Advisor claims 20% stake in company w/o agreement, does he have a case?

He’s some famous has-been (exited in the 90s, blew all his cash and didn’t make enough) in a hot hype field and zero’ed in on us. We were introduced at a conference, and met him several times since we’re in the same city. We gave him some consulting work to do as a trial, and he was terrible (didn’t turn up, missed meetings etc)

Now he’s claiming that we should give him 20% stake in our company and refuses to leave us alone. Keeps alternating between threatening to sue and reconciliating.

Does he have a case at all? We never agreed to this ridiculousness, and he has no documents in writing. He also won’t leave us alone and started spamming us on person facebook, messenger etc

  • I’ve met (and indeed employed) people like him in the past. Did you have any documents (even emails or SMS/Skype messages) relating to any work you asked him to do or any compensation in return? Was his consulting work paid?

    If you’ve not agreed anything then there is no case – otherwise any man off the street could come up to you one day, discuss something with you, and then claim some proportion of your business. I even have clients that do this today.

    What have you tried to get him off your case? Maybe try a light threat of invoicing him for lost productivity while he’s wasting your time your time. You might also want to get a lawyer to issue a cease and desist notice. Just sure you only escalate this enough to frighten him off without creating too much of a headache for yourself. Also, make it clear to others in your company that he has – or ever had – any involvement.

    Just stay firm. He isn’t entitled to anything unless you’ve agreed it.

    • Yes his consulting work was paid, and he was issued a 1099. The issue is that he never signed a formal consulting agreement (he kept delaying and delaying signing the statement of work).

      However he was issued an agreement several times and now that his work period is ended he keeps countering it to become an advisor or fulltime employee etc He doesn’t seem to understand that the period has ended and no amount of badgering will net him another position

      The others in the company are aware. He hasn’t shown up at all except once in 3 months, so most of them don’t recognize him anyway

      • Well I guess if there is nothing signed then no agreement was entered into and he can keep pestering all he likes but that won’t change the facts. Just make sure his pestering doesn’t make you start doubting or reconsidering your position. Sounds like if you give him an inch he will take a mile.

        • Thanks! Yes he keeps pestering and threatening us. One moment it’s “I’m sure we can work this out with me as advisor” and next moment it’s “I’m going to sue for gross misrepresentation and fraud”

          I don’t see how he could be entitled to 20% (!) or any equity at all, or why it would he would claim fraud. We have never promised him anything, or signed any agreements beyond a simple NDA. It’s just difficult to deal with since he messages us on both public and personal contacts.

          My only concern is that he makes a huge fuss out of this because of his “fame” (he contributes articles to a tech magazine). He’s done some shady shit that’s absolutely unprofessional though, and we have plenty of screencaps.

          • Haha, nice… keep some backups of those screencaps just in case! Maybe you should respond to his public messages stating there is no work for him. Perhaps you could pester him about something in return, people always go away when you ask to borrow some money 😀

            He’ll go away in time, just don’t let him wear you down until then!

      • Is he considered a work-for-hire? Check the laws in your state. WfH’s are typically employees not founders. Since you paid him, maybe he is a work for hire.

  • Do you think he will turn into a reasonable person after you give in to his demands?

    Name and shame this tool.

  • I think you need to figure out three things:

    Is he considered a “work for hire”? Check the laws in your state.
    Does he have any intellectual property rights? For example, does he have copyright on any code he wrote or any other ideas, or did he assign his rights to the company? If work for hire, you should own the IP. Check the laws in your state.
    Verbal agreements (torts) are still binding contracts. What had been agreed to? And what kind of paper trail is there? In some states, agreements don’t have to be signed. See VA, operating agreements.

    I went through something similar. Spent 1.5 hrs talking to a lawyer to figure out my rights. Worth every penny.

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