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Whistleblowers: CEO spins elaborate tales to lure investors to San Diego startup company

SAN DIEGO, California — A San Diego CEO is coming under fire for claiming that prominent billionaires Mark Zuckerberg, Warren Buffett and Carlos Slim would be making huge investments in his high-tech startup — tales that a small group of investors say were spun to lure them into writing big checks.

During an intensive nine-month investigation, San Diego Gay & Lesbian News (SDGLN) has uncovered a string of unsubstantiated claims by A. Latham Staples, president and CEO of Positive Mobile Health, that seem to be aimed at keeping investors interested enough to continue pumping money into the company, money which he and his Chief Financial Officer Robert Ray used to pay for dinners, iTunes downloads and even California DMV fees.

Aiding our lengthy investigation have been a significant number of whistleblowers — former employees, shareholders and investors — who have come forward alleging the company has burned through all of its investor capital, has no revenue stream and virtually no money left in its business account. Investors say they were prompted to write checks largely based on claims that Zuckerberg, Slim and other financial moguls were about to dive into their investor pool — claims they would later come to believe were purely fictional.

Because investors or lenders may be victims of serious financial crimes, such as investor fraud, SDGLN has agreed to conceal their identities as well as the names of some former employees, who have been financially devastated and are trying to find new employment. Because of the sensitive nature of the accusations, their claims have gone through a thorough vetting and fact-checking process to determine their veracity. Claims that could not be verified or triple-sourced did not make it into this article.

Spinning quite a tale

Speaking on condition that his name be withheld, an early employee of the company that later became Positive Mobile Health told SDGLN that Staples had constructed elaborate stories about meeting with famous investors like Mexican billionaire Carlos Slim, the world’s richest man, and even spoke of receiving counsel from billionaires Mark Cuban and Donald Trump.

“With Carlos Slim, [Staples] said he was going to go down to Tijuana to meet up with some individuals who would then place a bag over his head and take him to an undisclosed military base due to Mr. Slim’s security concerns,” he said. “[Staples] allegedly had two meetings scheduled, one that Carlos called off to reschedule and one Latham decided to call off himself at the last minute because the prospect of ‘being kidnapped in Mexico’ wasn't appealing.’

“On a trip to New York City … he told us he had lunch with Warren Buffett and they discussed Mr. Buffett investing,” he said. Buffett is the chairman of Berkshire Hathaway in Omaha, Nebraska.

According to the employee, who left the company in October 2014, Staples was also entertaining investment inquiries from Facebook founder Mark Zuckerberg and would be flying up to the Bay Area for a series of meetings, none of which ever took place.

“The most recent billionaire [Staples] claimed to have a meeting with was German billionaire Peter Thiel, of PayPal and Facebook fame. This followed the same as the Zuckerberg plan, where [Staples] would fly up to the Bay Area and meet with him about an investment.” But like the others, the employee said, this meeting never took place.

A case for investor fraud?

By dangling the names of these famous investors, Staples succeeded in luring real investors into supplying the company with hundreds of thousands of dollars.

SDGLN spoke to one investor who personally invested $86,000 over two installments and by all accounts is actually the company’s largest financial contributor. SDGLN is protecting his identity as he is likely the victim of a serious financial crime, and we have obtained documents proving he made the investments.

“I was told directly by [Staples] that Tom Velez was about to invest $10 million and would come on board as Chief of Technology,” the investor said.

Velez is yet another well-known entrepreneur who made his fortune in aerospace and computer science, so with his potential investment and participation the startup would become flush with cash and instantly credible.

The investor said this prompted him to hand over a check for $50,000 “in an effort to get a greater stake in the game before the initial investor pool became too crowded.”

However, the Velez investment never materialized and SDGLN has learned it was never going to happen. On Jan. 1, 2015, an official close to Velez told SDGLN: “Any claim of an offer or intent to invest any amount of money was a blatant lie.”

The official confirmed that for a short time Velez’s company was a vendor to the startup company, but nothing more, and like many other vendors, was never paid. All totaled, the official said, Velez’s company was out $20,000 for its interactions with Staples and his company.

Some months later the company was out of cash. Without any mention of the unmaterialized Velez investment, Staples claimed to have a few more famous investors, including Carlos Slim and a Texas-based venture capitalist, who wanted a piece of the startup company and all that was required to sew them up were a few face-to-face meetings in Mexico and Texas.

The investor agreed to then buy in even deeper, this time for $36,000 to help pay for the business trips.

In addition, the investor said, Staples claimed to be weighing interest from Zuckerberg and also again boasted of getting guidance and advice from Michael Dell and Donald Trump.

It was months later before the investor would come to believe it was all an elaborate lie regarding the pending involvement of Velez, Slim, Zuckerberg and the Texan. “[The Texas man] never made any offer of investment whatsoever because, as he put it, there was no product,” the investor said. “I confirmed this by direct phone conversations [with the Texan] months later, in September 2014.”

For his part, Staples remains steadfast. In an email exchange with SDGLN for this article, Staples claimed that not only were Zuckerberg and Slim interested in investing, he said that representatives of these famous billionaires were the ones who initiated the contact.

According to Rafael Calderon of San Diego-based D4C Product Development, a one-time vendor to Staples’ company, his company orchestrated a meeting between Staples and representatives from Carlos Slim’s office, not with the billionaire himself, and those representatives called off the meeting and there was never any attempt to reschedule it.

In an email exchange with SDGLN, Calderon made it clear that it was in fact Staples who asked to him initiate contact with Slim’s representatives, not the other way around.

Why the meeting was not rescheduled is not clear, nor is where the money went that the investor gave to fund trips that never happened.

