The following story was written by Henry Culvyhouse of The Daily Independent of Ashland, and is cross-posted with permission (original story here). If you live in the Ashland area, please subscribe and support local journalism.
F
ormer Braidy Industries CEO Craig Bouchard misled the Ashland community, the company’s board of the directors and investors, and crushed any dissent within the company’s ranks, according to a report filed in Delaware Court.
Among the many allegations contained in the report, Bouchard is said to have told potential investors in the Braidy Atlas Mill that the project could be moved to Mexico. It also states the company had only $11 million cash on hand at January and would’ve gone belly up by June of this year.
The 49-page report is part of the filings within the lawsuit filed by Bouchard on Feb. 14 in regards to his Jan. 28 ouster by the company’s board of directors. Bouchard’s attorneys have argued in filings that the board of directors did not follow the terms of a 2018 voting agreement, while the defendants have tried to evoke an “unclean hands defense,” meaning Bouchard had allegedly behaved so poorly, he doesn’t have a right to evoke the agreement.
The report was prepared by Frost Brown Todd Attorneys, a law firm hired by the company to conduct an independent investigation. The firm is not a party to the lawsuit. The firm interviewed 26 current and former employees, the board of directors, and current and former attorneys for the company, and reviewed 17,000 documents as of the release of the report.
Bouchard, his personal assistant Julie Kavanaugh, former controller Johanne Medina — who resigned on March 11 then filed an affidavit alleging Bouchard engaged in no financial misconduct — and former COO Mike Otero were requested to be interviewed by the firm, but declined.
A report on the many financial issues — some have already been disclosed by Braidy in court filings — is forthcoming, according to the report.
Money Woes
While some parts of the report are heavily redacted to protect confidential corporate information, it shows Bouchard misled the board about the status of investors.
“Each board member interviewed described the same pattern of conduct: Mr. Bouchard would provide an impressive list of purported interested investors. He would report that at least one of the investors would invest in Braidy imminently. That investment did not occur,” the report stated.
Investors from Japan, Abu Dhabi, Saudi Arabia, Oman, South Korea, and India were all mentioned as potential deals, but none came to fruition, the report stated. At a Jan. 16 board meeting — 12 days before his ouster — Bouchard told the board that he had a memorandum of understanding for a $1.8 billion sale leaseback with a company that “would ink within 24 hours.” A leaseback is when one company sells property to another, then rents it from the buying company. That deal never occurred and documentation shows the investor never had the intention of doing so, the report suggests.
At that same meeting, the board raised concerns that Bouchard had approached 100 investors, but only Rusal — the Russian metals manufacturer — bit, the report states. The report noted that besides the Rusal deal, there were no investments after early 2018.
One way the company tracked potential investor interests was through a “data room,” an online repository of the company’s finances for interested investors to research. One employee would monitor the “room” and the investors with access to it to see who was logging in. Periodically, the employee would send Bouchard a document reporting who was using the room as a way to track investor interest, the report stated.
Bouchard would send drafts of the document back to this employee, asking him to change information on it to show “more positive investor interest than existed,” the report states. Toward the end of Bouchard’s reign, this employee told investigators that he believed “only 30% of the information in the Funding Tracker documents remained reliable,” the report said.
This employee eventually brought this up to an observer of the board of directors. In August 2019, that observer told the employee to report the data directly to him. By having that direct reporting, the observer found “several instances where a possible investor was not frequenting the data room, yet Mr. Bouchard was reporting to the board that they were highly interested and engaging in diligence,” the report stated.
While Bouchard allegedly misled the board about investors, the report further states he hid cash flow issues and a potential deathblow to the mill project from the board.
At some point in 2019 — the month and day has been redacted — Kiewit, the contractor of the mill project, called now Braidy CEO Tom Modrowski and revised its construction costs from $900 million to $1.5 billion, which would have raised the total cost of the project from $1.8 billion to $2.4 billion, the report stated. As the then president of Braidy Atlas — a subsidiary of Braidy Industries — Modrowski reported the news to Bouchard.
Bouchard told Modrowski to “not send any emails about Kiewit’s new verbal cost estimate. Mr. Modrowski interpreted the instruction not to put anything in writing as an effort to avoid creating a paper trail,” the report stated.
The report stated Bouchard never told the board about the potential death sentence to the project. The company was able to negotiate the rise in cost to $915 million, avoiding disaster. However, the report noted “No one at Braidy, including Mr. Bouchard, could have known that would be the outcome.” The report further states the incident “raises serious questions about Mr. Bouchard’s ethics, judgment and willingness to expose Braidy to risk and potential liabilities.”
Veloxint, a Massachusetts-based company bought by Braidy in 2018, is another point of contention in the report. During the acquisition period, Bouchard told the board that the company had three or four products ready for market, including ultra-high-strength sockets for a tool manufacturer, the report stated. Those promises swayed the board into approving the purchase, the report stated.
Despite the promises Veloxint would have a product ready as early as 2018, current projections show it won’t before 2021, the report stated. However, Braidy kept funding the venture based on the reports Bouchard gave the board.
Dr. Alan Lund, Veloxint’s CEO, told investigators that Bouchard “did not fully understand Veloxint’s position and made promises to the Board that Dr. Lund felt could not be kept.” During a January 2019 email exchange between Bouchard, Lund and two other executives, the report states Bouchard told them to give the board more “aggressive numbers” about the forecast of the venture, the report states.
“Anything worse will likely shock the board,” the report quotes Bouchard as writing.
