What Dr. Wollny did announce on Feb. 1st 2001, and wherefore he may have been fired!
TURBODYNE
February 1, 2001
VIA FACSIMILE: 011-49-611-544-0506
Dr.-Ing. Friedrich Goes
Chairman of the Board of Directors
Turbodyne Technologies, Inc.
Dear Friedrich:
I want to inform you about some developments, which need immediate consideration and action on my side as CEO of Turbodyne Technologies, Inc.
1. As you well remember, the most damaging event for the shareholders was the nondisclosure of the sale of 8.7 million unregistered shares in 1999.
The press release concerning the circumstances of this illegal behavior caused the share value to drop drastically to eventually 9 cents from about US$2.50 in July of 1999. With 55 million outstanding shares and a loss per share of more than $2.00 the damage could definitely surpass the amount of $100 million.
Confronted with these tremendous losses for the shareholders on the one side, and on the other side for the company holding itself about 40 million shares in treasury, therefore creating additional financial damage of more than $80 million, I thought it my most urgent fiduciary obligation to investigate all the circumstances of the nondisclosure.
2. In these efforts I have been drastically hampered by the Board of Directors' efforts to obstruct any further legal discussions supporting the claims of possible malpractice directed against the law firm of Sheppard, Mullin, et al.
To provide myself with independent legal counsel by an attorney of my confidence, I retained the services of Norbert Schlei, a competent and well-experienced lawyer, on January 24, 2001 and handed to him a check for $10,000. The next day after retaining Mr. Schlei's legal services I was informed by the Bank of America, Carpinteria, that the check handed out by me and signed by the CFO, Mr. Joe Castano, as well as by me, would not be honoured because of specific instructions of Mr. Castano. Asked the reasons for his refusal I was informed by Mr. Castano that he acted on explicit orders of Mr. Wendell Anderson, the head of the Legal Committee.
Because of my insisting that the Company should fulfill its obligations based on the retainer agreement signed by me, Castano and I both instructed the Manager of Bank of America, Mr. Trevor Morris, by phone to honour the check deposited by Mr. Schlei.
To my surprise on the same day I received a copy of a letter sent by Mr. Anderson to Mr. Schlei informing him "that Turbodyne would not retain your services and at this time so advised Mr. Wollny" (attachment 1).
In my letter dated January 29, 2001 answering Mr. Anderson I expressed my clear understanding that "the Chief Executive Officer of a Company simply must be able to seek advice from professionals he trusts and on whom he feels able to rely" (attachment 2).
It further goes without saying that the retaining of counsel cannot be contingent upon the consent of the Board of Directors where, as here, possible wrongdoings on their part are among the subjects of the investigation by the lawyer so employed, as laid down by my letter to Mr. Anderson dated January 30, 2001 (attachment 3).
To my greatest surprise, I was informed by Mr. Schlei on January 30, 2001 that the retainer check has again not been honoured. Inquiring into the details of the stop payment I have been told by Mr. Morris that this was done on the advice of Joe Castano himself, acting on instruction of Mr. Anderson as explained in the letter of January 31, 2001 (attachment 4). Castano has now reiterated his refusal by memo dated January 31, 2001 (attachment 3). In this connection I note his denial of understanding as to how the FBI might be involved in this situation. For your information I mentioned the FBI only in passing on to him, without expressing any view of my own, the views expressed to me and other members of the Board by certain shareholders who feel that funds have been obtained from them by fraud. Whether and how those shareholders will act on their views remains to be seen.
3. For your information, the action of Wendell Anderson in purporting to issue instructions as to the dishonoring of a check issued by the company is legally indefensible. Individual directors have no executive authority whatever and are not authorized to act for the company or to direct its employees. Whatever the situation might be if the Board as a whole adopted a resolution as to the check, it is, obviously, the fact that no such Board action has been taken. Moreover, Mr. Anderson is mistaken in his claim that the Board disapproved the retaining of Mr. Schlei. As I have been informed by two directors, including yourself, the Board's decision merely declined to approve the retention of Mr. Schlei but specifically contemplated that I could proceed to retain him if I was determined to do so.
4. With all restraint I dare to say that this coordinated action of Mr. Castano and Mr. Anderson not only put me in an awkward situation as to Mr. Schlei but was in essence directed at preventing me from undertaking any further investigation, thus constituting a clearly unlawful suppression of possible claims to the detriment of the company. A CFO thus behaving, to the clear disadvantage of the company, has failed to fulfill his professional obligations and therefore should be terminated with cause, taking further into consideration his other wrongdoings as referred to in my letter to the Board of Directors on January 31, 2001 (attachment 6). In this regard I refer you to the legal opinion of Randall Fox, Esq., a specialist in employment law and a member of the firm of Reetz, Fox & Bartlett, LLP, expressed in his letter dated January 23, 2001 (attachment 7). Therefore, I am strongly opposed to the separation agreement proposed by Mr. Castano in his letter of January 19, 2001 (attachment 8).
5. The course of action that should be taken by me as CEO of Turbodyne is laid down in the memorandum of Mr. Schlei dated January 30, 2001 (attachment 9). I fully concur with his comments regarding my legal obligations to safeguard the interests of the company by avoiding any further conflict of interest in regard to Sheppard, Mullin, et al. Therefore, with all necessary speed I will terminate the rendering of any further services by this law firm.
It seems necessary to me to protect the company from being represented by lawyers who at the same time represent Honeywell, our only business partner, so to speak, and who are in addition exposed to possible claims by the company and its stockholders. amounting in the aggregate to more than $100 million.
6. With outright dismay I note, and must take into consideration, that the Sheppard, Mullin law firm even tried to involve the SEC in their efforts to preserve their status as counsel, as stated in two letters by Mr. Marc Blau of the SEC dated January 25, 2001 (attachment 10 and 11). After being confronted with such an outspoken rebuke by the SEC as mentioned in my letter of January 26, 2001 (attachment 12), the law firm continued to twist words and even tried in their letter dated January 29, 2001 (attachment 13) to put the responsibility for their unethical behavior on me. This behavior in my judgment disqualifies the law firm of Sheppard, Mullin to the utmost.
7. I further strongly recommend thorough inquiries into the purchase of the Pacific Light Metal Division by Turbodyne, which resulted in a dramatic loss of practically all the assets of our company in 1999. The obvious conflict of interest on the part of the members of the Board of Directors who were the sellers of the Light Metal Division to Turbodyne should have been fully investigated by the Board in the past, especially in view of the statements of KPMG reporting a considerable discrepancy between the assets actually acquired compared with the list of assets in the purchase contract, many of which turned out to be non existent.
As far as I have been told, requests for investigation of this matter have been made to the Board at different times, but no action has been taken and the matter has been covered up.
Friedrich, I do hope that you and the other members of the Board will support me in the matters discussed above. Members who cannot do so should, I believe, consider resigning from the Board. My informal surveys indicate that my efforts are supported by at least 60% of Turbodyne's shareholders. I intend, therefore, to go forward with all deliberate speed to accomplish what the owners of the company -- the real parties in interest -- want to be done and are entitled to have done.
Sincerely,
Rainer M. Wollny
Chief Executive Officer
6155 Carpinteria Avenue, Carpinteria, CA 93013
Telephone (805) 684-4551 - Fax (805) 586-3499 |
