Arcturus Therapeutics Ltd. has filed a lawsuit against its former President and CEO Joseph Payne, alleging breaches of contract and fiduciary duties.
The San Diego-based biotechnology company said in an open letter to its shareholders that Payne's "misconduct, poor judgment and failed leadership led to his termination as CEO in January."
Payne was CEO of Arcturus when the company merged with Israel's Alcobra Ltd. in November 2017. After the merger, he became the president and CEO of the combined company.
The executive committee of Arcturus' board comprising of Stuart Collinson, Craig Willett, Daniel Geffken and David Shapiro recommended that shareholders vote for the removal of Payne as the company's director at the extraordinary general meeting of shareholders May 7.
In addition, the committee recommended that shareholders vote for the adjournment or postponement of the general meeting to a later date.
Arcturus said the lawsuit filed in the San Diego Superior Court "details evidence of significant conflicts of interest, violations of trust and Payne's willingness to exploit Arcturus and its shareholders to benefit himself and a small sub-group of Arcturus shareholders."
The company alleges that Payne attempted to transfer intellectual property rights to privately held Providence Therapeutics and to his friend and investor in Arcturus, Bradley Sorenson, for no additional consideration to Arcturus and its shareholders.
Arcturus also claims that its investigation into Payne's activities found evidence of "suspicious trading activity" prior to several announcements from the company. This allegedly included Sorenson's trades in Arcturus securities that took place the day before the announcement of a strategic collaboration with CureVac on Jan. 4.
The company also claims that Payne operated an undisclosed and unauthorized side business out of the company's offices and during business hours, in which he acted as a vendor selling products, including a substance called Ionophore, to various corporate buyers, in violation of his employment agreement.