TSIC files lawsuit against former CEO to recover $6.06 million payment

By Caroline Salls

Pittsburgh, Jan. 2 - TSIC, Inc. filed a lawsuit Wednesday against former chairman, president and chief executive officer Richard Thalheimer to recover $6.06 million in alleged voidable fraudulent transfers, according to a filing with the U.S. Bankruptcy Court for the District of Delaware.

According to the complaint, Thalheimer was terminated as CEO on Sept. 25, 2006 and soon after requested to resign from the company's board of directors.

"Although TSIC had endured more than 20 consecutive quarters of losses under his leadership, Thalheimer characterizes his ouster as having been initiated by a group of activist investors using intimidation, theatrics and a 'double cross,'" TSIC said in the complaint.

Rather than litigating whether or not his termination was with or without cause, TSIC said it agreed to pay the $6.06 million to Thalheimer in satisfaction of all claims under his pre-existing employment contract.

In exchange, Thalheimer did not provide any services or other value to TSIC, which filed its Chapter 11 case within one year of the payment.

As a result, TSIC said the payment must be avoided under section 548(a)(1)(B)(i), (ii)(IV) of the Bankruptcy Code, and Thalheimer must return the payment to the company.

TSIC said Section 548(a)(1)(B)(i), (ii)(IV) of the Bankruptcy Code says a trustee can avoid any transfer of an interest of a debtor in property, or any obligation incurred by the debtor that was made within two years before the date of the filing of the petition, if the debtor voluntarily or involuntarily received "less than a reasonably equivalent value in exchange."

In addition, the provision says the trustee can avoid a transfer made to or for the benefit of an insider "under an employment contract and not in the ordinary course of business."

TSIC, a San Francisco-based specialty retailer formerly known as Sharper Image Corp., filed for bankruptcy on Feb. 19, 2008. Its Chapter 11 case number is 08-10322.

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