NEW YORK – In a July 25th decision, filed today, Judge Kenneth M. Karas of the Southern District of New York denied a motion to dismiss a case brought by a group of investors against Spherion Corporation (NYSE: SFN), an international conglomerate, headquartered in Fort Lauderdale, Fla., specializing in job outsourcing and other corporate services. The suit alleges that: “At the height of the Fraud Scheme, defendant Spherion US employed Thompson as its ‘corporate mole’ within plaintiff GlidePath—a secretly incentivized high-level covert agent whose undisclosed mission was to relieve defendant Spherion US of the Spherion Liabilities at the plaintiffs' expense.” (2nd Amended Complaint, p. 27).
The plaintiffs in the case, Jeimon, British investors, and Glidepath, a computer services and data management company formed in connection with the acquisition of the CyberCenter Business from Spherion Corporation’s British subsidiary (Spherion U.K.), seek $32 million plus interest and punitive damages from Spherion for losses alleged to have resulted from the conspiracy to defraud. In its decision, the Court upheld the legal sufficiency of the complaint, which alleges that:
- Spherion U.K.'s Managing Director, John Thompson, fraudulently induced the plaintiffs into making the acquisition by misrepresenting to them the collapsed state of the European market for the CyberCenter Business’s services and the fact that this was the reason that Spherion U.S. was giving up the business.
- Spherion made a secret deal with Thompson that if he got Glidepath to assume several million dollars of Spherion U.K.’s liabilities—in his new capacity as manager of Glidepath—Spherion would pay 1.3 million Euros for his benefit into an offshore conduit account in the Channel Islands.
- When plaintiffs did due diligence, Spherion U.S. backed up Thompson’s false statements regarding the existence of a strong market for the business’s services, the reasons for Spherion’s leaving the business, and the date of termination of Thompson’s employment with Spherion.
From Judge Karas’ decision (page 28):
- “A strong inference of fraud is raised by these allegedly conscious misrepresentations regarding the employment status (and conflicts of interest) of a key player in the transaction. These statements, regardless of the other numerous statements which Plaintiffs allege to be false, also demonstrate that Plaintiffs have raised a sufficiently ‘strong’ inference of fraud to survive Defendant's motion to dismiss.” (p.28)
- "An employer does not have to approve, or even be aware of, a representation made by an employee to be liable for that representation. It is black-letter law in New York that an employer is liable for the representations of its agents when those representations are made within the scope of the agent's employment." (p. 21)