Scuderi engine investors want answers as lawsuit against West Springfield company continues
Jim Kinney | jkinney@repub.com By Jim Kinney | jkinney@repub.com
December 03, 2015 at 9:10 AM
SPRINGFIELD — Investors in the Scuderi Group's plan to bring the Scuderi engine to market who are now suing the company have questions for Scuderi management, and they are only getting some of those questions answered, their attorney told a federal judge on Wednesday.
Thomas G. Shapiro, lawyer for the plaintiffs, told U.S. District Court Judge Michael A. Ponsor on Wednesday during a hearing at the federal courthouse in Springfield that the defendant is not providing all requested information. Shapiro represents disgruntled stockholder Paul Fournier of Granby.
Plaintiffs contend the West Springfield company's stock offering was improper.
Scuderi attorney James M. Donvan told Ponsor Scuderi is working to settle the investor lawsuit.
Neither Shapiro, of the Boston firm Shapiro, Haber & Urmy, nor Donovan, of the Leominster firm Bovenzi and Donovan, would comment following the hearing.
The late Carmelo J. Scuderi patented his version of a split-cycle engine in 2001, about a year before his death at age 77.
Scuderi's design links two cylinders: one for intake and compression and one for power and exhaust. In a traditional gas engine, each cylinder goes through four strokes: intake, compression, power and exhaust.
The two cylinders in the Scuderi design are connected with a crossover passage through which the fuel/air mixture moves from the compression cylinder to the power cylinder. The fuel mix is ignited as the second cylinder begins its downward stroke. This, in theory, saves energy compared with a traditional four-stroke engine.
Scuderi's children established the Scuderi Group in 2002 to bring their father's design to market, build prototype engines, test them and get big motor manufacturers interested.
The Scuderi Group is also marketing the design as a way to store energy.
But thus far the Scuderi Group has not been able to bring the engine to market.
In March, Hino Motors, a subsidiary of Toyota, sued the Scuderi Group for $150,000, money Hino invested in a Scuderi research project that never happened. Hino and Scuderi settled that suit in October.
In court on Wednesday, Ponsor asked for a status update from attorneys on both sides the case by Jan. 4. Ponsor said he expects them to continue the legal discovery process through the spring. Discovery is the compulsory disclosure of facts by parties being sued and defending in a case.
The next hearing might be scheduled for June or so.
Fournier has said in court papers that he purchased preferred units in Scuderi Group between March 2006 and March 2011.
In 2013, Fournier sued the Scuderi Group, alleging that the company raised $80 million from investors and used the money to pay family members as executives. The Fournier suit is now a class action lawsuit, meaning he represents a larger group of Scuderi investors.
His suit followed Scuderi's settlement of similar charges brought by the U.S. Securities and Exchange Commission.
In the SEC case, company President Salvatore C. Scuderi settled by agreeing to pay a $100,000 civil penalty to settle the SEC case.
In his suit, Fournier repeated findings released by the SEC, including that Scuderi used at least $3.2 million of investors' money to benefit the Scuderi family.
The detailed allegations released by the SEC and repeated by Fournier are:
Scuderi family members who were Scuderi Group employees received $2.9 million in salaries from 2008 to 2011, though the company had not generated any revenue between 2008 and 2011.
Family members received $1.6 million mostly in ad hoc bonuses to cover personal expenses.
The SEC said in 2013 that from 2008 to 2011, Salvatore Scuderi also made $330,000 in payments to his mother, the widow of Carmelo, and $240,000 to one of his brothers. The Scuderi group also made $500,000 in loans to Scuderi family members for which no records are kept.
The Securities and Exchange Commission also found that the company spent $230,000 in estate and trust planning expenses for Scuderi family members.
The Scuderi group made $500,000 in loans to Scuderi family members for which no records are kept.
The Scuderi Group loaned $605,000 for premiums toward insurance policies for Scuderi family members. The policies were then canceled at a loss.
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