Following-up on recent developments with MMRGlobal, including its recent purchase agreement with Kodak and ongoing developments with its biotechnology assets, a story came forth that was simply to compelling to let go untold in greater depth.
The fact is that Mr. Lorsch is back in the news and advocating for MMRGlobal shareholders in the courthouse as MyMedicalRecords.com, Inc. (MMRGlobal’s operating subsidiary) filed a lawsuit on Friday against Taylor Ford Armstrong, her soon-to-be ex-husband, Russell Lynn Armstrong, and Armstrong’s Venture Capital firm, Nuway Digital Systems, Inc. The complaint for damages alleges a breach of contract, misappropriation of funds and overall failure to demonstrate fiduciary responsibility by the Armstrongs pertaining to MyMedicalRecords.com and MMRGlobal shareholders. Per the usual, Lorsch is wearing many hats as CEO of MMRGlobal, once again acting as “supercop” to protect shareholder value. This latest Lorsch initiative showcases his tenacity to build corporate value in much the same manner as his legal battle with the Lymphoma Research Foundation last year to secure the Company’s rights to valuable tissue samples that has added millions of dollars of value to MMRGlobal.
First and foremost, some background must be in place in order to grasp some basic understanding of the individuals involved in the lawsuit. Taylor Armstrong (also known as “Taylor Ford” and “Shana Hughes”, but we’ll get to that in a moment) has found a claim to fame through BravoTV’s prime time reality television series “The Real Housewives of Beverly Hills.” A quick look into the life of Armstrong shows a clear-cut goal of wealth and the Hollywood lifestyle. Name changes are pretty common in the entertainment industry, so the shift from her Tulsa, Oklahoma-raised name of Shana Hughes is no real issue, but the switch to the last name of “Ford” is littered with undertones.
The common consensus is that the diva wanted to appear to come from a big money background and the name was used to imply that she was part of the Ford Motor Company family.
Quotes from the TV show such as “My husband is a venture capitalist and he’s richer than Texas” don’t leave much room for imagination about how Taylor feels about money and how proud she is to have it (or at least appear to have it). From a business standpoint, Ms. Armstrong holds herself out to be a partner in Patchi Chocolate USA, a founding shareholder of FamilyFilter.com, and Director of Crescent Financial Partners, Inc.
Russell Armstrong’s background is not without successes, but the positive is unfortunately clouded by shady dealings that have landed the man in trouble of many shapes and forms including lawsuits and bankruptcy. On the whole, Armstrong is widely-regarded as an incredible businessman with many high-profile associates. But…actions in 2000 left Russell being named in a lawsuit for fraudulent misrepresentations when he was the largest shareholder in Sunburst Acquisitions III, Inc. and President and Senior Managing Partner of Century Financial Partners, Inc. A 2003 lawsuit was filed against Armstrong (as well as other defendants) claiming securities fraud, breach of fiduciary duty and unfair business practices amongst other allegations. Segueing to current days, Russell recently ran a company called Nuway Digital Systems, Inc. and sports a Capital Venturist title at Century Financial Partners with claims of raising billions for upstart companies. Not that it is really pertinent to the situation, but further due diligence on the defendants shows that Russell and Taylor are currently in the midst of a divorce.
So how does this all impact Bob Lorsch and MyMedicalRecords.com? Russell Armstrong approached Lorsch with the idea of going into the eHealth business which resulted in him paying for Lorsch and his management team building a personal health records website when they met more than five years ago. Agreeing that electronic medical records – and in particular personal health records – were going to represent a strong trend shift in coming years and represented a significant business opportunity, Lorsch and Armstrong began building MyMedicalRecords.com with Nuway Digital Systems, Inc. holding the controlling interest and The RHL Group, Inc. as the second largest shareholder. Armstrong and his business set out on a course to raise capital for the fledgling company and also were compensated for consultation services. Moreover, Russell accumulated many options for personal services to buy additional shares of MyMedicalRecords.com in consideration for his duties serving as a consultant and board member for privately-held company. Apropos, it is extremely important to recognize that MyMedicalRecords.com, Inc. was a privately–held firm at this time and not at all to be confused with MMRGlobal which started after the reverse merger with Favrille in 2009. Although the same name is involved (MyMedicalRecords.com), all of these dealings transpired when the company was privately-held and before MMRGlobal existed. As the story goes, Armstrong was removed from the private Company well before the MMRGlobal we know today began as a public entity.
