Harley Franco, Harley Marine CEO court date set


#1

Looks like Harley Franco’s troubles are yet to be over. A reliable source I have at OTB sent me these documents (though these docs are public record), showing that a date has been set during Summer 2019.

I’ve also heard pretty reliable rumblings that Harley Franco is likely to call it quits as early as January and as late as the court date in July 2019 to save face.

To quote one of these documents in part:

This action is an attempt by Franco, the current President, CEO and Chairman of the
Board of Harley Marine Services, Inc. (“HMS Inc.” or the “Company”), to forestall his
removal from HMS Inc. for theft of Company assets and rampant self-dealing. That conduct led Godden and Bachteler—then the two other members of the Company’s board of
directors and those of its parent companies—to terminate Franco for cause by board vote
and later remove him from the board by written consent pursuant to the terms of the
Delaware limited liability agreements (the “LLC Agreements”) that governed those
entities.

NoticeofHearing.pdf (125.2 KB)
MotiontoDismiss.pdf (273.0 KB)
Declaration.pdf (2.4 MB)


#2

I’ve only skimmed the documents on my phone for about 5 minutes.

Macquarie’ lawyers, among others, are Perkins Coie which is one of Seattle’s largest and best law firms. It’s also a large national firm. It represents, or has represented, Hillary Clinton and the Democratic National Committee.

12(b)(6) motions to dismiss are routinely made, but rarely granted.

Harley Marine is a Delaware corporation. One of the reasons to incorporate in Delaware is it excellent Chancery Court with judges who are business experts that resolve shareholder and business disputes fairly quickly and accurately. Corporate papers often pre-choose Delaware courts and Delaware law to resolve disputes. As I skimmed the papers, it appears that trial is set for February 2019 in Delaware.


#3

While reading the documents I noted mention of the winch that was suppose to have been installed on the Jake Shearer. The point was brought up in the forum thread below.

https://forum.gcaptain.com/t/the-scourge-of-the-american-petroleum-tankers-that-prowl-the-british-columbia-coast-by-ingmar-lee-u-s-atbs/49838


#4

From the Declaration.pdf page 5

A.
MMS’s Forensic Accounting Revealed That Franco Had Embezzled
And Misappropriated Company Assets And Funds.
x Diverting Harley Marine Tow Winches.
13.
MMS’s forensic accounting and record review revealed that, while the
emergency audit of the Company was in process, Franco misappropriated two tow
winches owned by Harley Marine worth approximately $1.2 million by including
them in a sales contract between Conrad Industries (“Conrad”) and two Franco-
owned entities in which the Company has no financial interest. Specifically, the
sales contract, which Franco executed on behalf of his two entities, included the two
Harley Marine winches in the section entitled “Owner Furnished Equipment.”
14.
Harley Marine had purchased the two winches (along with a third) from
> Markey Machinery (“Markey”) in 2014 with the intention of installing them on three
> of its vessels: the Emery Zidell, the Barry Silverton and the Jake Shearer. Harley
Marine paid $523,000 per winch in 2014, but each has a current market value of
more than $612,000 (based on a 4% escalation rate provided by Markey in 2017).
15.
One of the winches was initially installed on the Emery Zidell, but was
later removed and placed in storage in Seattle. The second winch was never put into
use and remained stored at Markey in Seattle.
516.
After signing the sale agreement with Conrad, Franco caused Harley
Marine to ship the stored winch back to Markey for refurbishment in December
2017/January 2018. Upon completion of the refurbishment, Markey shipped both
the refurbished winch and the winch that had never been used to Conrad on or about
April 3, 2018.
17.
In short, Franco stole two significant Company assets—tow winches
with a collective value of $1,225,253—by including them in a sale transaction
involving two personal entities.
18.
Franco well knew the two winches were Harley Marine’s property
when he sent them to Conrad. Indeed, by email dated May 16, 2018, Franco was
reminded (as he had been made aware in the past) that the two winches appeared on
Harley Marine’s balance sheet (because they were its property). In response, he
acknowledged that the winches belonged to Harley Marine and offered to buy them
for a total of $50,000, approximately 4% of their market value. Harley Marine has
never received any payment for the winches.


#5

A lot of great people work at Harley Marine and this storm hopefully passes very rapidly


#6

The issues regarding holding companies will be resolved in Delaware in February.

The issues regarding the operation of Harley Marine Service and Harley’s employment and role in local corporate management will be resolved later in Washington.

Harley remains in control for now subject to restrictions to preserve the status quo and protect the company and minority shareholders.

Once the Delaware Court rules in February, there will be new motions for summary judgement in Washington based on the determinations of facts in the judgment in Delaware.

It looks to me like Harley will probably be forced out of HMS management in March or April, but he will still own a little ove half of the company. Then Macquarie will try to sell the company. That may take awhile

Will Harley be forced into personal bankruptcy?

In my opinion, the company and its employees would be better off without Harley.


#7


#8

There goes Harley Franco, how long until Harley Marine follows?


#9

If you had the burning desire to share this, a few typed out lines in your own hand would have sufficed.
Posting the actual email and waving it around like a flag is a bit too much.
Im sure some folks like working there and want to continue working there and don’t care for their dirty laundry to be aired out via social media.


#10

I just hope one or more small to medium sized local family PNW company(s) buys Harley, not Foss (Saltchuk), Sauce, or Crowley. It would probably be best if the company is broken up by geographic region: Alaska, Puget Sound, SF Bay & LA, Texas, New York, etc.

I wish that I could raise some money.

Please send a copy of that memo to the Seattle Times, and the Alaska Dispatch.


#11

I believe in the men and women of HM. Heres to the future🥂


#12

Amen to that. Its far from a job hunters market these days and the last thing the industry needs is more qualified people already seeking jobs in a stagnant market.


#13

It’s unfortunate how everything is playing out, but it’s not like much of this is privileged information.

I’m sure everyone at Harley already knows and I’m sure resumes are being cleaned up.


#14

I’d call this good news for Harley employees and customers. It’s a good reason to stay, not a reason to go. It should also encourage other mariners to start applying to Harley.

Whoever buys out Harley, they will probably keep existing crews and be a much better company to work for.


#15

It is a very sad state at the company. These accusations did not come from thin air. I, as a former employee, personally watched Franco and his cronies spend excess amounts of money on newbuild mistakes, company cars, inflatable tugboats for golf events, drinking parties on harbortugs, and all kinds of other crap. All the while I couldn’t even buy a set of coveralls or get reimbursed for a hotel while taking STCW classes. His continual raises were a slap in our faces, when we only had 2 cost of living raises in 5 years! It serves him right and he should be prosecuted for being negligent in company duties!
Also, I was 1 of the guys actually on the Jake Shearer when we were hit by the huge rogue wave. HMS’s ATBs are faulty by design. No working ballast and all types of other issues. But the REAL reason was simply Mother Nature. I don’t care how big the ship or how many overpaid pilots you have on board, when the weather goes to shit you are at her mercy an NO ONE else’s!


#16

Finally! Why does it take companies so long to rip off the bandaids? They have had a Cold War in the office since this filing last summer and I am sure it has cost them many contracts. Now we are going to put a “kid” with NO real maritime experience in charge? Just like Franco, another mistake. They need to clean house from the top down and change the culture and habits of that company. To many good people (sailors) to have a “college dropout” at the helm.


#17

The IBU contracted guys have gotten a raise every year and fully paid medical. Something to think about.