Tug and barge company Harley Marine Services is embroiled in a legal fight on both coasts of the US against Macquarie Capital over its ownership and future.
Harley Franco, who founded Harley Marine in 1987, has alleged that the Australian bank and an employee are trying to remove him as chief executive, take over the company and sell it.
Franco is now aiming to delay court proceedings in Seattle, Washington state, to focus on a simultaneous lawsuit in Delaware on the ownership of various Harley Marine entities held by the bank.
“Macquarie’s actions are a transparent attempt to improperly wrest control of [Harley Marine] from Harley Franco, regardless of the costs,” said Greg Hollon, the shipowner’s attorney at McNaul Ebel Nawrot & Helgren.
“The impact on the company, and to Harley personally, are significant. We look forward to setting the record straight and allowing Mr Franco to move forward at the helm of the company he has built over the last three decades.”
Action withdrawn
Macquarie declined to comment beyond pointing to a separate 2 July suit in which it had alleged wrongdoing by Franco related to misuse of company funds and assets, although the bank quickly withdrew that action.
Franco said: “I am personally troubled and saddened by Macquarie’s allegations.
“As we have made clear in our responses in the courts, Macquarie’s allegations are without merit. I look forward to prevailing in court, moving past this unfortunate chapter and continuing to steer the company toward a productive future.”
In 2000, Franco hired Matt Godden, then 19, as an IT consultant for Harley Marine, according to court documents filed at the Superior Court of Washington for King County in Seattle.
Godden became a full-time employee in 2015, then moved up to senior vice president in 2016 and chief operating officer last year.
In 2008, Macquarie became Harley Marine’s financial advisor as part of an investment deal that gave the bank 49% ownership. Franco owned 40% and Laurel Crown Partners held 11%, court documents show.
In 2015, Harley Marine entered into a restructuring deal in which Macquarie gave the company a high-interest loan. During the restructuring, Franco bought out Laurel, ending up with 53% of Harley Marine at Macquarie’s insistence, while the bank owned 47% through Holdco 1.
Franco and other employees voiced concern over the loan’s high interest but Macquarie reassured them it would refinance the debt as Harley Marine’s financial advisor. But Macquarie did not do so, in a “blatant act of self-dealing”, court documents allege.
Harley Marine said Macquarie has been trying to liquidate the company to recoup its investment and cash out on the loan but no such deal “has been or will be approved” by the tug company.
“Macquarie is aware of this, which is why it is using any means — including illegal and underhanded means — to attempt to oust Mr Franco,” the suit states.
In late 2017 and early 2018, Macquarie pushed Franco to name Godden — who had begun consulting work for the bank — company president but Franco said the 36-year-old was not ready for such a responsibility.
Macquarie then sued Franco in Delaware, where Harley Marine is registered as a company, and asked the court to determine Franco’s chief executive status.
Harley Marine’s Seattle lawsuit says Macquarie held a “bogus” board meeting by phone during which Harley Marine board members Godden and Tobias Bachteler, Macquarie Capital’s chief operating officer, appointed Godden chief executive.
“The entire meeting was bogus, violative of the parties’ written documents and applicable law, and fatally infected with illegal self-dealing,” Harley Marine alleges.
Macquarie then withdrew the 2 July lawsuit an hour before the hearing and right after its attempt to appoint Godden chief executive.
The suit alleges that Godden then rushed to Harley Marine headquarters in Seattle, locked Franco out of the company and cut off his email and phone access.
“Such actions have caused damage to [Harley Marine] and to Mr Franco, including a negative impact on the business and personal embarrassment, emotional distress, and other such damages to Mr Franco personally,” the suit says.
Franco demands that a jury levy an award of damages and several declarations on Godden and Bachteler, including irrevocable conflict due to improper self-interest in trying to force a Harley Marine sale.
On 6 July, Franco won a temporary restraining order in his Seattle lawsuit, declaring he is still Harley Marine’s chief executive and ordering that his access to the company be restored.
‘Theft of tow winches’
In its withdrawn 2 July suit, Macquarie had accused Franco of misappropriation of company funds, tampering with records and theft of two tow winches valued together at $1.2m.
“Franco has been engaged in a lengthy and wide-ranging course of misconduct designed to divert and misappropriate significant company funds and other assets,” the suit stated. “Franco ... has used the company as his personal piggy bank to finance every aspect of his and his family’s life.”
Macquarie also alleged that Franco wrongly gave himself pay raises totalling nearly $556,000 from 2011 to 2018; fraudulently spent $457,000 in personal expenses in 2017 and 2018; and embezzled $4m in Harley Marine assets.
