OCA files lawsuits against former chief executive officer, asks court to nullify capitalization agreement

By Jennifer Lanning Drey

Eugene, Ore., Sept. 5 - OCA Inc. filed a lawsuit alleging it was not provided sufficient information by former chief executive officer Bartholomew Palmisano about transactions the company executed with OCA International, LLC and Gimili Enterprises, according to a Friday filing with the U.S. Bankruptcy Court for the Eastern District of Louisiana.

In the filing, OCA asked the court to nullify its capitalization agreement with OCA International, Gimili and Palmisano and to order the entities to return to OCA all financial information, trade secrets and computer software related to OCA's foreign subsidiaries.

OCA transferred its foreign subsidiaries to Palmisano in 2005.

However, OCA said in the filing that Palmisano encouraged its board of directors to enter into the agreement without appropriate information regarding the amount invested by OCA in the foreign subsidiaries, the business prospects of OCA International, the business prospects of the foreign subsidiaries and the terms of the transaction.

As part of the transaction, OCA entered into a capitalization agreement with Gimili, which is owned by Palmisano. Under the agreement, OCA contributed shares of its foreign subsidiaries to OCA International.

In exchange for the transfer, OCA said it was supposed to receive $12.5 million in promissory notes from the foreign subsidiaries and 53.57% equity/ownership interest in OCA International. Gimili would receive the remaining equity/ownership.

OCA said the promissory notes were never prepared or delivered to OCA, and OCA has not received any interest payments.

"It is highly probable if not certain that OCA will never receive any interest or repayment of principal under the promissory notes," OCA said in the filing.

The capitalization agreement also gave Palmisano the ability to make capital calls on OCA through Gimili, and OCA said Palmisano delivered capital calls that were rejected by a director without the board's knowledge.

Under the agreement, if OCA does not fund its portion of a capital call made by Palmisano through Gimili, its percentage interest ownership in OCA International is reduced.

OCA told the court that as a result of the capital calls, Palmisano has increased Gimili's ownership in OCA International to 69% and decreased OCA's ownership to 31%.

In a separate filing, OCA asked the court to award it more than $12.48 million in damages and restitution for attorney's fees, punitive and exemplary damages, plus interest.

OCA, a Metairie, La., provider of business services to orthodontic and dental practices, filed for bankruptcy on March 14. The Chapter 11 case number is 06-10179.

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