Former Ecofibre exec alleges she was fired in retaliation for whistleblowing

Former Ecofibre exec alleges she was fired in retaliation for whistleblowing

Former Ecofibre chief scientific officer (CSO) and EOF Bio LLC president Dr Alex Capano.

The former chief operating officer and president of Ecofibre (ASX: EOF) biotech subsidiary EOF Bio has called into question the Australian hemp and medicinal cannabis group's governance, alleging in a verified complaint before a US court that she was retaliated against after invoking the company's whistleblower policy.

In her complaint to the Court of Chancery for the State of Delaware, which since this masthead's previous coverage has had more paragraphs uncensored for view, Dr Alex Capano claimed that last November she sent an email to three directors - Mark Bayliss, Robin Sheldon, and Vanessa Wallace - invoking the whistleblower policy with various allegations of misconduct against then CEO Eric Wang.

Wang is not a defendant in the case however, and in correspondence with Business News Australia he has described the allegations as "categorically false".

In the complaint, with two senior executives from the group's highest revenue-generating division Ecofibre Advanced Technologies also among the plaintiffs, Capano stated she later learned that two other leaders in the company supported her efforts and had written their own letters of support.

Ten days after she invoked the whistleblower policy, and after the company's annual general meeting, Ecofibre publicly announced that Wang had resigned.

Capano says she was and remains driven by a desire to "do right" by investors who have pumped millions of dollars into EOF Bio, its patents, and stated projects planned for clinical trials and passing regulatory thresholds for its treatments around endometriosis and ovarian cancer.

Before the holiday break in late December, Capano outlined a memo with recommended steps for this particular US subsidiary to succeed, including "rightsizing" the group's equity stake in EOF Bio "based on a legitimate valuation of its capital contributions".

She also called for reducing the Ecofibre group's authority to the appointment of one or two members to the EOF Bio board - a suggestion that was dismissed as on 26 January Capano received an e-mail from Sheldon, the group's general counsel, stating that four Ecofibre directors - Wallace, Bayliss, Bruce Robinson and Michele Anderson - had appointed themselves to the biotech's board.

Two days before that email, she had contacted Sheldon emphasising her concerns of alleged retaliation following the whistleblower complaint.

"I am writing to reiterate my prior complaints that I am being retaliated against by the company for being a whistleblower. First, I complained about Eric’s misconduct, which led to an investigation and his eventual termination from Ecofibre," she wrote.

"Second, I have complained about the misrepresentations being made to shareholders and otherwise regarding the valuation of Ecofibre’s stake in EOF Bio."

In that email, she alleged that instead of being supported, she had been "retaliated against by being cut out of decision making, had my responsibilities materially reduced for no legitimate reason, pressured to be silent about the corporate malfeasance, and otherwise retaliated against".

"I care deeply about the success of Ecofibre and EOF Bio, and believe I have been a key part to their success. I will continue to execute my responsibilities in good faith," she wrote.

It is understood that Capano contacted key Ecofibre shareholders - major backer and former chairman Barry Lambert and another high profile investor - voicing her concerns, and that not long after speaking with the latter she was fired on security grounds. 

In the verified complaint, Capano alleged Ecofibre had "conjured up" a false cause for her dismissal.

She alleged that Wallace, Ecofibre's chair, had emailed her "erroneously" asserting that Capano was not authorised to speak to shareholders.

"Wallace’s directive contravened fundamental principles of corporate governance, and EOF’s Operating Agreement, which expressly authorises communications with members, including information claimed to be confidential information," she said in the legal claim.

"At the time of the communication between Capano and Lambert that prompted Wallace to direct Capano not to speak to any 'shareholder' about any topic, Capano and Lambert were both preferred unit holders of EOF communicating exclusively about EOF. Wallace’s directive therefore lacked any reasonable basis in fact or law."

It is understood that Capano is not suing for damages. 

Ecofibre's whistleblower policy states: "Ecofibre encourages a culture of reporting actual or suspected conduct which is illegal, unacceptable or undesirable and any person who reports conduct as a whistleblower who is acting honestly, reasonably and with a genuine belief about the conduct will be supported and protected."

The company notes protections given by the Whistleblower Protection Scheme for Protected Disclosures are:

  • protection of your identity (confidentiality);
  • protection against detrimental acts or omissions, including victimisation;
  • compensation and other remedies; and
  • immunity from civil, criminal and administrative liability.

"In general terms, a Disclosable Matter means misconduct or an improper state of affairs relating to Ecofibre or its officers. It may involve a breach of law however it does not always need to involve a breach of law in order to qualify for protection," the whistleblower policy also states.

"Importantly, it is not always the case that information will qualify for protection under the Whistleblower Protection Scheme."

A spokesperson for Ecofibre says it considers the civil complaint as relying on "assertions that are factually incorrect and without foundation".

"The company is vigorously defending the litigation and has filed its motion to dismiss. At this stage, it would be inappropriate to comment further on the assertions made in the complaint," the spokesperson says.

"The complaint comes at a time Ecofibre is undergoing significant change to focus on the best opportunities to create value for shareholders and our customers. The aim is to return the company to positive operating cashflows and reduce financial risk. 

"Over recent months, this has involved difficult choices to create a simpler, more tightly focused business portfolio that is able to better leverage Ecofibre’s differentiated capabilities and market positioning. For example, in March we completed the sale of the hemp food and animal products business of Ananda Food."

When pressed to provide more elaboration as to which specific aspects of the complaint were factually incorrect, the spokesperson declined to provide further comment on the matter. 

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