Free Memorandum in Opposition to Motion - District Court of Connecticut - Connecticut

Case 3:01-cv-02158-WWE
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I |- . tNL, J.N B E R I N G

2637-140161

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF CONNECTICUT

DONALD WAINRIGHT, ET AL, Plaintiffs v. OSM COMMUNICATIONS, INC., ET AL., Defendants.

CASE NO. 3;01-CV-02158 (WWE)

OCTOBER 30,

2004

AFFIDAVIT OF DONALD WAINRIGHT

I, Donald Wainright, of 30 Vista Drive, Easton, Connecticut OG612 being duly sworn do hereby stale under the penalties of perjury: 1) I om over the age of eighteen and believe in the obligations of an oath. 2) I am a plaintiff in the above captioned action, which is pending in the United States District Court for the District of Connecticut. 3) I have suffered the following economic damages as to myself and my wife, a coplaintiff Janet Wainright
1) Back wages of $24,315.71,

2) Unpaid prjor bonuses and increases of $128,500.00, 3) Contractual moving losses and expenses of $41,821.30, 4) Contractual based six-month severance pay of $62,000.00, and
5) Employee benefit insurance coverage and losses associated with the defendants' willful failure to provide these contractual health benefits
4) The evidence which I have to document my damages is attached hereto.

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5) OSM owns and operates a nationwide network of programmable electronic I...E.D. signs in grocery stores throughout Ihe United Slates. The network delivers advertising and promotional messages in grocery stnroa. OSM soils advertising to manufacturers and marketers who wish to advertise their products among grocery store shoppers at the point of sale and provides grocery stores with o portion of the advertising revenue and free advertising in return for access to their premises for the placement of the advertising. 6) Until 1993, the business of OSM was conducted by an entity known as In fifnrfi Advertising. Inc. ("ISA"), which was founded in 1986 by Israel and Robert Polansky and initially funded by $500,000 provided by Israel Polansky. 7) ISA was controlled and operated by the Polanskys unlil about 1000, when Robert Polansky's activities in connection with the public offering of ISA oiock became the subject of a Securities and Exchange Commission ("SEC") investigation into fraud and record keeping vioialions. 8) As a result of the SEC investigation, it was alleged that Robert Polansky was responsible for misstating the net income of ISA in order to make it appear more profitable before the initial public offering, and directing that false contracts be prepared and provided to auditors and underwriters to conceal the fraudulent misstatement of ISA's income. In September 1996, Robert Polansky consented to the entry of a permanent injunction prohibiting him from any further violations of the anti-fraud and record keeping provisions of the Securities Act of 1933 and the Securities and Exchange Act of 1934. 9) In 1993, ISA entered into bankruptcy and its assets were acquired by an investment group that opertated as Electronic Marketing and Retail Communication ("EMARC"). The business was subsequently acquired by Valassis Communications Inc. ("Valassis"), which operated the business as Valassis In-Slora Marketing, Inc. ("VISM") until 1996, when the business wa3 acquired by OSM. The principals of OSM are, in fact, the some individuals, principally Israel and Robert Polansky, who founded ISA.

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10)As a condition of its acquisition of VISM, OSM was required to obtain R $250,000 line of credit to insure lhat OSM possessed adequate working capital In integrate VISM into OSM and continue its operations. 11 )At the closing of tho salo, OSM provided Valassis with a letter from an entity called Ameristar Capital Corporation indicating (hat it would make available to OSM a credit line of up to $250,000. In fact, Arnerislar Capital Corporation's letterhead shows that it was located at 444 Madison Avenue, Suite 303 - the very same office building and suite as OSM. Upon information and belief, the line of credit from Ameristar Capital Corporation was a sham and, at the time of the acquisition of VISM, OSM lacked adequate capital to operate VISM and meet its obligations lo its employees and vendors. 12)As part of the acquisition, OSM also acquired the right to offer employment to key pcraonncl of Valassis, including plaintiff Donald Wainright, who at the time of the acquisition was MIS Group Leader. I had originally joined Valassis in 1993 as part of the EMARC acquisition. 13)Thus, following the acquisition of VISM by OSM, Robert Polansky approached me to offer me employment with OSM. I expressed concern about OSM's financial stability and ability to meet its obligations should he accept employment with OSM. I had accepted a position with Valassis Communications' MIS department, and because of his performance in the industry, I had good chances of finding employment elsewhere, with benefits and pay comparable to or better than he had received at OSM. 14)ln response to my concerns about OSM's ability to meet its obligations, and with the intent of inducing me to enter inlo an employment contract with OSM, Robert Polansky informed me that, as a condition of the sale of VISM, OSM was required to obtain a $250,000 line of credit to insure that OSM could mcot its obligations to vendors and employees, In addition, Robert Polansky informed me that OSM had received a contract from NBC to fund OSM's operations I was unaware at this time that the line of credit was a sham and

