High life — Lawsuits allege investments funded Mobile couple's 'lavish' lifestyle

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Surgical scrubs, false degrees, embellished resumes and a country music album are central to a pair of lawsuits against a Mobile couple accused of diverting $5 million in investment money from a startup medical company to prop up their “lavish” lifestyle.

According to lawsuits filed by investors and business partners, Mobile’s Peter Falkner and his wife, Carla Williams Falkner — co-founders of a local medical device development firm, Innovative Medicine Partners (IMP) — are accused of preying on the entrepreneurial ambitions of local doctors, enticing them to co-found a company together and exploiting their reputations in the community to garner trust and millions of dollars in investments. The couple’s attorneys have vehemently denied the allegations, and Mrs. Falkner even claimed the lawsuits were retribution for the couple acting as “whistleblowers,” although she offered no specifics about that claim.

Peter Falkner Carla William

Peter and Carla Falkner | Photo by Innovative Medicine Partners

The lawsuits — both filed in September — lay out a picture of Innovative Medicine’s co-owners and investors discovering the company’s coffers had been drained. The lawsuits, which were filed separately, claim upwards of $10 million was raised to finance the research, design and commercialization of new fertility devices and other medical equipment.

Among the allegations is that one account which received $4.7 million in investments over the past five years now reflects just a $16 balance.

Investors allege Falkner and his wife, the company’s CEO and chief operations officer respectively, paid themselves large sums of money while simultaneously failing to bring projects to fruition that could have earned the company a steady income. They claim Mr. Falkner hoodwinked them during investment proposals by wearing scrubs and lab coats to portray himself as a member of the medical community while also lying about obtaining multiple degrees, owning medical patents and attending veterinary school.

Things reached a flash point in September when the lawsuits were filed against the Falkners in Mobile County Circuit Court by their business partners — Dr. Kirby and Dr. Deneen Plessala, a local OB-GYN and pediatrician — and a group of investors consisting of local doctors and Atlanta-based businessmen. Those lawsuits claim the Falkners committed fraud by misrepresenting their careers and credentials while failing to disclose pertinent information concerning their own personal finances.

Kirby Plessala Deneen Plessala

Dr. Kirby and Dr. Deneen Plessala | Photo by Innovative Medicine Partners

The drama has been heightened by the revelation of an investigation by the Alabama Securities Commission into the Falkners’ dealings on behalf of Innovative Medicine. They have held control of the company’s accounts and have been the primary marketers for security sales, according to the lawsuits. The Commission issued a cease and desist notice on Sept. 16, explicitly naming the couple, ordering the Falkners to immediately stop fundraising efforts in Alabama, and accusing them of selling unregistered securities.

The Security Commission’s order, signed by commission Deputy Director Edwin Reed, echoes some allegations made by the Falkners’ business associates. According to the Commission’s report, the Falkners helped Innovative Medicine raise approximately $10.5 million from more than 80 donors across 14 different states since the company’s launch in 2016. According to the plaintiffs, the Falkners are believed to have pocketed as much as half of that money.

The lawsuits seek to recoup much of what the Falkners paid themselves and to force the Falkners out of ownership of Innovative Medicine, where they jointly hold a 50-percent stake.

The Plessalas are being represented by Zachary Madonia and Thomas Richie with Bradley Arant Boult Cummings LLP, as well as Robert McGinley Jr. and Brian McCarthy of McDowell Knight Roedder & Sledge. The attorney team told Lagniappe Thursday they would be unable to comment immediately.

The plaintiff investor group includes Benjamin Murphy and William Dull of Atlanta; local couple Dr. Alexander and Lindsay Blankenship; and Dr. Louie and Gail Wilson. This group is being represented by Mobile attorneys Ben Harris and Joseph Steadman with Jones Walker LLP in Mobile and by Joseph Siegelman with Atlanta law firm Chilvis Grubman LLP. The attorney team did not immediately respond to emailed questions.

