Legal Question in Business Law in New York

I cofounded a tech startup with 2 other people. After a couple weeks, one disappeared for a week. During that time, while trying to find him, we found out he lied about his previous job and has 2 felony charges on his record (which he says will be expunged). There's nothing in our incorporation paperwork that's unusual, i.e. explicit clauses about being truthful, and he didn't contribute anything (money, IP, etc.) to the business. 25% of his shares vested immediately since we agreed he would work without a salary until our angel round, because he'd be consulting part time with his previous employer to cover his living costs. This was a lie and he was fired from an internship months earlier (and may face legal action from them). He pocketed $1700 that was supposed to go to a contractor to pay his bills, took $2300 dollars from someone who thought they were investing in our company, was on probation as we were forming the company, and lied about both having a clean criminal record and his previous employment, which he represented as a mid-senior level position instead of as an internship. Had he been truthful about any of this, he'd have no vested shares. Does it sound like we have a case to sue him for them?


Asked on 11/19/13, 6:40 am

2 Answers from Attorneys
Frank Natoli Natoli-Legal, LLC

Well, if you have any written statements signed by him that clearly shows he lied I think you may have a claim that his misrepresentation will warrant termination. But in almost any scenario I see here, he would have a right to the value of the shares vested.

Of course, I would conclude nothing here without getting all the facts. If you would like to discuss further over a free phone consult, feel free to contact me anytime that is convenient.

Kind regards,

Frank

www.LanternLegal.com

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212-537-4436

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DISCLAIMER: this is not intended to be specific legal advice and should not be relied upon as such. No attorney-client relationship is formed on the basis of this posting.

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Answered on 11/19/13, 7:36 am

The cost of initiating a law suit may outweigh any damages you sustained and the person may not have any money to pay a judgment even if you win one. You should consider dissolving the current entity / partnership and starting a new one, this time with proper paperwork.

My practice focuses on tech startups and I can assist you in starting a fresh page. Feel free to contact my office at your earliest convenience.

Roman R. Fichman, Esq.

www.TheLegalists.com │ @TheLegalist

email: Info (@) TheLegalists (dot) com

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Disclaimer: This post has been written for educational purposes only and was not meant to be legal advice and should not be construed as legal advice or be relied upon. No intention exists to create an attorney-client relationship or any other special relationship or privilege through this post. The post may contain errors, inaccuracies and/or omissions. You should always consult an attorney admitted to practice in your jurisdiction for specific advice. This post may be deemed as Attorney Advertising.

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Answered on 11/19/13, 7:49 am


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