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Teledesic Derivative Action Against Craig McCaw Successfully Concluded
For $217 Million Payment
GMT recently concluded a derivative action against Craig McCaw,
Eagle River, and certain Teledesic board members. GMT represented
David Montanaro, a minority shareholder and former officer of Teledesic.
The Complaint was filed April 9, 2001, alleging breach of fiduciary
duty against the defendants with respect to a last-minute $200 million
loan by Teledesic to another McCaw entity, made on May 12, 2000.
Teledesic and Mr. McCaw characterized the Complaint in court as a
"46-page diatribe of speculation and unsupported conclusions."
After unsuccessfully moving to dismiss, and in a final effort to prevent
discovery, Teledesic appointed two new independent board members,
Peter D. Byrnes and Herbert M. Bridge, who together formed a Special
Litigation Committee. The Committee was empowered by Teledesic to
investigate the allegations of the Complaint and resolve them as it
saw fit.
On June 25, 2002, the SLC issued its 64-page report under seal. On
April 8, 2003, the King County Superior Court unsealed the SLC Report.
The report thoroughly vindicated the merits of Mr. Montanaro’s
lawsuit, and recommended assertion of a claim by Teledesic against
McCaw and Eagle River. Among other things, the SLC criticized the
loan, which represented roughly two-thirds of Teledesic assets, on
the grounds that it was: (a) unsecured; (b) subordinate to senior
bank debt; (c) provided for 10-year repayment; and (d) below-market
interest, notwithstanding the fact that similar loans by Mr. McCaw
were not subordinate and repaid in 90 days at market interest.
The SLC, on behalf of Teledesic, asserted a claim against Mr. McCaw
and Eagle River, his personal financial vehicle. The issue was resolved
for payment of $217.5 million in stock and cash.
On July 9, 2003, the Court awarded Mr. Montanaro $299,608.26 in legal
fees. In November 2003, Teledesic tendered for outstanding minority
shares.
The case was handled by Jeff Tilden for GMT. A copy of the Fourth
Amended Complaint can be viewed here(pdf).
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