The Falkners have retained Stephen Whitehead and Mickey Wright of Lloyd, Gray, Whitehead & Monroe, P.C. in Birmingham and Thomas Benton of Benton Law in Mobile, according to a motion Thursday, Oct. 6, requesting an additional three weeks to answer the “complicated” allegations.

In an email statement, Whitehead said his clients deny all material allegations in the lawsuit and those made by the Securities Commission. 

“We are not at liberty to try the case in the media,” he said. “Our clients will respond in due course to the allegations in the legal actions.”

In a phone interview, Mrs. Falkner called the lawsuits “a joke” and the “most disgusting and disturbing thing I’ve ever heard in my life.” She added that the allegations were lies lodged against her and her husband in retaliation for what she described as a “whistleblower situation.” She declined an opportunity to elaborate on that claim.

“When you become a whistleblower and reveal who people really are, they get mean and they do very terrible things. That’s exactly what this was,” she said. “The allegations are false, incorrect and untrue.”

Mrs. Falkner said they are prepared to present testimonies from accountants that will quickly debunk claims made in the lawsuits. She also alluded to the possibility of a counter-lawsuit, saying “the claims coming back are pretty hefty.”

The lawsuits and documents have been attached to the bottom of this page.

Innovative Medicine Partners

Logo by Innovative Medicine Partners

According to court filings, the genesis of the Plessalas and Falkners business relationship began in early 2016 with a concept Kirby Plessala developed to potentially increase fertility success through intrauterine insemination (IUI) treatment. The Falkners allegedly learned of Kirby’s idea and claimed they could help the OB-GYN turn the idea into an FDA–approved medical device. They formed Innovative Medicine as a medical device development firm that seeks to turn concepts for new medical technology into intellectual property, develop them into prototypes, conduct research trials and bring them to market for licensing.

According to the Plessalas, Peter Falkner claimed he had 30 years of experience bringing such devices to the market and had “expertise” in securing patents and organizing medical field tests. 

After agreeing to move forward with the Falkners, Kirby Plessala’s original concept developed into what has been coined “SemScure,” which is a temporary plug designed to fit securely into a woman’s cervix after an IUI procedure, reducing the possibility of seminal fluid leaking back into the vaginal canal. 

During a dinner in August 2016, the Falkners pitched the idea of creating a company to develop the SemSecure device, as well as other equipment. This arrangement would allow the Plessalas to primarily focus on the medicine and science of the operation, while the Falkners dealt with the operational and financial responsibilities. Peter Falkner proposed the group could finance its entire endeavor by soliciting investments, according to court records.

The company was launched the same year with Deneen Plessala and Carla Falkner as 50-50 owners in order to give the company a “female face” and allegedly better position it to take advantage of programs supporting women-owned businesses. That structure was amended in March 2021 to give all four founders a 25-percent stake in the company individually.

Legal filings also say Mrs. Falkner was made the chief operating officer with control over the company’s day-to-day affairs and maintained primary control of the company’s bank accounts and credit cards. Deneen Plessala elected to forego a return to private practice as a pediatrician and instead used her medical background to become Innovative Medicine’s principal clinical researcher.

 Though he is reported to have been the de facto leader in the company from the onset, the lawsuits claim Peter Falkner’s only connection with Innovative Medicine on paper in the early years was as a “consultant” through his wife’s company, Synergy Management. He was made CEO when the founders restructured the ownership of the company. Kirby Plessala maintained full-time work in his OB-GYN practice and used his time off to work with engineers to develop concepts.

The company operated by launching individual subsidiaries named “InnoMed One,” “InnoMed Two,” and so on, to specifically house investments for the development of each different device.

In January 2017, the Falkners launched an investment campaign for IMP that, according to the investors’ complaint, included meetings where Mr. Falkner would distribute investor literature, valuations, pitch decks, projections, and timelines while wearing scrubs and sometimes white lab coats to depict himself as someone with a medical background.

“Peter Falkner wore medical attire, including scrubs and White Coats, during his interactions with Plaintiffs and portrayed himself as a member of the medical community,” the suit filed by Murphy and Dunn says. Photos of Peter Falkner on Innovative Medicine’s website also show him in scrubs. 

