Milwaukee-based Mortenson Kim Inc.
is suing former company president Shannon Safar, alleging she used a business opportunity with the Indiana lottery to secure an ownership interest in the company.
The complaint also alleges Safar, who was named president in January 2011, at different points over the last five years sought to limit the company’s new business development so she could afford to exercise her options to purchase more of the firm, formerly known as Mortenson Safar Kim Inc. She also allegedly did not tell chief executive officer Chris Mortenson about a competing agency’s interest in acquiring MSK.
Mortenson and his attorney did not immediately respond to a request for comment. Safar did not immediately respond to a message sent to her LinkedIn account. Court records indicate a summons has been issued but has not yet been executed.
The company, which provides integrated marketing services including public relations and advertising, was known as Meyer & Wallis until late 2012 when it was renamed
using the names of its managing directors, Mortenson, Safar and Peter Kim. Mortenson had joined Meyer & Wallis as an executive in 2007 and purchased a controlling interest in 2008 before acquiring the remaining interest over time.
According to the complaint, Safar and Kim were issued shares of MSK stock after Safar threated to withhold business with the Indiana or Hoosier Lottery in November 2012.
The company pursued the Hoosier Lottery account during 2012 with an “’all in’ strategy,” according to the complaint. The strategy included Mortenson authorizing using money from accounts receivables as it was collected, loaned money and her own personal savings to fund the plan to land the account.
The complaint says Safar “knew and understood the great risk Mortenson was taking to acquire the Hoosier Lottery business, and that MSK would be in a precarious financial condition if the Hoosier Lottery business opportunity was not obtained.”
Safar was one of the main contacts with Hoosier Lottery and, according to the complaint, told Mortenson in early November 2012 she had received a commitment from lottery representative to make MSK its advertising agency of record.
In a Sunday, Nov. 11, 2012 meeting, allegedly “arranged under false pretenses” Safar threated to withhold the Hoosier Lottery business unless she received a “substantial increase” in compensation and was provided an ownership stake in MSK, the complaint says.
Mortenson felt he had no choice but to meet Safar’s demands in order to save the company, the complaint says.
“If Safar walked away with the Hoosier Lottery business, Mortenson knew that the entire investment would be a total loss and MSK would be at the brink of financial ruin,” the complaint says.
Mortenson ultimately agreed to issue Safar shares of MSK stock at a discounted value, give her increased compensation and cover personal expenses she had accumulated in exchange for her finalizing the Hoosier Lottery agreement. He also agreed to issue Kim shares of MSK stock as well.
The complaint says Safar’s “unlawful and unreasonable threats and demands continued” after the lottery account was secured.
In November 2013, Safar was allegedly contacted by a colleague from a competing adverting agency with interest in acquiring MSK. Instead of bringing the potential deal to Mortenson, Safar allegedly engaged in secret negotiations, the complaint says. Part of the potential deal included Safar taking over all MSK operations at its Indianapolis office.
“Safar apparently poisoned the acquisition negotiations by casting Mortenson in a bad light, to the point where representatives from the competing agency stated that they would only consider acquiring MSK if Mortenson left the company and Safar remained in charge,” the complaint says.
Safar allegedly told Kim she could use the potential acquisition to threaten Mortenson into giving up more ownership of MSK, even if the deal did not become a reality, the complaint says.
Mortenson ultimately authorized the issuance of a 10 percent ownership interest to Safar as additional compensation and an additional 5 percent to Kim at a discounted rate. Both also were given options to purchase an additional ownership interest that could result in each owning 20 percent of the company.
Kim exercised his option and paid MSK for his 15 percent stake and covered the tax liabilities on the 5 percent stake he was given. Safar allegedly convinced Mortenson to finance her purchase and liability through a series of promissory notes, but has never made a payment on them, according to the complaint.
At one point, the complaint says Safar expressed concern to Kim that if the company continued to grow she wouldn’t be able to afford to acquire an additional ownership interest. She allegedly suggested employees should not go after new business until she “could manipulate a purchase of Mortenson’s controlling interest in MSK at a depressed value.”
In March 2016, Safar allegedly told Hoosier Lottery representatives MSK was considering making itself eligible for minority and/or women owned business status. She also allegedly pressured Mortenson to give her and Kim a 51 percent ownership interest in MSK “based on the misrepresentation that MSK’s clients … were demanding such a change.”
The complaint says Mortenson met with Safar on July 24 to discuss her future with the company and offered her an opportunity to resign. If she stayed, Safar’s role would be reduced, the complaint says. She “did not respond positively” and was absent from work on July 26 and 27 before officially being terminated July 28.
On July 27, she allegedly accessed company files and downloaded confidential information on clients, including the Hoosier Lottery account.
The lawsuit seeks a ruling that Safar’s ownership stake is null and void or to force her to transfer it back to MSK. It also seeks an undetermined monetary judgment along with an order blocking her from using the confidential information she allegedly downloaded.