Struggling directory publisher sued for defamation by former executives

By Jim Boyle | Oct 7, 2014

The ex-president and head of operations for a publishing company struggling to keep up

The ex-president and head of operations for a publishing company struggling to keep up

with the digital age have filed a defamation suit against their former employer, saying an e-mail issued to thousands of employees by the CEO falsely accused them of disloyalty, according to a suit filed at the Bucks County Court of Common Pleas.

James McCusker, of Doylestown, and Mark Cairns, of Ambler, both seek compensatory and punitive damages in excess of $50,000 from Hibu, an international company formerly known as Yellowbook, and its CEO Mike Pocock and the board of directors. At the time of their termination, McCusker and Cairns had been accused of sharing confidential information with Hibu's former CEO, Joe Walsh, as part of a plot to buy out the company, charges that both plaintiffs deny in their separate complaints.

Walsh served as CEO to Yellowbook from 1987 to his termination in 2011. During that time, the company, like most print media, were caught off-guard by the popularity of the Internet and the effect it would have on the industry. Yellowbook derived most of its revenue from ad sales for its ubiquitous Yellow Pages directories delivered to households throughout the United States.

Declining sales in the 2000s forced the United Kingdom-based parent company, Yell Group, to take substantial bank loans in 2009 to help with the company's restructuring. In 2010, the chairman of the board of directors instructed Walsh to find parties interested in buying the company's U.S. assets, the complaint says.

Walsh formed a group of private investors and offered to purchase the assets for $2 billion in December 2010, an offer that was rejected by the board of directors shortly after the January 2011 appointment of Pocock as the new CEO.

Throughout the spring and summer of 2011, Pocock formulated a plan to transition Yellowbook, now known as Hibu, into the digital marketplace. His strategy relied on the potential success of partnerships with Microsoft and Znode, an e-commerce provider. The plan projected a revenue mix of 75 percent digital and 25 percent print by 2015, along with growth of revenues, earnings and cash flow, an additional 1.5 million customers and reductions in expenses. Initially kept to help the implementation of the strategy, Walsh's employment was terminated in October 2011.

The claim says that Hibu continues its struggle to meet the projections and obligations from the 2009 loans. The partnership with Microsoft failed to create any favorable products or services or generate considerable revenue for the company, the complaint says. The online stores created by Znode and launched in early 2012 were deficient and costly, forcing Hibu to pull the sites down months later.

According to the complaint, Hibu maintained its allegedly over-inflated projections for 2012, 2013 and 2014 as a way to keep the 2009 lenders placated. McCusker and Cairns claim that they warned Pocock that the projections were fraudulently misleading, representing the strategies and acquisitions as successful endeavors.

In January 2013, Pocock announced to senior management that the transition plan was two years behind schedule. The executives met in Texas in February for the stated purpose of revising the 2014 budget, but that never happened, McCusker says. Instead, according to McCusker, Pocock and other executives maintained that it could not start the process all over again with their 2009 investors.

The claim alleges that senior management knew that revenues could not be delivered and the projections were too high, but they could not be revised because the inflated numbers were submitted to the 2009 lenders for the purpose of achieving a favorable restructuring of its debt.

On March 6, 2013, both McCusker and Cairns were terminated from Hibu based on allegations that they shared confidential information with Walsh. The complaint says that the company used phone records detailing repeated phone calls to Walsh as evidence, but MCusker and Cairns claim that Walsh remains a close friend and that they were never directed to sever all ties with their former mentor.

Following their termination, Pocock sent an e-mail to the company's 5,000 employees detailing the reasons for McCusker and Cairns firing, making the alleged false accusation public knowledge and libeling their reputation.

Both plaintiffs state that no evidence of disclosure had been presented, and the company made the false accusations in order to avoid its obligation to provide severance packages to the executives, a violation of the Pennsylvania Wage Payment and Collection Law.

McCusker and Cairns are represented by Clifford Haines of Haines & Associates in Philadelphia.

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