Mr. Falkner also allegedly claimed to have graduated from Auburn University where he majored in biology and minored in chemistry, and reportedly claimed to have later completed veterinarian school at Auburn and earned a master’s degree in clinical research from the University of Alabama-Birmingham.

In his bio on the company website, it reads, “Peter hails from Auburn University and the University of Alabama in Birmingham.” It also says he has  “written and co-authored multiple articles published in various medical journals. He has been involved with many global corporations as an executive team member directly active in investor relations, strategic planning, business development, regulatory affairs, reimbursement, clinical/surgical trials and training.”

Mr. Falkner has also used the professional abbreviations “CRS” and “CMD” behind his name in promotional material indicating he is a “clinical research scientist” and “certified medical director.”

The plaintiffs allege Peter Falkner discussed his wealth during these meetings and claimed he was collecting monthly royalty payments from patents he filed as a medical device entrepreneur, and that his previous associates had “gotten rich” from licensing income. He claimed he worked with global companies in surgical research and equipment and “trained surgeons across the world.”

Carla Falkner also allegedly boasted a resume of over 20 years of experience in operations and management of a multi-million-dollar corporation.

Court documents suggest the investment pitch included selling Class II shares at a price of $290,000, with each share representing a 1 percent non-voting membership interest in the respective subsidiary. A timeline distributed for InnoMed One, which was developing Kirby Plessala’s SemSecure device, showed six-year total revenues of $49.7 million with a payout of $497,000 for one-percent owners.

One advertisement for the company said InnoMed One and InnoMed Five — which was developing a second concept by Kirby Pessala that would make abrasions in a uterus’ lining to enhance egg implantation — represented a $1.5 billion potential revenue stream. The six plaintiff investors made multiple hundred-thousand-dollar contributions between both of these endeavors.

Just one outside concept, that of Dr. Matthew McIntyre, a urologist, was ever funded through Innovative Medicine, according to court filings. However, the company no longer has ownership of McIntyre’s intellectual property. 

The investors’ complaint states fundraising materials for SemSecure handed out in 2017 originally projected FDA approval and commercialization by 2018. The device was able to garner $2.3 million in investments between 2017 and 2020. However, the production milestones were continuously missed, according to the complaints. In March 2021, investors were told another $1.2 million was still needed to complete SemSecure by early 2022. The Falkners appear to have been able to exceed those fundraising goals and secured another $2.2 million in 2021. 

In total, $4.6 million was invested for the completion of SemSecure; InnoMed Two raised $3.9 million before it was divested in 2021; $1.6 million was contributed to InnoMed Five.

Court records and dates on financial reports suggest investors’ were alerted to problems late last year, and a review of company accounts and the Falkners’ history began to unravel the partnership.

According to the plaintiffs, during the company’s fundraising efforts in 2017, Mr. Falkner allegedly lied about his credentials and education. They cite a report from the National Student Clearinghouse, indicating Mr. Falkner not only doesn’t hold degrees in the fields or school he claimed, but holds no higher education degree at all.

The Alabama Security Commission’s Sept. 16 cease and desist order echoes these allegations, stating that Mr. Falkner attended Auburn between 1977 and 1978 and the University of Alabama-Birmingham from 1980 to 1981, but did not graduate with a degree from either school. 

Asked about the allegations during a phone interview, Mrs. Falkner simply stated those allegations are “inaccurate,” but declined to respond in the affirmative when a reporter asked if her husband does hold degrees. She then deferred questions to her legal team.

The plaintiffs say they’ve also found no evidence of any patents being filed under Peter Falkner’s name prior to Innovative Medicine. Though the plaintiffs say he has worked in the medical device industry previously, they claim there is no documentation he ever held an executive-level position. 

Mrs. Falkner’s career background has been brought into question as well, with plaintiffs arguing that, despite her claims to investors, she never held a previous position higher than the treasurer of her father’s business, MC Williams Contracting, which became insolvent.

