What is the name of your state (only U.S. law)? California
I'll try to make this short but there are some details that may be relevant. A company i worked for two years ago suddenly they decided they didn't want to pay the $8 Million in debt to our vendors. Let's call it Company S. The company had been in existence for about 7 years and $80 Million had been invested in developing the technology. The technology was about 95% developed. Good enough to supply the final product to customers but not perfected yet as far as the efficiency of the process. So Company S did not have any long term contracts yet. So it was difficult to get the existing investors to keep putting more money in
The Board brought in a new CEO and new CFO. Company S signed an investment deal for $12 Million to keep the company going while we concentrated our efforts to focus on a particular customers specs to secure a contract.
The new CEO and CFO , with the Board's approval, then hired a third party negotiating firm to call vendors and tell them Company S is out of money and need to lower their payables by more than half or they could go into bankruptcy. Thus the vendors would get very little of what we owe them if anything at all. They negotiationg firm would offer vendors 18% of what we owe them. Trouble is we had the $12 Million at the time. This money was 'hidden' at the law firm we use(That is what my boss told me when I asked). They would transfer some money every week into Company S bank account to make payroll and order new parts for the technology. This way they said it would never appear we had a lot of money in the bank in case anyone brought us to court.
Many vendors particularly small machine shops panicked and settled for 18-30% thinking if they don't they risk not getting anything.
There never was a threat that we would go into bankruptcy . The CEO told us that they wouldn't do that as they technology was too valuable and we were close to really nailing it.
So I think the whole thing about asking the vendors to settle for 18% because we had no money was Fraud. What does anyone thinkl?
And if it is Fraud who do i report this to? The DA of the county we are in? The State Attorney General? My major concern is that all these vendors took a serious financial hit.