The original CEO of a well-known local IT firm is suing the company he founded, claiming he was pushed out by “ambush” to clear a path for an allegedly illegitimate sale.
Michael Pirron last week filed suit against Impact Makers, which he launched in Richmond in 2006 and helped grow to upwards of $20 million in revenue annually.
The company gained notice for routinely landing on lists of Richmond’s fastest-growing companies and for gifting its equity shares and the proceeds of its eventual sale to two local charities.
Also named as defendants in the suit are company executives and directors Karen Coleman, Teresa DiMarco, Scott Walker, W. Wilhelm Rabke, Andrew Wolff, Rodney Willett and Marianne Vermeer.
Pirron also is suing Benefit Holdings Inc., an entity he claims the defendants created in order to purchase part of Impact Makers and diminish Pirron’s authority. The suit was filed in Richmond Circuit Court on May 8.
Pirron, who is now a vice president at competitor Networking Technologies + Support, is alleging six counts, including breach of fiduciary duty, breach of contract, statutory conspiracy, common law conspiracy and conversion.
He’s seeking either an injunction that would reverse the sale of Impact Makers to Benefit Holdings or $15 million in damages to be paid to IMH (Impact Makers Holdings) and $3 million to IM. He also seeks $36,000 in damages for himself for loss of rights to the company, loss of income, reputational damage, emotional distress and attorney’s fees.
Wolff, who took over as Impact Makers’ CEO in October 2018, said Wednesday the company is planning to respond to the lawsuit in court.
“The actions that we took were to support our commitment to doing what’s right to improve our company’s ability to fulfill our mission, which is essentially why we exist,” Wolff said. “This lawsuit is a culmination of claims and demands that we believe have no merit and do intend vigorously to defend it. Our intent is to make sure this lawsuit will not affect our dedication to serving our customers and making our community a better place to live.”
In a phone interview Wednesday, Pirron, who was removed as CEO last year, said that the sole purpose of the lawsuit is to roll back the sale and preserve his role as so-called permanent director of Impact Makers.
“I can’t just walk away … I want to protect my life’s work,” he said. “It’s a matter of principle. I’ve never sued anyone or been sued. I’m not a litigious person.”
Pirron founded Impact Makers in 2006, providing IT consulting services and differentiating itself by being a “Benefit corporation” or B-Corp., a legal designation that calls for it to donate leftover profits to charity. Pirron lobbied to create the B-Corp designation in Virginia in 2011.
The company is based in the Symbol Mattress development in Scott’s Addition and is a regular on both BizSense’s RVA 25 and Inc. Magazine’s lists for the fastest-growing private companies both locally and nationally.
Pirron claims that the suit arises from the “coordinated efforts of the defendants to empower and enrich themselves by targeting and eliminating Michael Pirron’s authority as permanent director of (Impact Makers Holdings) … thus destroying IMH’s purpose and gutting (Impact Makers’) public benefit mission.”
The suit claims that IMH was created during a restructuring of the company that started in late 2014 and early 2015. The purpose, the suit claims, was to put all of IM’s voting shares into IMH to help ensure that IM could fulfill its pledged gifts to charities. Part of the restructuring included donating the equity of Impact Makers to two local nonprofits: The Community Foundation and Virginia Community Capital. That structure would allow the two charities to benefit from the proceeds of a future sale of Impact Makers, which Pirron claims was valued at the time at $13.4 million.
The permanent director role gave Pirron the power to approve or disapprove proposed changes to IM or IMH’s articles and bylaws, issue shares of the companies, pay dividends to shareholders or give equity to employees.
The lawsuit claims the conflict between Pirron and the defendants began in 2017, when an IM board committee began studying whether board members should be paid, and that Coleman, DiMarco, Walker and Vermeer supported such an idea.
Pirron claims he vetoed such a measure on the belief that it would diminish the value of the company’s gift to Community Foundation and VCC. The suit further claims that in late 2017, board members began “conspiring outside of board meetings about how they could use their positions as directors to get rid of Pirron so they could compensate themselves.”
That same year, Pirron alleges that Impact Makers revenue decreased for the first time in its history and lost $900,000. That was after its value allegedly peaked at $21 million in 2016. Also during 2017, Pirron took half-time leave while going through a divorce from his spouse of 22 years.
In early 2018, Pirron claims Coleman informed him that the board had voted to remove him as CEO based on his previous year’s performance review. The company announced his departure at the time, but did not explain publicly the reasons for it.
After leaving his CEO post in early 2018, Pirron continued in what he claims were his rightful roles as permanent director at IMH and senior director at IM.
Later in 2018, Pirron claims four unidentified Impact Makers insiders offered to buy the company for $13.4 million. He claims to have objected to the deal, which ultimately never transpired. He also opposed measures put forth by the board, including a proposal to claw back 30 percent of the company’s gift to The Community Foundation and VCC, and using that money for a “new enhanced executive incentive bonus plan.”
He claims he raised his concerns to the board and that they were ignored, adding that he was allegedly excluded from certain board committee meetings.
The company posted a small loss in 2018 on revenues of $20 million, according to the suit.
Then in February and March 2019, Willett and Wolff made separate phone calls to Pirron in which they allegedly threatened him with legal action if he didn’t resign from his board positions. He claims those legal threats were attempted extortion.
Transcripts of the phone calls, which Pirron alleges to have recorded, are included in the lawsuit.
The lawsuit then goes on to explain “The Ambush,” a series of events that allegedly took place on April 11 and 12
Pirron claims that Coleman emailed IMH Board members and told them a company identified only as “Benefit Holdings Inc.” had submitted an offer to buy IM’s shares for $1,000, and that she called a board meeting for 1 p.m. the next day “for the sole purpose of voting on whether to accept the offer.”
Pirron claims the offer was only one page long and provided no information about Benefit Holdings. Per the Commonwealth of Virginia’s State Corporation Commission, Benefit Holdings was formed on April 11.
Pirron claims the defendants orchestrated the offer and kept it secret from him, and that he submitted 28 due-diligence questions about it, which went unanswered. Coleman allegedly said Pirron was being an obstructionist by asking these questions.
“During the April 11, 2019 IMH Board meeting, Pirron asked the identity of the Benefit Holdings directors. No one answered his question,” the suit claims.
The board eventually approved the sale in a meeting that Pirron claims lasted less than 15 minutes and in which he was the lone dissenter.
Pirron filed the suit individually and also as a shareholder derivative claim on behalf of the company and shareholders.
Pirron is represented by Thomas Wolf of LeClairRyan and Tricia Dunlap of Dunlap Law.
Pirron filed a separate, but related suit against Rabke and his law firm, Graybill, Lansche & Vinzani. That suit, also filed May 8, claims that Rabke aided and abetted the board members in their alleged actions. Rabke declined to comment.