Embroiled in Boardroom Fight, Pay By Touch Gets a Temporary Boss

An outside manager with restructuring experience, Thomas Lumsden of FTI Consulting Inc., is now running financially troubled biometric-payment provider Pay By Touch under terms of a Delaware court order signed Friday, San Francisco-based Pay By Touch announced on Monday. The Delaware Chancery Court in Wilmington appointed Lumsden, senior managing director of corporate finance in Baltimore-based FTI's San Francisco office, as custodian after the disputing parties in Pay By Touch's legal battles mutually endorsed him for the position the court created. A major investor, Stamford, Conn.-based hedge fund Plainfield Asset Management LLC, is fighting with Pay By Touch's majority shareholder, John P. Rogers, over control of the company, which several employees are seeking to have placed under bankruptcy-court protection (Digital Transactions News, Nov. 6). Plainfield, asserting rights it claims under a financing agreement, is trying to name its own board of directors because of Pay By Touch's alleged breach of its loan covenants as cash-flow problems mounted over the summer and early fall. Rogers, who has filed for personal bankruptcy, wants to name his own board. Today's Pay By Touch release says, “Mr. Lumsden's first objective is to bring immediate funding to the company so that critical business operations can continue.” Lumsden wasn't available for comment today, but a Pay By Touch spokesperson says his first step would likely be to go to the company's existing lenders. Citing the pending litigation, the spokesperson would not comment on reports that Pay By Touch is behind on payroll and vendor payments. All senior executives at Pay By Touch now report to Lumsden, a certified public accountant with 29 years of corporate-finance experience. That experience includes restructurings, reorganizations, and mergers and acquisitions, according to his FTI biography. He has worked with companies in the service, utility, and manufacturing sectors. Before joining FTI, Lumsden worked on bankruptcy and turnaround cases with accounting firm PricewaterhouseCoopers' Business Recovery Services unit. The spokesperson says business is operating as usual. “We haven't lost any customers,” she says. She adds that some customers who registered their finger identifications with Pay By Touch sites in the approximately 200 Jewel-Osco grocery stores in the Chicago area are now using Pay By Touch at the 10 local Shell Oil gas station/convenience stores that adopted the system in October. A court date to resolve the board issue has not been set yet in Delaware, where Solidus Networks Inc., which does business as Pay By Touch, is incorporated. Lumsden's term will last until those issues are settled. Meanwhile, the company is still in a three-week window in which it can decide its legal alternatives regarding the involuntary bankruptcy position filed by the employees in U.S. Bankruptcy Court in Los Angeles.