoting were in a 300-page dossier provided to the defense as a part of discovery, as such, they are in the record and I am free to share them. However, out of an abundance of caution, I redacted or changed the names (At some point I'll make up fake names to use in the book I'm writing).
First, a word about what I'm doing here. You all may be aware of my fondness for Jeffersonian quotes, but my favorite is one that I've never had an appropriate chance to use before. It is true that Kesseler v. AsystBio et al. is settled and withdrawn with prejudice. But, as old Tommy said when asked to surrender the Bon Homme Richard, I have not yet begun to fight
So what is going on here if this wasn't the fight? A couple of things. First, I've been keeping secrets from my friends -- all of you -- for three years. That's done. All of this is stuff I've wanted to talk about and, more than that, things I think you will find as entertaining as any legal drama the Fogbow has followed. The thing to remember about what happens next: I'm going to enjoy it far more than you know.
The other thing that's going on here has to do with the defense lawyers. Why them? They are the attorneys for, among others, AsystBio, a Michigan LLC. One thing that everyone was clear on at mediation is that I have sole control of AsystBio at this point. Which has been restored to good standing with the State of Michigan. It will become clear why this is an issue in due course, but that should give you a place to start.
Reality Check wrote: ↑
Wed Mar 06, 2019 11:53 pm
Slarti, If I am reading correctly you asked for $15,000,000 ($5,000,000 each) and in mediation got $20,000, an admission you were wrongfully removed from the board, plus some consulting hours that will never happen? This is for $90,000 in legal fees? Please correct me if I am wrong.
There was not an admission that we were wrongfully removed, there was an acknowledgement that we were not removed for cause. In other words, we have continuously been managers in good standing. See below regarding the reason this was important. I am required to provide consulting hours that will likely never be asked of me, but I am prepared to give regardless. I am entitled to receive 5 hours a month worth of consulting from Dennis for 18 months. 17 now. They have 2 years to pay me the $20,000 and I'm out of pocket over $85K.
The $15 million dollars (pinkie to chin) was pursuant to a clause in the operating agreement written by one of the former defendants. It speaks for itself. In the mediation, my lawyer admitted that the case was weak on damages. She also felt it was very strong on the merits. There was, in my opinion, a very strong cause for significant damages that was a moot point in mediation (because the defendants didn't have millions, or even hundreds of thousands, of dollars) regarding my interactions with Oracle. This occurred in April of 2016.
In the email included into evidence in the complaint, my postdoctoral mentor declared that there was an "irreparable schism" and that the only way forward was to split the company (with his side retaining the name and thus all of the assets of the company -- primarily the Small Business Technology Transfer grant proposal filed with the NIH a week or so after he declared a schism). After various emails, those on the other side of the "schism" proposed the following in an agenda for a management committee meeting. NOTE: this was in a meeting agenda due to a rule we had about quorums and votes on the agenda. This was their plan to implement their "schism". My thoughts are in my response below.
1.) Discuss the future AsystBio Company Structure - refer to the memorandum below.
Asystbio LLC Management Changes Memorandum
The purpose of this memorandum is to present a framework for the departure of Asystbio LLC managing members. The intent is to be fair and amicable to the departing members while allowing continuous opportunity to collaborate on current and future projects.
[The defendants] recommend that [Slarti and friends] review and accept the following:
1. Removal of equity interest and management responsibilities in ex- change for warrants that represent an equitable split.
2. Create a workable form of remuneration between companies.
3. Assumptions offered to both company entities (Asystbio & Adderstone)
....(a) 3 years compensation for any and all revenues of a fixed 7% profit sharing of all revenue. Excludes investment monies.
....(b) A potential Warrant issue of up to 18% which represents the 3 Asystbio departing members current shares.
i. A warrant issue from Adderstone is yet to be negotiated
....(c) Options of compensation for members participating in each others Company.
i. Additional warrant transfers: Whereas 1 warrant in exchange of 100 hours (1 warrant = .007% of revenue sharing)
ii. Fee per services basis at a rate TBD
iii. Participation by members of one company in the other is strictly voluntary.