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relied upon Robert Polansky's representations concerning the existence of Ihis lino nf credit and NEC's funding in making his decision to accept employment from OSM. 15)Robert Polansky further stated to me that his father, Israel, possessed sufficicnl financial resources to back OSM should OSM, in the long term, be unable to raise sufficient capital from other sources. Robert Pnlansky further slated to me that Israel Polansky was committed to providing such backing to OSM should il hn necessary. In particular, Robert Polansky represented thai Israel Potansky was prepared to utilize his personal financial resources to insure that OSM's obligations to me for wages, benefits, and reimbursement for expenses would be met. 1G)ln reliance upon the promises of Israel and Robert Polansky, I entered into an employment agreement with OSM on October 1, 1996, (Ihc "Employment Agreement"). A copy of the Employment Agreement is annexed hereto as Exhibit A. Thn Employment Agreement provided that I would be Vice President-Operations for OSM and would receive a salary of $100.000 per annum and a guaranteed 25% bonus at the end of his first year of employment for a total annual compensation in the first year of $125,000.00. In addition, the Employment Agreement provided that I would receive either a comprehensive health plan or reimbursement for the costs incurred by myself in retaining the health plan from his previous employment. 17)Israel and Robert Polansky had no intention of honoring their promises to me when they were made, as I later learned At the time OSM was established, and at all limes thereafter, it was the intent and purpose of Israel and Robert Polansky to cither raise capita! from others or to keep OSM as thinly capitalized as possible, so that the Polansky's could personally reap the benefit of OSM's fraudulent success, while using OSM's corporate form to deny creditors recourse should OSM fail to prosper. Thus, when necessary, Israel Polansky. through personal funds or the funds of family members which

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he controlled, would provide enough money for OSM to slay in operation, but Israel Polansky, in direct contravention of his and his son's promises to Mr. Wainright, refused to provide sufficient funds for OSM to moot its obligations to employees such as myself. 18)Sfarting Junn 1, 1997. my salary was increased by OSM to $124,00.00 for my first year of employment - a fact that is reflected in promotional materials prepared and distributed by OSM In potential investors. A nnpy of the relevant portion of OSM's promotional materials is annexed hereto as Exhibit B. In addition, OSM agreed that I would be entitled to his bonus of 25% of my salary on November 4, 1997, as provided for in the Employment Agreement. 10)ln reliance on the representations of Israel and Robert Polansky concerning OSM's access to line of credit and their promises to fund OSM, if necessary, to enable it to meet its obligations to myself, I diligently performed the work under the Employment contract. I was responsible for operations, product development, and working with potential investors. ! reported directly to OSM's New York office. 20)During 1997. I was told on numerous occasions, by both Israel and Robert Polansky, that deals had been finalized with potential investors in OSM that would raise the capital necessary for OSM to meet its obligations, including the unpaid waqes, benefits and reimbursements that were owed to Mr. Wainrkjht, During this period, I also received repeated assurances from Israel and Robert Polansky that, if capital coufd not be raised from NEC or some other investment deal, the Polanskys themselves would personally insure that I received thn wages, bnnnfits and reimbursements dun from OSM. 21)lnfact, an investment deal was never secured by the Polanskys in order to inject capital into OSM. Instead, OSM, upon information and belief, was funded entirely and surreptitiously through the resources of the Polansky family under lh« personal control of Israel Polansky. Although OSM is

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26)ln November 2000, I was compelled to seek other employment, which was obtained on January 29, 2001. 27)Thereafter, I commenced discussions with OSM and the Polanskys to obtain payment of (he amounts still due and owing to him for wages, benefils and reimbursable expenses- Despite due demand, OSM and the Polanskys have refused lo honor their obligations to me. 28)l am unaware of any liability insurance that Defendant has available to satisfy any judgment.
20)Gontrary to Israel Pnlansky's affidavit all nf his statements as follows are facts that are directly in dispute:

1) Israel states that "Olher than my investment in the company, I had no rolo of any kind in the operation of OSM, although I was a director of the company, because 1 was told that under Delaware Law [hot two directors were required, My son Robert Polansky was the other director." He_liad. direct control overjtiemoneY^srd expenditures of QSMpnd investors and participated in the tax benefits associated with OSM.
2) "Robert Polansky was the President and in charge of all operations". Israel had direct control over the money and expenditures of OSM and assisted with seeking investors and participated in the\tax_ benefits associated with OSM.

