Securities brokerage IDX Capital and its officers have won an $8.25 million judgment against a former business associate convicted of sabotaging a $25 million merger deal by sending the would-be buyer disparaging emails under pseudonyms, including the comic book character Daredevil.
The judgment in IDX Capital v. Phoenix Partners, 102806/07, was entered earlier this month by Manhattan Supreme Court Justice Jeffrey Oing (See Profile), who presided over a jury trial.
At the heart of the case is an alleged vendetta pursued by defendant Wesley Wang against his ex-business partner James Cawley.
(Wang is not the same Wesley Wang who formerly worked at SAC Capital and has cooperated with the FBI in its ongoing insider-trading probe.)
Wang's history with Cawley goes back to 2002, when the two were among the founders of Axiom Global Partners, a broker of credit default swaps. Cawley was the CEO and Wang was the COO. According to the lawsuit, as the company grew, Wang and Cawley's relationship turned sour, partly because Cawley tried to restrain Wang's "excessive spending" of Axiom funds to entertain clients.
Eventually, Cawley came to believe that Wang was engaged in actual misconduct, including using Axiom funds to buy cocaine and helping to pass confidential information to an employee of JPMorgan Chase & Co., according to the complaint.
Their dispute came to a head in 2004, when Wang and his allies at the company began trying to force Cawley out. In 2005, they convinced a board member appointed by an outside investor to vote for Cawley's removal as CEO and succeeded in getting him removed.
Cawley responded by invoking the arbitration clause of Axiom's founding agreement. An arbitrator found that the vote removing Cawley was ineffective because the investor that appointed the board member who cast the deciding vote had secretly sold its shares, and had no right to a seat.
Cawley was reinstated, but Wang refused to accept the arbitrator's conclusion. The complaint alleges that Wang continued to try to push Cawley out, soliciting a report from an outside accounting firm that found that Cawley had misappropriated $79,000 from Axiom. According to the complaint, the accounting firm never interviewed Cawley, who could have proven that the report was false.
Wang eventually initiated a proceeding in Manhattan Supreme Court to dissolve Axiom. That case eventually settled, with Wang and his allies leaving to form a new firm, Phoenix Partners, and Cawley going on to form IDX. As part of the agreement, Wang agreed not to disparage Cawley.
Subscribe to New York Law Journal