....(d) Asystbio LLC retains the Asystbio LLC name, logos, domains, sales marks, trademarks, registrations, etc. in perpetuity.
....(e) Asystbio LLC retains the rights to Mímir and Adderstone LLC (or its commensurate successor entity) retains the rights to Symple Cell.
...(f ) Both companies are otherwise free to pursue business interests exclusive of those assignments of intellectual property and proprietary information.
We look forward to meeting Sunday to discuss how we move to find an amicable split that is benefcial for all parties.
I typically refer to this as the "schism offer". I think you may notice similarities to the settlement agreement. I couldn't possibly comment. Except that I did, and it too, also, is in the record. Now, you may have wondered, "yeah, Slarti does go on when he's here, but is he really like that in meatspace?" Here's your answer:
Slarti wrote:I built AsystBio and assembled you all for a single purpose: getting the opportunity to test [redacted]'s vision for fighting cancer on its merits. I have never wavered in this goal or mislead any of you in any way. If any of you had come to me with a better opportunity outside the company I would have encouraged you to take it, even if that was bad for AsystBio or me personally. All along the way, I have preached integrity, transparency and professionalism and have demonstrated those qualities by my actions. I have sought consensus and open discussion at all times, never acting outside the will of the group when I was the sole named officer of AsystBio or overstepping my legitimate authority once we began acting in regular order.
Having secured the opportunity to pitch a plan to develop custom cancer drugs to the head of research for Eli Lilly (with Oracle's support, no less) I have justified the trust that was placed in me and demonstrated my ability to follow through on my plan. As a result, we stand on the cusp of potentially taking a significant step in the fight against cancer.
While AML-MutationCounter is not required for the Lilly play, it can be naturally included in this pitch and, if it were, any interest from Eli Lilly (in addition to the support Oracle has already indicated its willingness to supply) would, in my opinion, allow AsystBio to make a very strong resubmission the STTR possibly even as a fast track or even a direct to phase II if Lilly was willing to fund the phase I experiments.
I don't want to take anyone down this road who isn't a willing participant, but I think every single person involved in this should ask themselves what is the most effective way for AsystBio to fight cancer and whether or not they wish to be a part of it. Even if your reasons for participation are purely selfish, the plan most likely to succeed is also the plan most likely to be lucrative.
In any case, it is time to get everything out in the open and discuss it so that a viable plan that is fair to everyone can be determined. I have started with my thoughtful response to this agenda below. It is my hope that we can restore the communication that has been so lacking amongst all of the stakeholders in AsystBio and find a way to move forward amicably, if not together.
I have reviewed this agenda and find it astonishingly unprofessional and inappropriate. As a result, there is no framework for discussion nor business that can be conducted so [Everalm and Slarti] (and [redacted] as earlier indicated) will not attend.
As I have said, fair deals require everyone knowing what everyone else is doing and everyone doing the best thing for themselves. This proposal doesn't provide for this or for any context in which to negotiate such a deal. In addition, it ignores critical issues which must be resolved in order to move forward as well as attempting to dictate unfair and unworkable terms regarding subjects which have no part of the negotiation regarding AsystBio.
First and foremost, any honest proposal regarding the division of equity (or revenue) must describe the business and investment plan intended to generate the return on those shares. In order to approach investors legally, the SEC requires documentation that would satisfy a savvy investor. In the absence of this (or a good faith effort), I don't believe that anyone has an obligation to treat warrants as having any value.
Here is a list of some of the other problems with this offer:
AdderStone is not a party to this negotiation, nor is what anyone does after leaving AsystBio pertinent or appropriate to be dictated. Even if it were, the proposal for collaboration is completely unworkable.
The proposal mentions Mímir and Symple Cell, two intellectual properties that AsystBio in no way controls. While I have consistently advocated that the company negotiate for these rights (and appropriate compensation), the leadership of AsystBio refused to do so and thus should not have mentioned them.
