“Competition in this market is keen”Don Day | May 15, 2007
Today’s Idaho Statesman simply scratched the surface of a long and complicated lawsuit laid forth by Citadel Broadcasting. Idaho Radio News has obtained a copy of the lawsuit, and response to it by Peak Broadcasting.
Citadel spins a rich narrative, that alleges Peak CEO Todd Lawley set forth a grand plan to defraud Citadel, and raid many top employees. It’s a fascinating look inside the two radio companies, and their business dealings.
In setting up the story, Citadel notes that “competition in this market is keen,” referring to the Boise metro area radio industry.
Citadel notes that Lawley was the third highest ranking executive in the company, inferior only to the company’s CEO Farid Suleman and COO Judith Ellis. The company says Lawley had access to “virtually all of Citadel Broadcasting’s confidential, proprietary and trade secret data.”
In July of 2006, four months before he left the company, Citadel alleges Lawley tried to recruit company regional president Kevin LeGrett, but that LeGrett declined the offer.
Citadel says that it too made a bid for CBS Radio’s cluster of stations in Fresno, CA. The company says Lawley took part in discussions relating to the negotiations between Citadel and CBSR. The suit further alleges Lawley sought out Suleman and “probed (him) for information relating to Citadel Broadcasting’s bid for the Fresno cluster, including but not limited to the ‘book’ provided by CBS to Citadel Broadcasting in connection with the sale of the Fresno cluster.”
The book is the bundle of documents provided by a seller to interested parties.
Lawley left Citadel on November 13, 2006 – and a week later – joined his newly formed company “Peak Broadcasting.” Idaho Radio News has confirmed that Peak Broadcasting LLC was formally incorporated in the State of Delaware on November 9, 2006 – the announcement by CBSR of its Fresno sale to Peak came on November 16, 2006. Joe Mauk of Fresno, CA purchased the domain name “peakbroadcasting.com” on November 8, 2006. Mauk is listed as chief engineer for the Fresno Cluster of stations now owned by Peak Broadcasting.
That timeline again:
November 8, 2006 – Mauk purchases PeakBroadcasting.com
November 9, 2006 – Lawley and his agents incorporate Peak Broadcasting LLC
November 13, 2006 – Lawley resigns from Citadel
November 16, 2006 – Peak announces deal to buy CBSR’s Fresno properties
Fast forward to March of this year: Citadel says Lawley made a presentation to potential investors in Peak Broadcasting. Citadel says Lawley openly showed the group “proprietary, confidential and and trade secret information,” that came from his time at Citadel. The suit alleges Lawley did not try to hide the fact that the data came from Citadel.
The suits says Kevin Godwin notified the company that he would resign effective immediately on March 16, 2007. That notification was made to COO Ellis, who had plans to leave the country for vacation the next day. The suit says Ellis asked Godwin to stay on for an extra “week or so” to help the transition. Citadel says Godwin e-mailed Ellis the next day and noted that his resignation was effective immediately.
The suit says Godwin tried to delete data on his company-issued laptop. The suit says he “attempted to do so,” leaving some ambiguity over the efficacy of that attempt (simply deleting files on a Windows system doesn’t make them go away – it just deletes the “pointer” to the file. Disk recovery software would allow the data to be retrieved in many cases.)
Citadel said that it became concerned that Peak would try to “raid Citadel Broadcasting’s employees.” The company scrambled to lock down Owens and Sutton. It offered Owens a 29% pay bump, and Sutton a 36% increase. Citadel says Owens and Sutton said they were a “package deal.” Citadel says it reached a deal – but on Sunday March 18, the company told Ellis that they were resigning.
I first heard of the departures at 4:05pm that day, with several e-mails echoing the initial tip throughout the evening. I sat on the information pending official confirmation.
There has been lots of confusion concerning Rick Stewart/Sutherlin. The suit says Stewart was hired by Citadel on February 26h, just five days before this site broke news of the Peak Broadcasting purchase of Clear Channel’s Boise stations. Citadel says Stewart was set to start work as KQFC program director on March 19th, but instead began work on March 12th. In that time, he purchased a jingle package for KQFC, and looked at proprietary information regarding KQFC, according to the suit. The suit also says he flew to Fresno during that time to meet in secret with CEO Lawley.
February 26 – Owens hires Stewart as KQFC PD
March 3 – Word of Peak’s CC purchase released
March 12 – Stewart starts work
March 15 – Godwin resigns Citadel post
March 18 – Sutton and Owens resign
March 19 – Stewart fails to show up for duty at Citadel
On March 22nd, Lawely held an all staff meeting with the employees of Clear Channel Boise. Peak did not take control of the stations until April 1. Sources tell me that Lawley did not mention Godwin, Sutton or Owens by name.
Sources also tell me that Lawley brought up competitor Citadel during the meeting, specifically saying that Citadel would have to write a ‘very very large check’ if it wanted to hold on to the rights to Boise State University athletics, which are held by KBOI-AM.
Citadel alleges the following against Peak Broadcasting, Todd Lawley, Mike Owens, Mike Sutton, Rick Sutherlin and Kevin Godwin:
- Civil Conspiracy – Computer Crime
- Violation of Idaho Trade Secrets Act
- Unfair Competition
- Imposition of a Constructive Trust Upon Illegal Proceeds and Profits
- Trespass to Chattells/Conversion
- Breach of Fiduciary Duty – Loyalty (against Lawley, Owens, Sutton, Sutherlin and Godwin only)
- Breach of Fiduciary Duty – Confidentially (against Lawley, Owens, Sutton, Sutherlin and Godwin only)
- Violation of Computer Fraud and Abuse Act (against Godwin and Owens)
COMING: Summary of Peak’s response to the suit.