More generally, the report states during the early years of Braidy, the board was “relatively inactive.” Early financial reports to the board “lacked key details,” the report stated. However, over time the report said the board began to ask for more exact figures — when those figures came in late 2019 and early 2020, the report states the board was surprised the company would run out of money by June 2020.
Dr. Christopher Schuh, a member of the board, told investigators he was surprised about how much money was spent in the Ashland office, even though the mill wasn’t built.
Bouchard didn’t take too kindly to the additional oversight, according to the report. When questioned at the Jan. 19 meeting, he took a “my way or the highway approach,” later threatening to fire one board member for asking questions, the report states.
In an email to Lund following that meeting, he told the doctor, “Our directors are wimps,” the report said.
“Rather than working with the board collaboratively to address its concerns, he instead called its members names and threatened to fire them,” the report stated.
‘Imminent Investors’
The board wasn’t the only one getting inaccurate information, the report explains. When Bouchard courted investors during his worldly travels, the report states he told them about other investors that were about to bite — but weren’t even in the cards — acquisitions on the part of Braidy that never happened and a construction timeline that was “faster than reality.”
“Mr. Bouchard sought increasingly speculative and complex international solutions for Braidy investments — (redacted) in the Middle East, Central Asia and Southeast Asia,” the report states.
In addition to telling potential investors that the Ashland mill would be moved to Mexico, Bouchard also told them Braidy would be building mills in other states, in Saudi Arabia and “buy a multi-billion-dollar European automotive and aerospace conglomerate that had more than 50,000 employees,” the report stated.
Bouchard didn’t have the cash to fund such projects, the report noted, and talk about them did nothing but scare off investors and distract Bouchard from raising funds for the mill.
As time went on, employees and board members became concerned with how Bouchard conducted himself on sales calls, possibly alienating future business partners, the report stated. Sometimes he would speak throughout an entire business meeting without addressing the investor’s needs, the report stated.
As Bouchard continued, he started excluding other Braidy representatives from sales meetings, the report states.
Braidy’s Nasdaq listing was another point of concern among interviewees, according to the report. While Bouchard presented it as a “crowd-funding strategy,” there was concern he was using it as an escape plan to sell his shares if things went south, the report shows.
‘Having a bad day’
Back in October 2019, Braidy publicly announced COO Gen. Blaine Holt had resigned “to follow his dreams.”
The report paints a different picture.
According to interviewees in the report, there was belief Bouchard monitored emails and “punished perceived disloyalty.” The report details how that played out on the morning of Oct. 18, 2019.
That morning, Kavanaugh — Bouchard’s assistant of about five years — emailed the CEO three PDF images of emails between Holt and others, the report states. In one email, Holt called Bouchard a “very foolish and greedy man.”
Later that morning, Kavanuagh asked the company’s IT director to go to lunch with her at Fat Patty’s, the report states. At the restaurant, she put Bouchard on speakerphone, who told the IT director that he was going to fire Holt, according to the report.
He told the director to disable Holt’s email accounts, login information and keycard access to the building that afternoon, the report stated.
When Holt left the office for a late lunch, he came back to discover his keycard didn’t work, the report states. He then called Bouchard.
“I bet you’re having a bad day,” Bouchard said, according to the report.
He then proceeded to call Holt a traitor, told him he was going to be fired for disloyalty, then read him excerpts from the general’s emails, the report stated.
It didn’t end there, the report stated.
Later that evening, Bouchard shot an email to CFO Julio Ramirez, the report states.
“We need to have an honest conversation about topics/emails you shared with (Gen. Holt). I must understand whether you want to develop your career with Braidy or follow (Holt) to a different place,” the message read.
Two days later, Kavanaugh sent Bouchard another email chain that showed Ramirez, Holt and Modrowski discussing a plan to encourage the board to interview management about Bouchard’s financing strategy, the report stated. In one of those emails, Ramirez called Bouchard’s plan “crazy.” On Oct. 21, Bouchard sent Ramirez an email stating “I’m assuming much of the statements in this email were caused by the drama introduced by (Holt). If you still believe these things we should have a discussion about how to better use your talents in another spot,” the report quotes Bouchard.
Later that day, Bouchard made an appearance at a company-wide meeting of the Ashland office. It was one of the few appearances he made there — the report estimated he only turned up in Ashland 10-25 days out of the year. Most of the time he spent traveling the world or at his Florida home.
Several employees later told investigators that Bouchard began the meeting stating, “I am the largest shareholder, Chairman of the Board and the CEO of Braidy, and what I say matters.”
Dissension would not be tolerated, the report shows.
“Braidy employees present at the meeting reported uniformly that Bouchard’s message was to fall in line or find a new job,” the report states.
Build that fence
Around the time of the Holt firing, a reporter from Louisville was coming to Ashland to file a report on Braidy. Bouchard ordered an opaque fence to go up around the site, even though no construction had been started since the June 2018 “groundbreaking,” which the report characterizes as nothing more than a PR stunt.
Costing more than $100,000 — keep in mind, the company’s coffers were dwindling down to $11 million cash on hand, per the report — it was put up to “leave the reporter with the misimpression that mill construction had begun,” the report stated. Due to the site’s hilly topographic, it did not obstruct the view — a picture included in the report shows an empty field behind the fence.
Remember when those “Braidy Strong” and “Braidy Driven” banners popped up around the area like potholes in spring? According to the report, that was a PR move Bouchard pushed for the benefit of another Louisville reporter visiting the area in November 2019.
In an Oct. 17 email, one Braidy executive asked Bouchard if “we should run the jobs story the day before (the reporter) comes to give people something to galvanize around,” the report shows.
That’s the autumn announcement that Braidy would hire 15 Ashland Community and Technical College Spring 2020 graduates, the report states.