Chip Tate’s Shares In Balcones Remain Unchanged After New Investment, Board Says

The founder of Balcones Chip Tate retains a 27 percent interest in the company despite a major capital investment finalized without him, a board representative wrote to me in an email.

The board of Balcones, which is suing Tate in civil court, issued a public statement posted online by WhiskyCast Tuesday saying it had finalized a $15 million dollar investment deal. All of the money came from within the board, according to the statement issued by board member Michael Rockafellow.

Earlier this month, the board filed a civil lawsuit against Tate, alleging that he had taken actions detrimental to the company and refused to cooperate with the board’s efforts to raise capital.

In a court filing responding to the allegations, Tate said the board had tried to force him out and wrest away his share of the company.

Tate referred to a letter of suspension issued by the board to him last month as a “termination.” He contended that the board didn’t have the power either to suspend him or to approve major investments without his consent.

The company agreement states that Tate’s presence is necessary for the board to establish a quorum.

Tate is under a gag order prohibiting him from discussing the case, but has joined Twitter, where he has said that future court filings will reveal new information about the legal battle.

Chip Tate Says Balcones Board Tried To Force Him Out In Court Filing Denying Allegations Against Him

Balcones founder Chip Tate denied the charges pitted against him by the board of his company and alleged that the investors tried to orchestrate a hostile takeover of his share of the company, according to a court filing submitted Friday and posted Tuesday to the web by Whisky Cast.

In the filing, Tate denies saying he would shoot Balcones board Chairman Greg Allen or burn the distillery down, as alleged in the civil lawsuit filed earlier this month by the board. Instead, Tate says the owners tried to wrench away his share of the company through actions taken at meetings held without him. If true, those actions would violate the company’s bylaws, which require Tate’s presence for a quorum.

“This is not an employee dispute,” the filing reads. “Quite the contrary this is an attempt to purloin the plump ripe peach that is Balcones from the founder Chip, who built it with his own two hands from scratch. This is a private equity group trying to unjustifiably take advantage of a craft distiller and take his ownership in Balcones.”

The filing says that the board authorized an internal offering, which Tate opposed, of $15 million in debt that would have diluted Tate’s ownership of the company from 27 percent to less than 10 percent. Taking such action without Tate’s consent violated the company agreement, according to the filing.

The document says that Tate was not suspended, as alleged by the board, but rather terminated after talks between Tate and Allen over buying each other out of the company broke down. According to the filing, Allen “barged, unannounced and without warning, into a meeting (literally throwing open the door and stopping the meeting) Chip was having with a corn supplier at Balcones on August 5, 2014. As Chip tried to diffuse the situation created by Allen, it was revealed to Chip that two sheriff’s deputies were waiting outside with instructions to remove Chip from the Balcones premises.”

Following that, the document says, Tate received a letter of suspension and was then served with a lawsuit.

“It is absurd to call this anything other than a termination,” the filing says.

The document denies that the board has the power to suspend Tate because Tate’s presence is needed for a quorum and he did not attend the meeting at which the board voted to suspend him.

A hearing in the case is scheduled for Thursday.