The Herald, Sharon, Pa.

March 23, 2014

Judge’s action upholds founder’s firing

By Joe Pinchot
Herald Staff Writer

WHEATLAND — A local judge recently dissolved a temporary injunction he had imposed to block the apparent hostile takeover of a Wheatland company and unfroze a company bank account.

However, Mercer County Common Pleas Court Judge Robert G. Yeatts made clear that he was not passing judgment on the maneuvering that has occurred between the factions competing for control of Paramount Games, which prints small games of chance tickets and event tickets.

Yeatts said he “is in no way implying, suggesting or in any way ruling that the defendant’s actions in this matter are proper or that this court has in any way ruled that either party is the proper party in control of the corporation.”

However, the action upholds the firing of Paramount Games founder Paul J. Swartz as far as day-to-day operations are concerned.

Representatives for the parties either declined to comment or did not return telephone calls.

Swartz was the sole director of the company due to the resignations of other board members until earlier this year, when he appointed three others.

At around the same time, shareholders led by Douglas S. Dohner and Frank T. Taverrite circulated a document to other shareholders to create a five-member board.

The document “was confusing, at best” Yeatts said, because it acknowledged Swartz as a board member but listed five nominees to the board, none of them being the founder.

“Paul Swartz took the position that the defendants were attempting to remove him from the board,” Yeatts said in a March 14 memorandum that followed two days’ of testimony brought on by the Swartz-led board’s suit against the Dohner-Taverrite board. “The defendants maintain that that was never their intention.”

The Dohner-Taverrite faction elected a new board and fired Swartz as president and chief executive officer, replacing him with Dohner. It also axed Swartz’s brother, Michael, who held an unspecified position with the company.

The Swartz-led group asked for the emergency injunction and, upon Yeatts issuing it, notified Paramount’s banks to freeze corporate accounts.

“Since then, vendors have not been paid and the corporation’s payment obligation on (a) loan ... has not been paid,” Yeatts said. “Employees were paid because Douglas Dohner loaned the company his own personal funds.”

The court actions filed in Mercer County and Delaware, where Paramount is incorporated, have left the employees of the company “in a state of confusion,” the judge said.

Dohner, of Annville, Pa., and Swartz, of Las Vegas, have known each other since the late ’90s, when a company Dohner owned, and has since sold, bought product from Paramount.

Dohner became Paramount’s sales director, and eventually found fault with Swartz’s financial dealings within the company. He alleged Swartz received a loan guarantee fee on a loan taken out by the company; took $25,000 from the company in 2012, a year in which it lost money; took advanced dividends in the amount of $30,000, which morphed into a loan Swartz never paid back because dividends were never issued; and used money from his company expense account for a strip club.

Swartz, in turn, testified that Dohner has “deceived and manipulated  company operations” by buying unnecessary supplies, giving raises that were unearned and the company could not afford and “caused cash-flow issues for the corporation,” the judge said.

“It was Swartz’s opinion that if Dohner remained in charge of the corporation, the corporation would lose key customers, lose vital employees and would not properly oversee the employees,” the judge said.

In dissolving the injunction, Yeatts said he agreed with the Dohner-Taverrite group that Swartz remains a board member, and the Swartz-led group has not shown that an injunction is necessary “to prevent immediate and irreparable harm that cannot be adequately compensated by damages.”