Complicated Cree suit reaches court
Eric Hunter showed signs of having been injured.
By JONATHAN B. COX, Staff Writer
In a Greensboro courtroom today, two brothers torn apart by allegations of corporate malfeasance and physical assault will meet as a federal judge begins to referee their $3.2 billion legal brawl.
It will be the first time that Eric Hunter has seen his younger sibling, Neal Hunter, since suing Cree -- the Durham semiconductor maker that the men co-founded -- in June. The older brother contends that Neal Hunter, who is Cree's chairman, engaged in fraud and lied to investors. When Eric Hunter decided to inform the U.S. Securities and Exchange Commission, he says he was threatened and harassed.
The case has taken several unusual twists, with members of the brothers' family, including their mother, alleging that Eric Hunter is mentally unstable. He has, in turn, sought to show he has been victimized, filing court documents from an investigator who contends that Hunter, his wife and two sons were followed in Switzerland, where they've spent the summer.
Eric Hunter will walk into court today with bruises, cuts and a black eye, injuries he says he sustained this week at the hands of an unidentified family member who beat him for filing the lawsuit. He declined to say where the alleged assault occurred.
"Who is crazy here?" Eric Hunter asked in a bedside interview from a Chapel Hill hotel room where he was recovering from his injuries. "You've got somebody who's taken to the SEC real solid allegations of financial impropriety, and who tried to work with the company on a number of occasions."
The SEC has begun an informal inquiry into Cree, and several shareholders have filed class-action suits against the company.
It will be up to U.S. District Court Judge Frank W. Bullock Jr. to dissect the case. Today Bullock will hear arguments on Eric Hunter's motions to stop the alleged harassment and to amend his complaint to, among other actions, add Bank of America and other banks involved with Cree's second public sale of stock.
Cree has denied any wrongdoing and accused Eric Hunter and his attorney of using the media to spread unfounded allegations. Cree has seen a 40 percent decline in its shares since the lawsuit was filed.
Analysts and investors will watch closely today for signs as to how the litigation will play out.
"Even just a few points in Cree's favor will go a long way," said Peter Reiss, a stockbroker with Paulson Investment Co., which helped take Cree public and owns shares in the company.
"$3.2 billion is such a ridiculous number, and so many of the other things that he's throwing out just don't seem to compute, so if they can start whittling away at a few of them, I think investors will feel very good," Reiss said.
Jim Phillips, attorney for Neal Hunter, declined to comment or make his client available for an interview for this story. Chuck Swoboda, Cree's chief executive officer, couldn't be reached.
Questions about deals
Eric Hunter says that dating to August 1995, shortly after he gave up management control of Cree, his brother and others at the company engaged in undisclosed deals to boost Cree's finances and stock.
A few of those deals allegedly involved Charles & Colvard, the Morrisville gemstones company. Eric Hunter founded C&C with another brother, Jeff Hunter, and the company depended on Cree for the raw material to manufacture its products.
Eric Hunter contends, for example, that his brothers entered into a pact requiring Charles & Colvard to accept unneeded supplies from Cree, boosting the semiconductor company's income by 35 percent. Eric Hunter has sued the gemstones maker and his brother Jeff, though that case is not yet set for a court hearing.
Many of the allegations made by Eric Hunter, especially in connection with Cree's relationship with Charles & Colvard, were raised in the late 1990s by Off Wall Street, a Massachusetts consulting company, and others .
When Charles & Colvard filed to sell shares to the public in 1997, it admitted that it had a close relationship with Cree, outlining terms of its supply agreement and the relationship between the Hunter brothers.
"The company is heavily dependent on Cree's technology," the SEC filing stated.
Asked whether he regrets starting Charles & Colvard,as it allegedly contributed to improper activity at Cree, Eric Hunter said: "I regret one thing: I regret not having brothers who had the ethical ability to run companies."
Close family
By all accounts, the brothers were a tight-knit bunch growing up in the mountains of Ashe and Watauga Counties. Their mother raised them alone after their father, Charles Hunter, committed suicide in March 1967.
All three attended N.C. State University, and Eric later emerged as the brains behind the three companies -- Cree, Charles & Colvard and World Theatre -- that employed a number of their extended family members.
"Eric told me at one time he likes to start companies, but he doesn't like to run them," Reiss said.
After his brothers took the reins of Cree and Charles & Colvard, Eric Hunter became more distant, Reiss said. Eric Hunter, his wife and children would travel for long periods of time, leaving no forwarding phone number, the Hunters' mother, Annabel Harrill, said in a court affidavit.
She and other family members said they became worried about his mental health, noting a decline over several years. They allege Eric Hunter has said that he used to work for the CIA and that his family was involved in President John F. Kennedy's assassination.
Eric Hunter rejects such claims, saying they are part of an effort to discredit him. He admits that he met with a Chapel Hill psychologist in 1986 or 1987, but for marriage counseling, not for psychological treatment. He and his first wife are divorced.
"All they've done is circle the wagons and say, 'Eric is crazy,'" he said Wednesday. "That is the most direct form of harassment you can do to an employee." Eric Hunter is still a Cree consultant.
The alleged wrongdoing reached a climax in May, he said. He and his wife, Jocelyn, who also is suing Cree and Neal Hunter, had completed an investigation of their own.
"We sat down with my mother and said, 'Look, this is really bad, and we've got to straighten it out; we need to sit down with Neal right now,' " Eric Hunter said. "She said, 'Well, I don't see any need for that.' "
The next day they went to Washington to meet with SEC officials. The couple called Harrill, and she allegedly warned them not to take action. That intensified the couple's efforts, and they later filed a series of lawsuits and moved to a hotel in Interlaken, Switzerland.
"I would never talk to them again," Eric Hunter said of his mother and brother, Neal. "Not a chance, considering the false information they've spread throughout the world."
He says he is committed to fighting his case in court and is certain that his allegations are supported.
Others aren't so sure.
"I think Eric's going to have a very hard time substantiating any of these charges," Reiss said. "I think after people get a feel for this suit [today], you're going to see people sue Eric. There must be a few irate people."
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