The couple allegedly had never sold securities prior to Innovative Medicine, either, and when they did, the proper protocols were not followed, according to a state agency. 

The Securities Commission states the Falkners failed to file any notifications with it or the U.S. Securities and Exchange Commission (the SEC) when investments began being sold in 2017. After the discovery of the misstep in 2020, the Falkners allegedly continued collecting investments, and the Securities Commission states it has no record of Innovative Medicine filing a Form D for security sales, as is required by state law.

The Falkners also allegedly failed to disclose what plaintiffs claim is a problematic financial history, as well.

 According to the Securities Commission, Mrs. Falkner was in bankruptcy proceedings in 2012 and Peter Falkner filed for bankruptcy in 2015, a process which was still active when he petitioned the Plessalas’ to co-found Innovative Medicine in 2016. His original case was closed later that year. According to the Plessalas’ complaint, Mr. Falkner reopened the bankruptcy process in September 2021 to avoid a judicial lien and was again closed in January 2022.

The plaintiffs allege the Falkners misrepresented their own personal wealth while recruiting investments. According to the Plessalas’ complaint, Peter Falkner’s annual income was $42,000 in 2015 while he carried $630,000 in liabilities.

“In other words, while pushing the Plessalas to embark on a business venture that would require the raising of investor funds, Mr. Falkner failed to disclose that without the Innovative Medicine venture, he had no other source of personal income that would be sufficient to cover his liabilities,” the Plessalas wrote in their claim.

The investors claim the Falkners were paying themselves large monthly sums from Innovative Medicine’s accounts without their or the co-founders’ knowledge.

These “self-dealings” were allegedly propping up the Falkners’ “lavish” lifestyle and company money is reported to have been used to pay for their personal expenses, utilities, meals, international flights and over $60,000 in Amazon purchases, according to the lawsuit. 

One allegation suggests the Falkners spent $28,000 of company money to pay for flights via British Airways to England in order for Carla Falkner, who is also a local country music artist, to record part of an album in 2021 at the famed Abbey Road Studios, where the Beatles recorded most of their music. Mrs. Falkner recorded “A Tribute to The Carpenters,” which is an album of covers of songs originally recorded by The Carpenters.

Carla Falkner has been involved in country and Christian music for several years, although her efforts appear to be primarily self-funded in recent years. She is represented by her self-owned record label, BelleFire Records. She brought in some notable musical talent to accompany the Carpenters project, including the London Strings, Sir Cliff Richard, Jeff Coffey, Toto’s Steve Lukather and Chicago’s Bill Champlin and Billy Dean. It is not clear if these musicians were paid for their involvement in the recording or who funded the production of the album.

Even while facing lawsuits and accusations of misusing company money, Mrs. Falkner was in London, England Tuesday, Oct. 4 performing at the Camden Club, a bar/restaurant/nightclub. Camden Club owner Andrew Hart verified she did perform that night, saying, “She was a lovely person and the most beautiful singer.”

Hart refused to say whether Carla Falkner had been paid to play at the club, if she was recruited to play there, or if she rented the space out for the event. The Camden Club website says it can be rented out for events. Ticket prices were $12 apiece and the club has a 100-person capacity. 

Plaintiffs also claim the couple used more than $120,000 in investment money for travel, and spent thousands more on concert and event tickets. The suit claims they paid $1,755 for passes to a Kenny Chesney concert; $1,525.81 to see Luke Bryan; and $3,000 to attend the Country Music Awards. Other alleged expenses include $5,229.32 for clothing from Locker Room, $3,323.19 for event photography at Carla Falkners’ musical performances, and $1,613.86 from Gundry MD, which sells restorative supplements. 

Company money was allegedly spent to pay for the Falkners’ children’s tuition, gas, car washes and various automobile expenses. Legal filings also claim company money was used for home repairs. The Falkners recently sold a house on Monterey Place in Mobile for $700,000, according to online listings. Photos for that listing also show a canvas in the home in which Mr. Falkner is wearing scrubs. 

