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Randy Pitchford and ex-Gearbox lawyer engaged in ugly legal fight over alleged $12 million ‘secret bonus,’ unpaid loans, camgirl porn

via twitter.com/duvalmagic

Gearbox CEO Randy Pitchford and former Gearbox general counsel Wade Callendar have filed lawsuits against one another, each accusing the other of various forms of fraudulent behavior. Gearbox’s suit against Callendar (via Kotaku) accuses him of taking out six-figure loans from the company for personal use and failing to repay them; Callendar’s filing against Gearbox and Pitchford claim that promised remuneration for his services was never actually paid, and that Pitchford forced him out of the company once he started to make noise about it. 

Both sides make serious allegations in their lawsuits. Gearbox claims that it made a $300,000 loan to Callendar to enable him to purchase a house, paid more than $120,000 in fees for an Executive MBA course at Pepperdine University, covered $50,000 in legal fees for “contentious litigation regarding personal matters” in 2017 and 2018, and that Callendar “abused” a corporate American Express card on unapproved personal expenses. 

Meanwhile Callendar alleges that Gearbox, and Pitchford personally, failed to deliver promised payments for services rendered, cut him off from corporate interests in Gearbox and other companies, and ultimately forced him out of the company. He also alleges that Pitchford “syphoned” Gearbox funds for personal use, and that he negotiated at $12 million “executive bonus” from publisher Take-Two that was paid against employee royalties. 

Callendar was hired by Gearbox in 2010 and was promoted to general counsel in 2011, according to the Gearbox suit, a position he held until his resignation in July 2018. In 2014, Gearbox, with Pitchford’s approval, issued him a cash loan of $300,000 for the purpose of buying a home in Frisco, Texas. To ensure that Callendar did not default on the loan, they also agreed that his monthly salary would be “grossed up”—that is, increased to cover the extra expense of the loan repayments. The suit alleges that, in March 2018, Callendar demanded that the grossed-up payments stop, however, and “objected to Gearbox seeking repayment of the home loan from Callendar’s future royalty payments” despite a balance of more than $136,000 remaining.   

Gearbox says that it made other significant payments to or on behalf of Callendar during his time with the company, including more than $73,000 in tuition fees (and another $52,000 in additional expenses) that enabled Callendar to attend an Executive MBA program at Pepperdine University, $50,000 in legal fees for “contentious litigation regarding personal matters” in 2017 and 2018, and unspecified “abuse” of his corporate American Express card. 

Callendar’s suit, filed more than a month after Gearbox’s, corroborates his term of employment with the studio but says that his personal relationship with Pitchford goes back to the early 1980s, when they were children living in the same neighborhood. 

“Over the years, Pitchford repeatedly tried to persuade Callendar to work with him at Gearbox,” it says. “Callendar ultimately acquiesced to Pitchford’s pleas; by July 2010, Callendar relocated to Texas, and was a licensed Texas attorney serving as Gearbox’s Executive Counsel. In 2011, Callendar was promoted to General Counsel of Gearbox.” 

Callendar alleges that in 2015, he was given a minimum three percent equity interest in Gearbox “in consideration of Callendar’s efforts above and beyond that of a general counsel,” and was also promised “that Gearbox would pay Callendar a transaction fee percentage exceeding any amount paid to any other broker(s) for outside financing efforts involving Gearbox.” He was also made a 33.3 percent owner in The Hatch, a newly-founded limited liability company that he co-owns with Pitchford and Gearbox co-founder Stephen Bahl. 

But, because of their long history and Pitchford’s reassurances, much of Callendar’s work was apparently done without a contract. For instance, he and investment broker Greg Richardson arranged a financing deal for Gearbox that included a $15 million loan and a $10 million line of credit that would become available after the original loan was repaid: “Neither Richardson nor Callendar operated under a signed contract prior to the performance or the conclusion of their funding efforts,” the suit states. “The repeated assurances of Randy Pitchford were universally relied upon in good faith.”   

Callendar says that his relationship with Pitchford grew strained, but that he continued to perform his duties, and “personally intervened” in the Pitchford family embezzlement case that came to light last year. He claims to have recovered nearly $750,000 in cash for the family and “facilitated” a civil judgment of more than $2 million against the embezzler, but, “true to form, Randy Pitchford thanked Callendar in a uniquely Pitchford way: Pitchford actively concealed Callendar’s successful intervention(s) and recovery of funds when retelling the story to news outlets.” 

He also took umbrage with a “side deal” Pitchford allegedly negotiated with Borderlands publisher Take Two Interactive that paid a $12 million “executive bonus” to Pitchford Entertainment Media and Magic LLC. “Because Pitchford agreed to have his private ‘bonuses’ counted as advances upon the royalties owed to Gearbox employees, those employees—and their families—won’t receive any of their accrued royalty or ‘profit’ shares until their work repays Randy’s bonuses to Take-Two Interactive/2K Games,” the suit says. 

In mid-2018, Callendar says he gave up trying to “correct” Pitchford and retained his own counsel in order to negotiate an exit from the company. When Pitchford found out, Callendar alleges that Pitchford falsely announced that Callendar had resigned from the company. The suit says Gearbox IT was instructed to “intercept” communications from Callendar so that he couldn’t correct the record; since then, “Callendar has received no accounting or information regarding the interests to which he is entitled; his Hatch interests, his Gearbox interests, his Gearbox royalties, his Cabinet Shares, etc.” 

Both lawsuits take personal swipes at their targets—Gearbox alleges that Callendar’s Amex misuse includes “trying to get six-pack abs”—but Callendar makes some particularly salacious and disturbing allegations about Pitchford. He claims that Pitchford had a “personal collection of ‘underage’ pornography” on a USB drive he misplaced in 2014, for instance, and that he “siphoned Gearbox profits” to pay for “Peacock Parties,” in which “adult men have reportedly exposed themselves to minors, to the amusement of Randy Pitchford.” 

Pitchford acknowledged the presence of porn on the USB drive in the December 22 episode of the Piff Podcast (via Ars Technica), in which he explained that he’s a consumer of “camgirl” porn, and clarified that it was not “underage,” but “barely legal” pornography, a legally significant distinction. He said he copied a video of a particular performance onto the flash drive, so he could “work out the method” of the act in question (Pitchford is a well-known aficionado of magic), but then left the drive at Medieval Times.

“Some kid, an employee of Medieval Times, discovered this memory stick, took it home … and discovered secrets of my company and future games in development, and also discovered the pornography. It was ‘barely legal’ porn. This girl’s handle was ‘Only 18’,” Pitchford said.

The USB drive was returned in exchange for “swag” and free games, but came back to the office while Pitchford was on a business trip. “I think the entire office looked at it,” he continued. “And there was one piece of content on here. And it never occurred to any of them that the reason why there was just that single porno was because of the magic trick, not because of… I don’t know what the fuck they thought.” 

In a new statement today, Gearbox described Callendar as a “disgruntled former employee,” and his allegations as “absurd, with no basis in reality or law,” in a statement sent to Kotaku. It also said that it will file a grievance with the State Bar of Texas, “for filing a lawsuit that includes accusations that he knows to be untrue.” That appears to specifically refer to Callendar’s claim that Pitchford had a collection of “underage” pornography.

“We imagine that he used the quotation marks and lawyer language in hopes that will give him some angles of defense when we inevitably take action against him for false statements,” Gearbox said. “Wade is engaged in a shakedown and he’s clearly using deceit and lies to try to cause damage by promoting a narrative that he knows is false.” 



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