Photo: ShutterstockThe former general counsel of three related Pittsburgh-based companies selling cannabis-derived products, known as cannabidiol (CBD), has filed a lawsuit alleging the companies failed to pay him and his spouse promised stock options and salary.
On Monday, Peter Borghetti and his spouse, Cherylann Borghetti, filed suit against CBD USA Grown Inc., KMA Holdings Group, Greenleaf Golden Enterprises and Deborah Gestner, who is president and founder of CUG. The lawsuit, which was filed in the U.S. District Court for the Western District of Pennsylvania, alleges violations of Pennsylvania’s Wage Payment and Collection Law, breach of contract, breach of stock confirmation and fraud, among other things.
According to the 30-page complaint, which was filed by Morella & Associates attorney Justin Papciak, Peter Borghetti began working as corporate counsel for the companies in April 2018. The employment agreement, according to the complaint, included $50,000 of CUG stock, plus an agreement to reimburse the Borghettis for health care costs, as well as life and disability insurance.
Borghetti became executive vice president and general counsel for the companies beginning in October, the complaint said, adding that the employment agreement stipulated that the companies could fire him for cause only after giving him 10 days’ notice and the right to appeal the determination. If he was fired for cause, the companies would also have to pay any previously earned portion of his salary and benefits, the complaint said. However, if the companies wanted to fire him without cause, they would need to give him 180 days’ notice and pay one year’s worth of salary, or $194,000, along with a year of benefits, the complaint said.
According to the complaint, Borghetti and his wife also each purchased $15,000 in stocks from CUG with promises that the stock would pay a dividend of up to 50% of its investment value, with a guaranteed annual dividend of $10,000.
However, the complaint said the company failed to tell the Borghettis that CUG had not registered its stock with either state or federal regulatory authorities.
The complaint further said the company was operated in a way that prevented Borghetti from performing his job functions, including failing to pay court filing fees or provide the necessary paperwork to submit a trademark application. Nevertheless, Borghetti was fired in February, the complaint said.
The Borghettis sued seeking unpaid salary, benefits and severance obligations under the state’s Wage Payment and Collection Law, as well as recovery for breach of stock confirmation and fraud in connection with their stock purchases. The plaintiffs also contended that they relied on the companies’ representation regarding the value of its stocks.
“At all times CUG maintained that it could pay the dividend,” the plaintiffs said in the complaint. “Moreover, in deciding to accept the stock as payment on the basis of the dividend representation, P. Borghetti also relied upon related representations by CUG would in fact pay a dividend equal to 50 percent of his preferred stock’s face value.”
Regarding their stock purchases, the Borghettis alleged they were each owed $20,000 for the stock purchases, but were never paid.
The plaintiffs further contended that Gestner mismanaged the company, which would allow the plaintiffs to pierce the corporate veil. The complaint seeks damages in excess of $90,000.
Messages left with CUG and Greenleaf Golden Enterprises seeking comment were not returned Monday. Papciak also did not return a call seeking comment.
READ THE COMPLAINT HERE:
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