CEO’s Divorce Case Brings to Light Corporate Issues

In July 2014 an appeal was filed by Eric’s ex-wife Jante Langan contesting parts of their 2012 divorce (Jante Langan v. Eric Langan 300^th District Court Brazoria County). The document provided a number of new concerning details for shareholders, including potentially SEC violations. I encourage everyone to read it for themselves(here), but below are some of the relevant takeaways:

·       Disclosed a loan from RCI to Eric. At the time of the divorce the remaining balance was $59,000. This loan does not appear to be disclosed in any SEC documents.

·       Eric had taken out a loan of $90,000 from his direct report, Ed Anakar (Director of Operations). 

·       Eric had taken out over $1.29 million of margin loans against his RCI shares.

·       Disclosed a loan from Eric to CTO Travis Reese of $6,000

·       Eric had a debt personal debt of $38,500 to Robert Axelrod.  Robert is a lawyer that does legal work for RCI.  Eric was personally borrowing from Robert while funneling RCI’s corporate business to him.

·       A plane that was listed as Eric’s property is registered to Cool Planes, LLC, which has a registered address of RCI’s headquarters. Was it owned by RCI or by Eric? Were company resources used to purchase/manage it?

·       Discloses additional details about Eric’s criminal charges for “assault of a family member” and “interference with an emergency call”.

·       Jante accuses Eric (and the Board) of delaying the signing of his new employment contract until after the divorce was finalized in 2012. The dates from RCI’s proxies validate Jante’s claims, as the board allowed his contract to expire for a period of more than 3 months:

“On July 23, 2012, we entered into a new Employment Agreement with our Chief Executive Officer and President, Eric Langan. His previous employment agreement expired on April 1, 2012.”

Interestingly, when the 2012 contract was due to expire in 2015, a new contract was put in place immediately on the day of the prior contract’s expiration. Since he was not in the middle of a divorce, there was no expiration period. Another example showing that the board puts Eric’s interests before shareholders.

“in July 24, 2015, we entered into a new Employment Agreement with our Chief Executive Officer and President, Eric Langan.  His previous employment agreement expired on July 23, 2015.”