J.P. Morgan Withheld Payment From Tech Client, Lawsuit Alleges

J.P. Morgan Chase & Co. allegedly withheld a $12 million payment to Good Technology Inc. last year, worsening a cash shortage that forced the mobile-security company into a sale brokered by the bank, according to newly public claims in a continuing legal dispute.

The new details allege that the bank, in its capacity as a customer of Good Technology, hastened the company's demise, even while the bank was advising it on a sale.

The allegations were unsealed Friday as part of a continuing lawsuit in Delaware court. The plaintiffs, including Good Technology employees who owned shares, accused J.P. Morgan and the company's venture capital backers of mismanagement and conflicts of interest that resulted in a $425 million sale to BlackBerry Ltd.

The plaintiffs argue that the deal, which brought J.P. Morgan $4.1 million in fees, undervalued Good Technology.

The plaintiffs, which include Good's former CEO, have previously argued that J.P. Morgan allowed Good Technology to be sold for relatively little because the bank hoped to win future business from BlackBerry.

J.P. Morgan, which had no immediate comment Monday, has previously denied the allegations, as have the venture-capital firms.

The plaintiffs' suit seeks to recover damages on behalf of Good's employees and other common shareholders, who received virtually nothing for their stock in the BlackBerry deal. Good was at one point valued at $1 billion by private investors. Its 2015 sale to BlackBerry, for less than half that, was an early sign of cracks in what was a hot market for private technology companies.

Allegations questioning bankers' intentions in deals have become more common, with plaintiffs' lawyers looking for signs that deals were swayed by conflicts of interest.

The allegations unsealed Friday highlight a different risk: what can go wrong when investment-banking business is mixed with tech spending.

In the Silicon Valley rush, many Wall Street firms have bought services from companies they hope to advise on mergers or in initial public stock offerings. Some startup founders feel that banks using their software can better promote a firm to potential acquirers or IPO investors.

J.P. Morgan was Good Technology's largest customer, having signed a $12 million contract with the company in late 2014, according to court filings.

The complaint alleges that J.P. Morgan delayed paying its bill, "accelerating the crash crunch that J.P. Morgan was supposed to address as financial adviser." The complaint didn't provide details of the contract or any billing schedule.

By 2015, Good Technology had delayed a planned IPO and was burning through cash. At a May board meeting, Ron Fior, Good's chief financial officer, "explained the impact of a delayed payment by a very large customer on the company's cash position." That customer was J.P. Morgan, according to the complaint, which was filed in September and made more fully public Friday.

In July 2015, Mr. Fior emailed Good Technology CEO Christy Wyatt a presentation showing that Good would run out of cash by August or September, depending on when J.P. Morgan made its payment, according to the complaint. Good Technology and BlackBerry announced their deal in Sept. 2015.

Write to Liz Hoffman at [e-mail]

(END) Dow Jones Newswires

October 31, 2016 18:05 ET (22:05 GMT)

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