The former chief executive of a company chaired by Rep. Chris Collins said in recently filed court papers that the congressman manipulated its finances and used a "questionable accounting practice" that led the company's bank to drop it as a customer.
Former CEO Gregory R. Chiklis made those statements in court papers filed last week against ZeptoMetrix, a Buffalo biotechnology firm Collins, R-Clarence, invested in years ago, when he was a businessman and held no public office. The lawsuit was settled days after the papers were filed Tuesday in State Supreme Court.
Chiklis sued to ease the restrictions of a non-compete clause and to collect a bonus he felt he was due after his resignation last year. His sworn statement asserted that Collins remains heavily involved in ZeptoMetrix operations as chairman of its board of directors.
"I was expected to report to ZeptoMetrix's board of directors," Chiklis said in an affidavit he signed Jan. 12, three weeks after he left the ZeptoMetrix payroll on Christmas Eve. "Despite this standard corporate hierarchy, most decisions were unilaterally made by Chairman Collins."
In the court papers, Chiklis asserted:
- ZeptoMetrix would pay more than $500,000 a year to ''phantom employees'' who provided no services to ZeptoMetrix. Chiklis doesn't say in court papers where he believes the money went, but he asserts it was part of an effort to reduce stated profits and avoid paying him his full bonus in recent years.
- ZeptoMetrix engaged in another "questionable accounting practice." Chiklis doesn't describe it in his papers, but says "it resulted in our long-time bank, KeyBank, rejecting our business, so that ... ZeptoMetrix had to find a different bank to provide its banking services." KeyBank wouldn't comment.
- As the accountants prepared for the annual financial examination of ZeptoMetrix in September 2016, "Chairman Collins told the board that he wanted a clean audit and that if the accountants pushed too hard on any issue ZeptoMetrix would find different accountants."
The Collins camp responded through an attorney for ZeptoMetrix, John G. Schmidt Jr. of the Philips Lytle law firm. Schmidt said it should surprise no one that Collins is a "tough-minded businessman, a strong negotiator and someone who has created hundreds of jobs."
"Like every business," Schmidt said in the written statement, "disagreements arise and are resolved, which is exactly what has happened here. It also should be no surprise that someone who brought this type of action under these circumstances will attempt to create controversy to try to bolster their bargaining position.
"That is also the case here," Schmidt continued. He said the claims of phantom employees, questionable accounting and the hard line taken against outside accountants are "simply without merit."
Schmidt also said: "ZeptoMetrix and Mr. Chiklis have now agreed to a resolution that satisfies both parties. Both can now move on.”
Chiklis did not return a Buffalo News telephone message. ZeptoMetrix stock is not publicly traded.
Collins, as The Buffalo News reported in October, is the rare member of Congress who remains heavily involved in personal business interests despite a high-profile public office. He is one of just three House members serving as a chairman of a corporate board of directors and the only member to sit on the board of a publicly traded company. By limiting their private-sector responsibilities, members of Congress avoid potential conflicts of interest and leave more time for their public duties, according to government watchdogs and some House members.
In a separate case, the Office of Congressional Ethics concluded that Collins – a director and the largest shareholder of Innate Immunotherapeutics, a publicly traded Australian biotech firm – may have tipped off would-be investors about a pending stock sale. The office also concluded Collins may have broken House rules by seeking favorable treatment for the company from the National Institutes of Health. The matter is now before the House Ethics Committee.
In the court filing in the ZeptoMetrix case, Chiklis said sales and profits at ZeptoMetrix climbed during his time as a top official with the company. But he asserted his descent began when he tested the waters for a sale of ZeptoMetrix in 2016, angering Collins. After that, Collins' actions "reduced my contracted-for bonus by hundreds of thousands of dollars."
"I confronted Chairman Collins with my concerns, but he ignored my inquiries and requests," Chiklis' statement said. "Following my complaints, he began to actively criticize and badger me in front of other board members and in our meetings and by email. He frequently characterized me as ungrateful and took every opportunity he could to reduce my compensation."
Outwardly, there was no sign of discord. ZeptoMetrix saluted Chiklis on Facebook in June 2017 for being named a finalist for Entrepreneur of the Year in New England. (Though ZeptoMetrix began in Buffalo, Chiklis began working for the company at its Franklin, Mass., office and kept his home there.) Chiklis, during the summer of 2017, continued the practice of favorably retweeting articles about Collins' various activities in Congress.
Knowing his contract wouldn't be renewed, Chiklis in October wrote a letter of resignation that would be effective Dec. 24. When ZeptoMetrix announced the change in leadership, it said little about the departing CEO, other than to thank him for his "leadership and insight."