This offer was made with no discussions to establish the issues under contention, set the context of the negotiation or understand the positions of any of the other concerned parties. In my opinion, this is an example of the very worst of business practice. Transparency and open discussion are hallmarks of honest negotiations and fair deals.
Before any discussion of dividing AsystBio can take place, the contributions (both financial and sweat) of the various parties in building AsystBio must be established. Frankly, the failure to acknowledge my six years of full time work and roughly $100K I have put into AsystBio is insulting, but the arrogance and negligence of ignoring people who were made promises in good faith by AsystBio with the full support of the management committee (and who provided what they were asked (or more) in return is unacceptable. I have been asking the management committee to deal with this important outstanding issue for the last nine months, and the AsystBio leadership has failed to do so.
[Everalm] sought and received permission from his company to join AsystBio. This brought the very significant value of his expertise to the table, which is to b e thrown away without discussion under this plan.
None of the parties (either the other managers, minor stakeholders, people with options for equity or those who contributed financially) were considered or even contacted to discuss what led to this split and why it is necessary or the merits of the plan that underlies this offer.
AsystBio is currently bound by an operating agreement that everyone agrees is
flawed. This must be addressed as a part of any plan to move forward.
In addition, there are important issues that are completely ignored.
Most importantly, the STTR was not mentioned. As Bill should be aware from the BBCetc class, an STTR proposal is the property of the company, not the PI. Under the proposed plan, should the STTR b e funded, the money would be deposited into the AsystBio bank account (to which I have sole access). This is merely one of the ways that liability could attach to AsystBio or individual managers. As such, I formally request a copy of the proposal as submitted as the last few that Bill sent around were in an unreadable format.
The domain AsystBio.com and the content on the website.
AsystBio is making a sales play to Eli Lilly with Oracle's support and through their sales channel. This has been accomplished with the full and enthusiastic support of the management committee and within the guidelines they set (i.e. without committing AsystBio to anything). This is a relationship that has been a year in the making and the idea that AdderStone could be simply swapped out for AsystBio is naive.
The management structure of AsystBio as laid out in the operating agreement cannot b e supported by a valid business plan (nor can the management structure in the proposal). To go forward this must be addressed by outlining a plan regarding what roles the company needs filled going forward and when, what the people filling those roles will need to produce, what expertise they will require and what milestones they will have to achieve before any equity offered in compensation will vest.
In light of the above, the current equity distribution is no longer tenable.
A framework for renegotiating this must be agreed to. I believe that a fair basis for doing so is that everyone who has participated up to this point gets an "entitlement" of fully vested equity for which they have no required responsibilities to collect. I also think that both [redacted] and [redacted]should be included in this for their work for AsystBio in good faith. In addition to the managers, this agreement would also need to include [redacted], [redacted], [redacted], [redacted] (as a member of the board of advisors, he was promised the option to purchase equity by the consensus of the AsystBio managers) and [redacted] (holds a note which may be converted into equity).
In the future, I think that it is necessary to determine how equity will be used as an incentive to attract employees or corporate officers. I don't believe anyone should receive vested equity for a job unless they have past experience outside the company that demonstrates their competence or until they have sufficiently demonstrated their ability to perform as members of AsystBio.
