More on Barnes & Noble's response and counterclaims to the suit filed in August by former CEO Demos Parneros, who charged breach of contract and defamation and asked for severance of more than $4 million, damages and punitive damages:
Filed on Tuesday, B&N's 35-page rebuttal charged again that Parneros engaged in sexual harassment and bullied other executives but went into the most detail concerning what it called his "sabotage" of a deal to sell the company that was made public for the first time in Parneros's suit, indicating perhaps that the collapse of the deal is at the core of B&N's decision to fire Parneros under extremely hostile terms.
In B&N's telling, Parneros consistently worked against the offer and successfully destroyed it. Parneros has said that he supported the offer and that the suitor backed out after doing due diligence.
When the potential buyer, who remains unnamed, made an "indicative proposal" in early 2018 and the board agreed to pursue the offer, B&N said, Parneros "reluctantly" met with people from the potential buyer. The first instance was in February, when the potential buyer's CEO requested a meeting with Parneros, which Parneros "insisted be kept short, even though the Potential Acquiror had requested a longer meeting."
Before a second meeting at the end of March, "the Potential Acquiror made numerous requests for information to the Company. Parneros repeatedly interfered with the Company's responses to these requests by demanding that the Barnes & Noble finance team provide less detailed data to the Potential Acquiror. When one executive disagreed with Parneros and cautioned that providing a detailed response was an important step in securing an indicative proposal from the Potential Acquiror, Parneros continued to press for less detailed disclosure of information to the Potential Acquiror."
At the March meeting, B&N alleged, "Parneros did not prepare for the meeting, and he did not bring any materials with him. For most of the meeting, Parneros harshly criticized the Company. He described the Company as 'spiraling' and 'ugly,' and he even questioned his own decision to join the Company, stating: 'Why did I come here?' Parneros also attempted to paint himself as a hero by claiming that he had brought back opportunities for the Company."
At the end of the March meeting, B&N continued, the buyer's CEO "asked Parneros if he could briefly meet for a drink. Parneros declined the invitation, claiming that he already had plans. The CEO then suggested meeting for breakfast the following morning. Again, Parneros declined."
In April, the other company sent B&N "a revised indicative proposal with an increased offer price. At that time, the Potential Acquiror informed the Company that it remained committed to entering into a definitive transaction agreement on an expeditious timetable."
In May, the B&N board "asked Parneros to provide answers to a list of questions in order to assess whether to go forward with the potential transaction. At a meeting with directors, Parneros portrayed the Company and its expected future performance in a positive light and advocated that the Company forgo the potential acquisition, and instead have him continue to lead the Company."
Nevertheless, the board decided to move ahead with the offer and "expressly directed Parneros on at least two occasions to do so. Parneros appeared visibly upset with the directors' decision." B&N attributed Parneros's reaction to this reasoning on his part: "If the transaction went through, Parneros would no longer be the CEO of a standalone public company, and instead could be relegated to the position of a divisional head, or lose his job entirely."
Then, on June 18, a "critical" third meeting was attended by Parneros and other B&N executives, as well as the CEO and executives of the potential purchaser. The meeting was supposed to "last several hours and be followed by a dinner attended by both sides." B&N said that beforehand, the CEO wanted Parneros "to explain a recent downward sales trend."
The meeting "did not go well, due in large part to Parneros's disloyal conduct," B&N said, claiming that he "showed little interest" in preparations for a presentation by B&N's finance team and held no "strategy or preparation sessions with the other Barnes & Noble executives in advance of the meeting, nor did he even discuss the strategy or approach for the meeting with them. Instead, acting in furtherance of his own self-interests and against the clear mandate he had received from Riggio and the Board, through his conduct at the meeting, Parneros attempted to sabotage the potential deal entirely."
He did so by following the potential buyer's CEO's opening remarks with "a long, rambling monologue, which failed to address the issues and questions posed by the Potential Acquiror and, instead, portrayed the Company in an extremely and unduly negative light, with no realistic prospects for success. Among the many shocking and disparaging statements Parneros made during the meeting, he described the Company as an 'ugly mess' and complained that the Company had 'no talent' before he arrived."
At the same time, he "did not provide positive information concerning initiatives that the Company had made in 2018 or about the Company's expectations for growth in 2019." Parneros's behavior "stunned and horrified" the other B&N executives at the meeting, the company added.
The potential buyer "immediately and negatively reacted to Parneros's damaging characterizations of the Company. Soon after Parneros finished his speech, the Potential Acquiror abruptly cut the meeting short and cancelled the scheduled dinner. Parneros did not appear dismayed by the Potential Acquiror's decision to abandon the meeting. Instead, at the end of the meeting, Parneros declared to his colleagues and the Company's advisors that there would be no need for future meetings about a potential acquisition."
The next day, the potential buyer "informed [B&N chairman Len] Riggio that it was withdrawing its revised indicative proposal, citing the Company's failure to explain its sales decline--information that it had specifically requested at the June 18 meeting and information which the Board had expressly directed Parneros to provide to the Potential Acquiror at the meeting."
Among other demands, B&N is asking to recover "all compensation paid to Parneros, including salary, bonus payments, and other payments and benefits during the period in which he acted adversely to Barnes & Noble, lasting at least five months, totaling in excess of one million dollars."