Bankruptcy court case pits Vanderbilt against investors

The Tennessean/April 2, 2004
By Bill Lewis

The criminal case against a lawyer who punched an opposing attorney has been settled.

Now a Bankruptcy Court in Nashville is being asked to decide who really owns the potentially world-changing discoveries of a Vanderbilt scientist and whether the university profited from a scientific breakthrough owned by other investors.

Then there's the matter of allegedly missing royalties from Amway Corp. allegations that assets were moved overseas and Vanderbilt's own lawsuit to collect $2.5 million that it says the university is owed for research and other services.

The contestants include Vanderbilt scientist Dr. Robert Holcomb, a company he set up to commercialize his discoveries and investors who won control of the company in bankruptcy court three years ago.

Those investors recently asked U.S. Bankruptcy Court Judge George Paine to order Vanderbilt to explain its role in starting a company called Demeter Systems LLC and what steps were taken to prevent any conflicts of interest on the part of university officials, including Vice Chancellor for Health Affairs Dr. Harry Jacobson.

Neither Jacobson nor Vanderbilt is named as a defendant in the bankruptcy court case, and documents filed with the court do not accuse him of a conflict. Jacobson is a member of the board of Demeter, which was created with an investment of at least $500,000 from the university, as well as investments from others.

The case of the pummeled attorney, at least, was straightforward. Another attorney said he was almost killed by a ''sucker punch'' thrown by a lawyer representing Holcomb in 2001.

''I almost died. I came within 10 minutes of dying,'' attorney Thomas Buckner said of the incident about two and a half years ago outside of a Memphis nightspot allegedly involving Holcomb's lawyer at the time, Gerald Easter.

Buckner is one of a group of investors who believe Holcomb has started a series of companies, including Demeter, using a discovery that the investors claim they own.

Buckner, who fell and struck his head, said he recovered after a month in a hospital. Easter pleaded no contest to a misdemeanor assault charge in March 2003 and was sentenced to 30 days in jail, according to news reports in Memphis at the time.

Now Buckner and two other investors in technology developed by Holcomb contend that Easter helped Holcomb move assets of a company they control, Holcomb Healthcare Services, to the Isle of Man in the British Isles without permission.

Easter could not be reached for comment this week.

That company was formed to commercialize a scientific discovery made by Holcomb magnets that can be used to block pain. The invention, Magna Bloc, is sold by Amway. A set costs about $160, according to the Amway Web site.

Holcomb Healthcare Services claims in a lawsuit against Amway that millions of dollars of royalties have not been accounted for. That case is set for arbitration in June.

Holcomb and his backers had a falling out when investors, who believed they weren't being repaid, ousted him and other board members from the company bearing Holcomb's name.

Holcomb, who is a physician as well as an inventor, has a reputation of not following through on potentially lucrative business deals and his relationship with some investors has soured, said Donald Bowlin, a Florence, Ala., accountant who describes himself as a former business associate of Holcomb's.

Bowlin said that frustrates him because he believes Holcomb's ideas really work.

''We should all be worth billions of dollars,'' Bowlin said of himself and other investors.

Holcomb declined to be interviewed for this article.

Holcomb Healthcare Services claims that many other companies formed by Holcomb are using the Magna Bloc technology, including companies that Vanderbilt has invested in and has encouraged others to invest in, according to documents recently submitted to the Bankruptcy Court.

One of those companies, they said, is Demeter Systems LLC, which was created to commercialize Green Coal and other Holcomb discoveries.

Green Coal allows coal to burn without pollution. Other Demeter technology allows the preservation of wood without resorting to harmful chemicals; allows gasoline to burn cleanly; and makes seawater drinkable.

Vanderbilt has invested at least $500,000 in Demeter, university officials said at a news conference two years ago when they announced the discovery of Green Coal.

Holcomb Healthcare Services claims that it owns Green Coal and all other technologies developed by Holcomb, saying they are all based on Magna Bloc, insists investor Van Morgan, an Alabama attorney.

Magna Bloc is the ''core technology,'' he said.

That claim is unfounded, said Holcomb's attorney, Caldwell Hancock.

''Any claims that the 'mother Magna Bloc technology' has anything to do with Green Coal and other technology, those claims are going to be disputed,'' Hancock said.

Hancock also denied allegations that royalties from Amway were diverted from Holcomb Healthcare Services.

Buckner, Morgan and fellow investor and Memphis businessman John Townsend want the Bankruptcy Court to order Vanderbilt to explain its role in the creation of Demeter. They also want the court to require an explanation of steps taken by the university to avoid what they see as conflicts of interest by Jacobson and other members of the Vanderbilt board of trust.

''Jacobson has taken Holcomb under his wing,'' Morgan said. ''What is clear is that (Jacobson) has a vested interest that creates a conflict with his position at Vanderbilt.''

Jacobson said through a spokesman that he does not have a personal investment in Demeter and sits on its board as a representative of Vanderbilt.

Morgan contends that Vanderbilt has a responsibility.

''The guy has been on their campus. They financed him,'' Morgan said of Holcomb. ''Nobody would have given him a dime if not for Vanderbilt. Sales pitches were made in Vanderbilt laboratories.''

Buckner, Morgan and Townsend were appointed governors of Holcomb Healthcare Services by Judge Paine in 2001. Paine appointed them several days after three other officers in the company filed the initial bankruptcy petition. The judge's action essentially made Morgan, Buckner and Townsend managers on behalf of 131 other investors.

Soon afterward, Vanderbilt sued the company, saying it is owed more than $2 million for research provided on campus.