Hartford Business Journal

www.HartfordBusiness.com • May 28, 2018 • Hartford Business Journal 11 Reporter's Notebook Matt Pilon | mpilon@HartfordBusiness.com Health Care/Bioscience, Startups & Entrepreneurs, Government/Law and Energy LAW Legal challenges, damages mount for would-be Hartford med-tech investor A New York arbitra- tion court has ordered a would- be Hartford entre- preneur — who promised but failed to bring 195 medical- technology jobs to the Capital City in exchange for state aid — along with his associ- ates and various companies to pay $14 million to former investor-employees who were allegedly defrauded out of six- figure investments as well as salaries and benefits. In two separate legal cases culminating in Nov. 2017 and March of this year, arbitrators awarded nearly $2.9 million and $10.9 million, respectively, to about a dozen individuals who had been recruited to work for an array of companies controlled by David Wagner, including CliniFlow Technologies, Downing Investment Partners, Hanover Square Capital Partners, 3si Systems, Downing Health Technologies and others, ac- cording to court records. Those are some of the same companies Wagner once told the Connecticut Department of Economic and Community Development that he would move to Hartford as part of a $45 million investment that included erecting a new office building near Hartford Hospi- tal in exchange for $4 million in state aid. Ultimately, Wag- ner, who missed key project deadlines, only received $400,000 in state money, but his project hasn't come to fruition. Last November, DECD declared Wagner to be in default of his aid agreement and the agency has been trying to recoup that money. Meantime, the employees who filed the arbi- tration actions against Wagner's companies and management team said that in order to be hired, they were required to invest six-figure sums — money that was largely never recouped and al- legedly not used for its intended purposes, court documents said. Many also said they were paid little or no wages after starting their new roles, even though they were promised salaries. "The evidence is overwhelming that [their] en- tire employment process was a scheme intended solely to entice new employee-investors, know- ing their money would be redirected to unstated purposes that would not benefit the company into which the money was invested," arbitrator Ste- phen Ruffino wrote in his March award decision. In the November award decision, arbitrator Carol Mager wrote that Wagner was "without dispute the chief initiator of the schemes … " but said that co-defendants Michael Shaut, Marc Lawrence and Richard Buckingham were "ac- tively involved" as corporate officers. Wagner, a Trinity College alum who previously sat on the Hartford private school's board of trustees, was found personally liable in each of the arbitration awards. However, in January he declared personal bankruptcy in Rhode Island, which stayed the arbitration proceedings against him, according to court records. "We are aware that Mr. Wagner through vari- ous entities has been perpetrating this scheme for many years and with dozens of individuals victimized throughout multiple states," said Ross Carmel, an attorney for the petitioners in each of the cases. "We're certainly happy about the result of the arbitration award, we believe the amounts therein were correct and indicative of the harm that Mr. Wagner has caused." Attorneys listed for Wagner, Shaut, Lawrence and the companies did not respond to requests for comment. Records of arbitration proceedings are often shielded from the public, but documents can be viewed once attorneys seek affirmation of an award from the state supreme court. In this instance, both awards against CliniFlow and the other parties are available for public viewing on the New York Supreme Court's website. A judge affirmed the $2.9 million award in February, though Shaut this month notified the court he intended to appeal, court records show. The $10.9 million award has not yet been af- firmed, records show. Meanwhile, both sets of arbitration plaintiffs, as well as plaintiffs from two ongoing federal lawsuits against Wagner, have intervened in his personal bankruptcy case, asking the judge to rule that Wagner's financial obligations to them can't be discharged under bankruptcy law. GOVERNMENT CT Tech Council pushes policy agenda The Connecticut Tech- nology Council wants gubernatorial candidates to keep the needs of the state's approximately 6,000 tech companies front-of- mind this summer. The tech council this month issued a member survey that helped de- velop the group's "growth agenda," which identifies getting the state's "fis- cal house in order" as the most important task for the next governor. "There is simply too much uncertainty in the business atmosphere right now for any significant growth to take hold," said Bruce Carlson, CEO of the East Hartford-based industry group. About 341 people from the tech council's company database, nearly half of which were C-level tech execs, responded to the first-quarter survey. The council also conducted several focus groups around the state to devel- op its agenda, which was released ahead of a June 13 gubernatorial candidate forum it has organized in Trumbull. The tech council wants the next governor to use the recent work of the Commission on Fiscal Stability and Economic Growth as a blueprint. "While others may find problems in specific rec- ommendations, this repre- sents the only plan on the table for discussion," the tech council said. That CEO-led commis- sion had hoped for the leg- islature to pass its entire package of wide-ranging tax, fiscal and economic policy recommendations this year, but was largely unsuccessful in doing so. Tech leaders also cited the state's poor transpor- tation infrastructure and lack of regional collabora- tion as primary reasons for Connecticut's relatively sluggish recovery from the last recession. The tech industry is hoping that a strategic economic growth plan can be formulated and imple- mented across state agen- cies, overseen by a cabinet- level economic growth coordinator — which would be a new position. The survey also raised concerns about attracting a tech workforce, noting that companies are filling talent needs through the use of virtual employees. Survey respondents are recommending a state- wide tech job board to connect employers with talent, more computer sci- ence and STEM education, public financing to assist with hiring, and additional tax credits for investing in Connecticut companies. The survey noted sev- eral strengths Connecticut could leverage, including its educated workforce, quality of life, location within a high-tech corridor, grow- ing startup community and relatively high middle- market growth. Bruce Carlson, CEO of the CT Tech Council, which is hosting a gubernatorial forum next month. David Wagner, Chairman & CEO, CliniFlow A "no-trespass" sign surrounds two Washington Street properties, which CliniFlow Technologies' David Wagner proposed to redevelop. PHOTO | HBJ FILE PHOTO | HBJ FILE

• Cover