Van Conway, a well-known Michigan-based corporate turnaround expert, is suing the firm he co-founded after its board of directors removed him from his position as chairman, CEO and president.
The suit, filed in Oakland County, Mich., on Wednesday, alleges the board of the Birmingham-based firm, Conway MacKenzie Inc., removed Conway as CEO while he was on medical leave and cut his compensation by roughly 80 percent in an attempt to transition control to co-founder Don MacKenzie.
Conway MacKenzie is a household name in the world of corporate turnarounds and restructurings -- and the firm has been deeply involved in the auto industry for some 25 years. The firm has often helped automakers identify financially troubled suppliers and fix them before parts deliveries get interrupted.
Conway's suit is also against certain board members of the firm, including MacKenzie, Joseph Geraghty, Gregory Charleston, John Young and Jeffrey Zappone.
“The claims he’s alleged are completely without merit,” MacKenzie said. “The firm will vigorously defense itself from this frivolous litigation, and a counterclaim will likely be filed.”
In the meantime, Conway said he is starting his own firm, Conway and Partners LLC, to compete against his former company, but potential legal hurdles remain as Conway Mackenzie claims his ability to work in the field is limited by a contract agreement, the suit states.
“There’s always a change of guard, and we definitely had dead wood. Who is dead wood is up for interpretation,” Conway said in an interview with Crain’s Detroit Business, an affiliate of Automotive News.
“We didn’t come to terms after they removed me because they never intended to settle and now they are nervous. I’m not going to breach any obligations. But for 42 years I’ve done one thing. I don’t have hobbies; I don’t need the money; so I’m going to stack the deck here. They’ve inspired the wrong guy.”
MacKenzie said he’s hopeful Conway will adhere to the conduct of his agreement with the firm, but did not provide details.
“We’re hopeful he acknowledges his responsibilities, but it’s America,” MacKenzie said.
Conway recently leased the fourth floor at 401 S. Old Woodward Ave. in Birmingham -- one floor above Conway Mackenzie -- for his new company. He declined to discuss whether others from his former firm will join him in his new venture, but said a few “heavy hitters” will be hired shortly.
The rift between Conway and Conway Mackenzie began in October when Conway had double knee-replacement surgery, which resulted in cardiac complications, the lawsuit says.
Three days after Conway’s surgery, while he remained in the hospital, the board of directors called an unscheduled meeting to discuss a permanent change in the company’s management structure, the suit says.
Citing the meeting minutes, the suit states MacKenzie was increasingly frustrated by the way the firm was currently managed and he “would like to see the frustration removed.”
The board then voted for MacKenzie to serve as interim CEO in Conway’s absence, according to the filing.
The suit alleges the move as a material breach of the firm’s shareholder agreement, which calls for Conway and Mackenzie to remain on the board as founding shareholders.
The suit also alleges Conway MacKenzie did not pay Conway a bonus from its budgeted $14 million in bonus and equity distributions for the year. Conway claims in the suit he is owed a bonus ranging from $400,000 to $700,000. The suit also alleges the firm cut his salary by 60 percent as well, which coupled with a bonus nonpayment totals an 80 percent cut in compensation.
The board later voted to remove Conway from its board of directors, which the suit claims wasn’t communicated to Conway or the firm’s non-board shareholders until Feb. 8. Conway responded with an email to the company’s shareholders concerning the actions, which MacKenzie classified as a resignation, the suit alleges.
MacKenzie said the board did work with Conway to resolve the matter privately.
“This is most unfortunate, but it’s a reality that disagreements occur in business,” MacKenzie said. “This is complicated and (the decision) didn’t happen without serious thought, deliberation and proper conduct.”
Conway and MacKenzie co-founded the firm in 1987, which focuses on turnaround advisory and financial consulting, and expanded the firm to more than 100 professionals in Birmingham, Atlanta, Houston, New York, Chicago, Dallas and Dayton, Ohio.
The firm gained local attention during the Great Recession for working on the turnaround of several automotive companies and, more recently, Detroit’s Chapter 9 bankruptcy.
“This firm has great core values and will withstand this, but it is unfortunate that we’re confronted with this inconvenience,” MacKenzie said. “The long history of this firm, and the history between Van and I, transcends all of this.”
As of Friday morning, Conway MacKenzie had not yet responded to Conway’s legal complaint or filed a countersuit.
“The real question is whether I can do it again, to build a successful firm. The beauty of the future is that we’re going to find out,” Conway said.
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