Staywell sues former CEO Davis
by Mindy Aguon
Guam - Staywell Guam, Inc. is suing its former chief executive officer, president and board chairman, Donald Davis, alleging he broke his fiduciary duties to the company to increase his own salary. The company wants Davis to pay back close to a half-million dollars in wages they claim he wasn't entitled to.
According to a civil suit filed in the Superior Court of Guam, Davis was fired in February 2008, after the board of directors expressed concerns that he unilaterally authorized in increase in his salary. In November 2008 Davis informed the board that he could not work without being compensated and had his money tied up in a major investment so he needed a salary or a consultant fee. The board agreed that Davis would receive an annual salary of $129,000.
Court documents state Davis wanted $258,000 a year, but the board agreed to an annual salary of $129,000 with the other half to be paid and distributed when the board determined there was available funding to do so. But the lawsuit claims that three days later, Davis allegedly countersigned the agreement and began paying himself the full amount from Staywell's general fund.
The board apparently didn't learn about this until April of last year when a board member made a formal motion to prohibit Davis from taking unauthorized compensation and to establish his salary at $180,000 a year.
Davis is accused of paying himself at the expense of other substantial creditors, which included board directors Francis Santos and Chen Mack, who both had no-interest promissory notes from the company totaling more than $280,000. The court documents state Davis' decision to pay himself rather than satisfy the debts owed to other directors as SGI's general creditors harmed the company and was a breach of his fiduciary duties.
Staywell contends Davis' violation of his duties was made worse by the fact that audited financial statements from 2008 through 2011 showed the company's annual net income of $161,000 barely exceeded the board approved salary for Davis. They maintain Davis had no justification to receive the unauthorized salary of $258,000 when the company struggled to turn a profit that was less than his salary and they were never able to find adequate funding to issue any dividends to its stockholders.
Davis was fired in February of this year. Staywell attempted to resolve the matter but the court documents state his attorney responded to the claim but showed no desire to resolve the matter.
Staywell has asked for a jury trial and is seeking the return of $448,000 and 6% interest for the money they claim Davis was unauthorized to take. The company contends only an award of punitive and exemplary damages will deter this kind of misconduct and remind directors and officers of businesses on Guam of their fiduciary duties and obligation to be fair and transparent.