The Plessalas’ complaint alleges the Falkners told investors they would only be compensated for the management work they did if the company was able to raise sufficient funds to pay the founders, while covering costs to develop the technology. Despite this, the Falkners are claimed to have repeatedly paid themselves first as new funds were raised.

Revelations of these payments came by way of financial statements accidentally sent to one of the investors from Innovative Medicine’s accountants, court records claim.

Those financial documents allegedly show Peter Falkner having been paid more than $312,000 over a span of six months from April 2021 to September 2021. The largest distribution was in July 2021, when he collected $93,199 from the company, the suit claims. Those same records allegedly show Carla Falkner collected more than $100,000 from InnoMed One during the first nine months of 2021.

These payments came as the Falkners continued to tell their business partners and investors they were unable to pay themselves due to insufficient funds, the suit claims. The Plessalas claim the Falkners have made away with millions over the past two years from the company, while the Plessalas have received only $15,000 during the same time period.

The investors claim the Falkners have failed to distribute appropriate financial reports to investors for the past five years, in violation of the company’s operating agreements. In April 2022, a demand letter was issued seeking those documents. “Scant” reports were produced in June 2022 showing the accounts were nearly drained. InnoMed One’s account balance showed just $16 and an InnoMed Five account had $106, according to the suit.

After a collective review of the company’s financial reports, plaintiffs estimate the Falkners have paid themselves approximately half of the $10 million raised in investments. According to the Plessalas, the Falkners allegedly siphoned an additional $225,000 out of the company in 2022 through payments out of InnoMed One and InnoMed Five accounts designated “research and development” or “consulting” on financial statements.

The Falkners also allegedly directed accountants to begin distributing $50,000 per month as “founder payables” from the company without disclosing the practice to their investors and not including the costs in projected budget reports. The plaintiffs claim this was a way to “double dip” from the company’s finances and “maximize personal gains.” Accruals in one Innovative Medicine subsidiary have already amassed $2 million.

To date, none of the InnoMed medical devices have been completed, according to the complaints, and there is reportedly no money to continue work, as the company’s accounts currently sit at less than $5,000. Innovative Medicine holds $1 million in liabilities, including $250,000 to Regions Bank and a $300,000 bridge loan from one of the Atlanta investors.

Between both lawsuits, the Falkners are facing 26 separate allegations of wrongdoing, including fraud, deceit, breach of fiduciary duties, breach of contract, breach of good faith and fair dealing, conversion, gross mismanagement, waste of corporate assets, unjust enrichment, conspiracy and securities fraud.

The Plessalas’ suit claims they have been forced to directly fund the company to cover essential operations and protect its intellectual property and assets. And the Plessalas claim the Falkners’ actions have resulted in a deadlock for the company to move forward. Due to the Alabama Securities Commission’s investigation and orders, the Plessalas say Innovative Medicine is unable to raise additional funds to pay off debt and continue development.

“In short, because of the Falkners’ misuse of investor funds, Innovative Medicine and the InnoMeds are in limbo,” one claim states.

Demand letters from plaintiffs were delivered earlier this year, seeking resolutions and returns. Mediation with the investor group was scheduled for August 17, 2022, before Fulton County, Georgia, Superior Court Judge John J. Goger and the Falkners initially had agreed to participate. However, less than 12 hours prior to the hearing the Falkners allegedly reneged.

The Falkners are allegedly attempting to shed themselves of the company as well.

According to the Plessalas’ suit, over the past eight months, Peter Falkner has been “aggressively” trying to sell the company to potential buyers while continuing to misrepresent the company and failing to disclose the Security Commission’s investigation. Peter Falkner is reportedly going to such lengths to suggest creating a new company to pitch to buyers and transferring all of Innovative Medicine’s assets to it before the sale.

The Falkners’ attorneys are expected to answer these allegations by November 4.

 


Plessala v. Falkner

 

Murphy v. Falkner

 

Alabama Securities Commission CD-2022-0020


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