No future offers will be considered until all of these points have been addressed
This email was sent approximately 15 minutes before the meeting was supposed to begin at 2:30pm. Just after midnight, we received the following email "minutes" from a management committee meeting that had been held in our absence and in violation of the quorum rules we all agreed to. There was absolutely no due process prior to this. The previous action of the management committee in regular order was to authorize an executive committee in late January/early February. The executive committee met only once, on February 24, 2016. The very same day that a fraudulent LinkedIn account was created in the name of one of my co-plaintiffs. One of our colleagues, I'll call him Buddha-is-Belgian, is the only person who had means, motive, and opportunity to create the account. My lawyer is currently asking LinkedIn for additional information (they have been very helpful) which I hope will include an email account which is linked to the ID theft and possibly even communications in which one of the plaintiffs was impersonated to my postdoctoral mentor. When I told my mom about this, her advice was to go to the FBI. I wouldn't disregard a Jewish mother -- particularly MY
Jewish mother -- but it wasn't my identity so it isn't my call. But on to the action that precipitated the lawsuit:
Meeting Minutes: 17-Apr-2016 AsystBio Management Board
Attendance: [some folks]
Absent: Slarti and his friends
Based on the email response from Slarti and in accordance with the management board agenda to 'Discuss and Decide the future AsystBio Company Structure'. The following motions were put to a vote and passed.
1. Revoking Slarti and [redacted]'s management authority and removing them from the management board, for cause, namely non-compliance to follow the course prescribed by the Management Board; specifically not following the constraints of a consensus vote and involvement of all executive committee members were needed to move forward with negotiations & decisions.
2. Disbanding the executive committee and consequent to that all contract or negations with Oracle, Lilly or any other party without pre- approval from the management board.
3. Motion to adjourn
Tabled Decision - When and how to inform Oracle of the New Company Structure
A couple of days earlier, I had gotten the final piece in a plan that I thought had the potential to effectively cure cancer. I asked my contact at Oracle if I could get the idea in front of Eli Lilly. He asked me for 3 paragraphs describing the project, which I provided (below). He passed it along and told me that it would take six months or a year, but it would result in the idea getting presented to the Vice President of Research of Eli Lilly with the full support of Oracle (and likely another company that was in the Oracle Partner Network) including making all of our demos. That's what Oracle had already begun to deliver on. After that, they were talking about giving us access to a billion-dollar-a-year sales channel to sell AsystBio use cases using Oracle products. Instead, when Eli Lilly replied that they were interested Oracle had to tell them that the expertise was gone. Everalm once speculated that Oracle may have a case for restraint of trade.
The plan that I came up with and that Oracle passed to Eli Lilly:
AsystBio has submitted a small business grant proposal to develop AML- MutationCounter, a molecular test to detected of acute myeloid leukemia. Standard tests only reveal disease levels above a 5% background, but by use of a custom NGS pipeline on targeted AML markers, the sensitivity can be improved to near 0.1%. This allows the determination of which patients (after initial treatment) have been cured and which will relapse relatively quickly, information which leads to reduced treatment costs and improved patient outcomes.
To further improve outcomes, it would be desirable to predict which patients will be cured and which will relapse before the initial treatment is performed. There are several DNA damage checkpoints that are known to protect cells from chemotherapeutic agents and radiation. Thus mutations that cause functional changes in one of the proteins involved in a checkpoint which enhance checkpoint function will tend to make treatment less effective and those that degrade checkpoint function will result in more effective killing of cancer cells. AsystBio could create a database of mutations observed in publicly available genomes and their impact on checkpoint function that could then be used to predict the effectiveness of treatment based on the targeted sequencing of a patient’s DNA.
Finally, AsystBio could provide a pharmaceutical development service to help produce a treatment customized to a patient’s needs. We have established a methodology for creating simulations of biochemical pathways as well as proof-of-concept for tools to use them to perform virtual experiments. Combining the information on mutations that was generated with what is known about the interactions that comprise DNA damage checkpoints, computational models can be constructed and validated with data on the accuracy of the treatment predictions. The efficacy of treatment for patients predicted to relapse could be improved by use of a custom adjuvant to reduce the effectiveness of one or more of the DNA damage checkpoints. By perform- ing virtual experiments to systematically test the effect of combinations of chemical entities, the ones most likely to produce successful treatment can be identified. Not only would this guide the development process down more productive paths, saving time and money, but it would allow drugs tailored to a patient’s DNA.
But that was a long time ago. My plans aren't so modest anymore.
Much, much more will be revealed...
Any followup questions?