TSR sues dissident shareholders, alleges 'shadow campaign' to 'seize control'
Hauppauge headquarters of TSR, a computer staffing company. The company's management has been having a long-running battle with its shareholders, who hold about 49 percent of the stock. Credit: Steve Pfost
Technology staffing company TSR Inc. has filed a federal lawsuit against three dissident shareholders, charging that they mounted a "shadow campaign" to pool their ownership interests and "seize control" of the company.
The complaint follows a long-running battle between TSR's management and the shareholders, who hold about 49 percent of the company's stock, according to Bloomberg's compilation of government filings.
On Dec. 7, Hauppauge-based TSR announced a plan to pursue strategic acquisitions and the engagement of Uniondale-based Farrell Fritz, P.C. as its legal adviser in that process.
That announcement followed its rejection in November of an offer by one of the shareholders, Mineral Wells, Texas-based QAR Industries Inc., to buy all TSR shares it doesn't already own for $6.25.
TSR shares rose 12 percent Thursday to close at $5.04, according to the Nasdaq website.
TSR's lawsuit, filed Dec. 21 in U.S. District Court in Manhattan, charges that QAR, Fintech Consulting LLC, based in Iselin, New Jersey, Zeff Capital LP, a Zeff affiliate and three principals of those companies failed to fully disclose their intentions to stockholders.
The complaint, announced in a TSR news release after the stock market close Wednesday, alleges that the shareholders violated disclosure requirements of federal securities laws.
The lawsuit asks that the court allow the company to further postpone its annual meeting, which was originally scheduled for Nov. 28, and block the major shareholders from exercising their proxy votes.
Manhattan-based Zeff is running two insurgent candidates for director against a slate offered by TSR.
Calls for comment to Zeff, QAR and Fintech were not immediately returned.
TSR chief executive Christopher Hughes said he was barred from commenting because of regulations that apply to public companies.
In June, Joseph Hughes, the founder of TSR, and his wife Winifred, the parents of Christopher Hughes, sent a letter to TSR’s board requesting that the company be sold.
The following month, Joseph and Winifred Hughes sold their 41.8 percent stake in the company to Zeff, QAR and Fintech.
In another legal skirmish, Fintech filed a lawsuit in Delaware in November, charging that TSR's board breached its duty to shareholders by approving a measure in August that would make a hostile takeover more difficult.
The lawsuit in the Delaware Court of Chancery seeks to invalidate the anti-takeover measure, known on Wall Street as a "poison pill," and seeks unspecified monetary damages.
TSR's newly filed lawsuit, however, portrays the major shareholders' acquisition of 49 percent of the stock as an "imminent threat" to the interests of minority shareholders and justification for adopting the poison pill.
Ken Schachter covers corporate news, including technology and aerospace, and other business topics for Newsday. He has also worked at The Miami Herald and The Jerusalem Post.