What soon followed was what appears to be Armstrong’s modus operandi for getting himself into trouble. Nuway, Taylor and associates, embarked on a path of self-dealing at the expense of the non-public MyMedicalRecords.com. MyMedicalRecords.com contends that Taylor contributed to the plan to sell shares of Nuway (which would eventually be converted to shares of MMRF) through, in part, the use of the prowess of the “Ford” name to imply that her family members were major investors in MMRGlobal. Total collections from the practices tallied more than $1 million, of which the Armstrong-controlled MyMedicalRecords.com did not receive a penny. Where did the money go? It is alleged (with portions of the allegation proven) to have been spent on the Armstrong’s lavish lifestyle including redecorating their mansion and a business endeavor involving a restaurant with Eva Longoria. In plain speak (if the allegations are true), the Armstrongs were inappropriately raising the capital and then funneling it into their own life unbeknownst to Bob Lorsch, MMRGlobal and certainly the people making the investment.
Upon learning what was going on behind the scenes in early 2007, MyMedicalRecords.com stepped-in immediately and ordered a special audit committee to conduct a thorough investigation of the activities.
Ultimately, MyMedicalRecords.com requested that Russell, Taylor and Nuway enter into an agreement resolving all the claims being brought forth; which they did. The agreement was very specific about disclosing all the names of people who gave money to the defendants to fill their desire to invest in the company now MMRGlobal – but did not receive their shares – so that Lorsch could right the situation. Additionally, Nuway and the Armstrongs returned 100% of all holdings and considerations in MyMedicalRecords.com, paid $250,000 to MMRGlobal and were completely removed from any position or association with private MyMedicalRecords.com.
Equally important, the settlement agreement provided a clause which made provisions for liquidated damages should more people come forth in the future with provable claims of an investment for which they never received a stake in MMRGlobal. Specific dollar figures of $1 million for the first breach and $250,000 for each additional breach was agreed to by the Armstrongs. The settlement agreement was signed by all parties under guidance of their respective counsel, including Beverly Hills Housewife Taylor Armstrong.
In typical fashion, Lorsch has taken a situation and turned it in favor of investors. By removing Armstrong and rescinding his holdings, the investors were given the shares that they were properly due with shares left to spare. The excess shares were returned to the Company treasury and the balance sheet was expanded with the payment from Armstrong.
Of course, the question of “How did you get involved with Russell Armstrong?” certainly was one of the first we asked Mr. Lorsch upon learning a bit more about Armstrong’s past. It is, most likely, the question on the mind of anyone reading this article. Bob was very candid that he did not know a great deal about Russell at that time and about the high recommendations that were given to him regarding Russell as well as many of the accolades Armstrong achieved throughout his business career.
Moreover, after discussing what it would take to get the business model in action, Armstrong provided nearly one million dollars in funding, which further validated Nuway’s abilities. “I don’t think anyone could have foreseen that circumstance,” commented Lorsch. “Most importantly, as soon as it was discovered, we immediately rectified the situation for the benefit of the Company and investors. We issued whatever shares we were told were due to investors and, in all honesty, added many more surrendered shares to treasury which ultimately added to share value. Russell was removed from the US Company over four years ago and we had hoped he was behind us.”
This settlement agreement is back in the spotlight as over the last few months, three different people have come to MMRGlobal with claims of making an investment through Armstrong, Nuway, or associates. MMRGlobal has conducted investigations and believes the claims to be true. As such, MyMedicalRecords.com, Inc. has filed suit for $1.5 million against the Armstrongs and Nuway based on the agreed upon liquidated damages in the settlement agreement. Should additional persons with claims come forth it could actually boost the total dollar figure of the lawsuit by $250,000 for each claim that turns out to be valid. “We intend to see to it that the settlement agreement is honored,” said Mr. Lorsch. “We will pursue this situation to get whatever is due to the Company which will not only benefit the old Armstrong shareholder group but the new shareholders who are part of the Company today. It’s very important to us to have the settlement agreement honored and it’s really that simple.”
The word “lawsuit” is fickle in the investment world as the mere sound of it can send chills down the spine with thoughts of long, drawn-out, expensive battles where lawyers seem to be the only ones who win.
Such is certainly not the case in this instance. This is a very streamlined lawsuit that comes down to the simple fact of either the Armstrongs withheld information or they didn’t. There’s no proving cause or damages.
The astutely-written settlement agreement handled all that and made things black and white. In a sense, the Armstrongs got a “get out of jail free card” the first time around with the simple admission of their actions in the 2007 agreement with minimal penalty. If they withheld information – for whatever the reason – they more than likely will be required to cough-up the dough for the pre-defined damages. After all, they agreed to it through no coercion and with proper counsel.
We said it the first time around when we conducted interviews with Bob Lorsch about how vigilant the man is in doing everything possible to look-out for his shareholders and build value in MMRGlobal. Always in “watchdog” mode while still traveling the country working on agreements or promoting the importance of personal health records, Lorsch exemplifies the hard work and commitment that investors should expect in senior management of a company trading on any exchange. Hats off to the man and his relentless pursuit to do the right thing.