Ex-Gearbox employee provides evidence that Pitchford diverted funds

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Randy Pitchford

Former Gearbox corporate counsel Wade Callender has filed new documents in his lawsuit against CEO Randy Pitchford, alleging that they prove Pitchford diverted Gearbox funds to a personal account.

As we reported in January, Callender launched a counter-lawsuit after Gearbox brought legal action against Callender, alleging misuse of company credit cards. Among the lurid allegations in Callender’s suit were that Pitchford had siphoned off $12 million in Borderlands bonuses from Gearbox into a personal account.

Callender’s lawyers made a new 76-page submission on June 12 which includes an amendment to the Borderlands 3 contract between Gearbox and publisher 2K Games that references the $12 million payment, along with another $3 million for Gearbox’s CFO Stephen Bahl. In the contract is a clause entitled: “Bonus for satisfaction of dedicated executive requirement.” It states that 2K Games would pay out the $15 million bonus in three $5 million instalments, conditional on hitting milestones.

However, the contract amendment makes specific reference, regarding the $15 million bonus, to Pitchford and Bahl. If the money was owed to Gearbox as an entity, Pitchford’s diversion of his share would very much look like stealing. But the specific mention of his and Bahl’s names appears to legitimise the payments. No doubt that precise point will be extensively argued in the court case.

Given that Pitchford owns 50 percent of Gearbox, the fact that he negotiated a $12 million bonus for himself rather than his company poses a few ethical questions. Game Daily spoke to attorney Richard Hoeg of The Hoeg Law Firm, who said: “If the royalty were just owed to Gearbox on the whole and then Randy diverted it, it would look very much like stealing. As an officer or director you owe a duty to protect the assets of the company. That’s usually divided into a duty of loyalty and a duty of care. Here the duty of loyalty is very much implicated, as one could argue—as they are in fact arguing—that Randy took a business opportunity directly out of the hands of the company he owes this duty towards.”

He continued: “It was likely Randy negotiating the agreement directly, so that brings up its own concerns, especially if the plan was always for Randy to receive this $12 million. In fact, if he weren’t in functional control of the company, I wouldn’t doubt that if such a provision were in an agreement of this type, that he could go to his board and CEO and say, I deserve a portion—or perhaps even all—of such bonus amount. The issue is that he is in control of the company, and I’m not sure they went through the proper corporate processes to ‘cleanse’ any such decision to divert the funds to his magic company.”

We’ll bring you further news as the lawsuit develops. And you might want to keep an eye on Gearbox’s website.