3) "My investment in OSM provided funds for OSM to function while if sought investment capital." Israel continued to fund OSM as late as May of 2004 by his own admission.

4) "OSM never had the capital to set up the telecommunications network," Israel intcntfonally'mislead myselfand future or DotentMinvestors if he actually believes this.
5) "In 1909,1 was reaching tho point that I could make no further inveslrnents without jeopardizing the savings necessary to meet my needs and those of my

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wife, and in 2(100 I stopped making investments altogether." This_is indirect contradiction to his investment in May of 2004 as he staled [ri_his deposition. 6) "At the same time, my son continued to seek venture capital to sustain the company. He came close to success but never achieved it and as a result of this and because the company's software was missing or disabled, the company ceased all operations at the end of 2000. "Israel participated in the frauc/ and deceit o[_mysejfand investors by seeking money for a company he_knewwas a sham 7) "From lime to time I met with potential investors who wanied to know who their capital partner would be." Ttiis_statement shows tliat Israel did participfitejn the company's attempts to infusocash andsince the efforts failed because it was nota real company, out rather a shell to fund the personajaffairs of Robert, Anne and his own tax benefits, 8) "The company is no longer operational but does retain virtually all of (he assets il anqi jirnri in 109fi except, I am tnlri hy Robert Polansky. mat certain essential, proprietary operating software was taken or made inaccessible by plaintiffs Donald Wainright and Deborah Russo-Willinms." / have not made any software fogcm:gs/E>te nor token any software, from the company. 9) "At no time did I ever guarantee to either the plaintiffs or anyone else that I would fund the company so that plaintiffs' salaries or benefits could be paid. I never made any representations to anyone to that effect. "This is a straight out misrepresentation and tic by the dcfcndantJsract_Polansl
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1 'l)"l nevnr rlirncted, controlled or otherwise influenced the operations of OSM." ferae/ has already ste/grf fftaf he gave money to, met with investors and helped witli OSM finfj jfs funrifaJRinc) gonl$. Israel has also participated in running the company ond derived benefits from OSM's tax losses, a// to his benefitand_now h*L 's trying to hide from his responsibilities that inure to him from running a sham corporqtiori

Signed under pains and penalties of perjury, this ^j_ day of October 2004. Donald Wainrighl

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ID :

APR 27 '04

14:43 No.003 P.01

OSAA
313-432-2864

Communications. Inc.
fax.

£12-308-6551

To: Don Wainright Front Bob Polaneky Re; Employment Contract Date: July 23, 1996

This ie to forward the following terms of employment beginninq
September 3, 1996. Base Salary: $100,000 Bonusa 25* guaranteed bonus Denefitsi Comprehensive Medical coverage plus inmsurance (dental too). * *

StocK Options: To participate in the Company's stock option program other Parameters!

1. Moving expenses.
2. Bonus to be expanded to cover short fall in Bale of house vs. purchase price (Polonehy approval needed)
3. Car to toe included if bus in CBS ie in New York City not to exceed $500/month.

Timing: September 10, 1996

444 Madison Rvofiuti

*

Sulifi ^01

*

New Voih, Netu Vorfo

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Year 2

Year 3

Year 4

YtarS ,!

Year 6'.

Year?

Siitiry: Bob I'lilansky Isrnul I', > busty Caniii-n IKMIL-CFO
Al JiHii-s [roliiil s;i · AJniiu (sckT iHMkl

S130,ouo · 50.I1HO
73.000 53.0110 1 12,500 S562,50ll

154,300 51,300 159,133

163,909 54,636 · 36,273:
81.9S3 131.127 60,100 112,932. 561 4,659

53.04S
77,230 1 23,600 75,368 127.308 36,650 38,330 JJ9.rU! SS79375 5596,756

173,891 37.964 179,108 59,703 86.946 139.1.13 63,760 130A18 S6J2.092 89,354 143 .286 63,673 134.331 5671,654

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247.6 ii,:'
521,180

113.927 28,932 1 19.403 37,964 111.290 29,831 39,703 17,389 253,040 1 14,629 17.911 262.692

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551,920

569,507
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139,1)3 98.538 143.286 69,556 101,494 73353 71.643
77.613 382,560

330,001)

394,037

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