Public Canadian dealership group AutoCanada Inc. on Wednesday launched a $328-million lawsuit against its founder and former CEO, Patrick Priestner, claiming he acted against the interests of the company when he acquired dealerships through private companies.
Priestner “breached his fiduciary and other duties to AutoCanada by appropriating corporate opportunities of AutoCanada to acquire dealerships privately through Canada One Auto Group Ltd. and his other holding companies,” the company alleged in a Wednesday news release.
AutoCanada, the country’s only publicly trade auto group, also is seeking $1.3 million in punitive damages “on account of Priestner’s high-handed, malicious, arbitrary and highly reprehensible conduct.”
None of these allegations have been proven in court.
Priestner founded AutoCanada in 2006 and was its CEO until 2014. He was then executive chairman until May 2016 and remained in an advisory role until 2017. At issue are several stores Priestner acquired while at AutoCanada. During his tenure, he added several stores that AutoCanada was prohibited from owning to the private Canada One group. Several automakers prohibit public ownership of their stores.
In its statement of claim filed Wednesday in the Ontario Superior Court of Justice, AutoCanada said it seeks damages of $328 million for “breach of contract, fraudulent misrepresentation and/or negligent misrepresentation.” It also claims a declaration that it “holds an option to purchase all dealerships acquired by Priestner or the Priestner entities during his tenure at AutoCanada,” among other claims.
Priestner acquired or obtained controlling interests in 25 dealerships during his tenure at AutoCanada, according to the company.
In a statement, Priestner vowed to fight the legal action.
“The claims now put forward by AutoCanada are absurd, and nothing more than a desperate attempt to distract from the board and management’s failure to create value by trying to misappropriate the dealerships that I was expressly permitted to purchase,” he said. “I look forward to presenting our response and bringing to light this leadership team’s issues, for shareholders, dealers and partners to fully appreciate.”
Priestner is CEO of Canada One, which owns 20 stores in Alberta, British Columbia, Manitoba and Ontario, according to its website.
AutoCanada’s board permitted Priestner, through Canada One and other holding companies, to buy dealerships of brands AutoCanada could not own, including General Motors, Ford, Toyota and Honda stores. AutoCanada said it and Priestner agreed that it would receive an option to purchase those stores when an automaker allowed public ownership of its dealerships.
Before GM Canada’s decision in 2017 to allow public ownership of its stores, Priestner acquired nine GM stores that AutoCanada had a stake in. After GM’s decision to allow full public ownership, AutoCanada reached a deal with Priestner to assume control of five of those stores while selling its stakes in the other four.
AutoCanada alleges Priestner made “intentionally false or misleading and fraudulent” claims about those GM stores. The company alleges that Priestner told AutoCanada’s board and management that GM Canada required that AutoCanada buy out Priestner’s stake in five stores while selling its stake in the other four. That was not true, according to AutoCanada.
“Rather, the division of the dealerships… was engineered by Priestner in breach of his duties to AutoCanada as former CEO and Chairman of the Board,” the claim reads. “Had AutoCanada known that it was Priestner that engineered the [GM store] split, the transaction would not have been approved as structured and AutoCanada would have received all of the [GM] dealerships or a more favourable decision than the [GM store] split, or AutoCanada would not have proceeded with the transaction or would have sought to proceed with an alternative transaction.”
The company also alleges Priestner of providing “false, misleading or insufficient” information on the acquisitions of several Ford, Toyota and Lexus stores.
“Instead of actively seeking OEMs to change, Priestner used and misrepresented existing OEM policies or positions to the board so as to justify the expansion of his private dealership network for his own personal gain,” AutoCanada alleged.
AutoCanada Executive Chairman Paul Antony declined to comment. A spokesman for Priestner also declined to comment.
AutoCanada owns 68 dealerships in Canada and the United States.
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