Another investor who spoke to SDGLN on the condition of anonymity said: “It was based on these false claims of big names wanting to invest that kept all of us invested in the success of the company. Yet the dates would pass and the money never came.”

This second investor described the lengths to which Staples would go to reinforce his stories. “He was always on the phone for hours claiming it was Donald Trump. Sometimes he would claim to be talking to Michael Dell.”

Either way, the alleged investors are not buying it.

“Now that I look back, it was all just a game for him,” one investor said. “He got all of us, both employees and investors, to believe we would get rich quick when in fact he was using all of us.”

About the CEO of Positive Mobile Health

Staples is an enigmatic personality who has been a source of controversy, ever since he moved to San Diego in late 2007. He’s charming, handsome and slender with a bright smile and hint of a Texas drawl.

While you won’t find this bio on the Positive Mobile Health’s website, prior to joining the company Staples worked at Smart Circle International (where he and his CFO Robert Ray first met), a company with a less-than-sterling reputation whose employees sold cheap bags of cosmetics while canvassing mall parking lots and hospitals.

According to a former employee at Smart Circle who asked to remain anonymous, the compensation was commission only. “We sold $20 bags of make-up and we got to keep $7 from each bag. If you didn’t sell anything, you didn’t get paid. It was hardcore solicitation,” he said.

The employee confirmed that Staples and Ray -- now the top two executives at Positive Mobile Health -- were salesmen for Smart Circle International.

Staples is known as a master salesman who fully commits, whether the product he’s selling is knock-off makeup or the fictional narrative of himself that includes powerful family and political connections in his native Dallas/Fort Worth, Texas and close relationships with famous billionaires.

Philanthropy claims

Prior to Positive Mobile Health and the make-up gig, Staples was the CEO of Empowering Spirits Foundation (ESF), a San Diego nonprofit organization. It was at ESF when he first stirred up controversy when the 2011 Free To Be Festival in Los Angeles orchestrated by Staples was a spectacular failure and left dozens of vendors unpaid to a tune of more than $200,000.

Though he was the organization’s CEO, it is not clear if Staples himself was ever compensated. When Staples stepped down temporarily (ostensibly to guide Positive Mobile Health and its predecessors), he hand-picked a longtime friend as his successor, Clayton Gibson, and, according to court filings, offered him a salary of $70,000.

In a lawsuit he has since filed in a San Diego court, Gibson claims he was never paid any money by ESF, despite Staples’ promises.

Adding some veracity to Gibson’s claims, court records obtained during this investigation show an outstanding judgment against ESF by one of its former employees Margie M. Palmer, who worked for Staples and ESF in 2011 but who was still owed several paychecks. According to the court filing, Palmer won her case and in 2012 a judge ordered ESF to pay her unpaid wages totaling $9,039. Palmer’s attorney confirmed that she has yet to see any money from the judgment.

With a history of unpaid staff, broken promises and unpaid vendors, the results of our investigation into Staples’ current venture may not be surprising.

So where did the money go?

SDGLN has obtained receipts of more than $90,000 both invested and loaned into the startup company and one investor said he was directly responsible for another investor bringing in an additional $50,000.

According to multiple sources, almost all of that money is gone. As of an October 2014 shareholders meeting it was reported that there was “a little more than $100” in the corporate account.

While some money had been paid to vendors as start-up cash for projects, few of those projects were ever completed because the company could not continue to pay them. There were also several thousands of dollars paid to an attorney as a retainer to help Staples and the rest of the board of directors fight a lawsuit by the company’s founder, but at the October meeting it was reported that money had run out and absent another influx of cash to the law firm, they would no longer represent the company, an influx they never received.

But those payments don’t equal much of the overall investment into the company.

Perhaps a better gauge of where the money went is a financial document obtained by SDGLN that appears to be an accounting of a February 2014 Bank of America statement that allegedly serves as a transaction record from the company’s account.

This document shows nine cash withdrawals totaling $6,600 in just a one-month period, as well as over $1,500 in payments to the California Department of Motor Vehicles. The vast majority of transactions are from iTunes and at local eateries such as McDonald's, Popeyes, Smashburger and nearly $900 at the high end La Jolla restaurant Barbarella.

While these transactions appear to show that Staples and Ray were using investor dollars to pay for personal expenditures, Staples said all the expenses are allowable per his and Ray’s employment agreement. He would not elaborate further.

After several emails sent to Ray seeking clarification, Ray responded last week by declining comment.

PMH Board Chairman George Schwartz also defended the expenditures, telling SDGLN in an email exchange that the expenses were perfectly permissible, calling them “reimbursements for expenses” allowable under their compensation agreement. Schwartz added that Staples and Ray haven’t received any salary as the top two executives at the company.

While they may not have received a salary, they were obviously able make cash withdrawals and neither Staples, Ray nor Schwartz were willing to explain what more than $6,000 in cash withdrawals was reimbursing. What is not in dispute is that Staples and Ray were buying dinners, downloading music and paying DMV fees while their employees were going without paychecks and investors were watching their money vanish.

About the start-up company

Positive Mobile Health (PMH) is a startup that promises to provide patients with mobile access to their physicians, medical records and prescriptions wherever they are in the world through their smartphones or tablets.

Initially called Remedev, then PremloCare Intuitive, the company became incorporated under the name EXUSMED after Staples is credited with orchestrating the ouster of its founder, Dr. John Mackoviak, who is now suing to regain control. The company has since changed its name to Positive Mobile Health, and Staples remains CEO along with Robert Ray, the company’s CFO, who Staples brought with him.

In some of the company’s online promotion, it has touted relationships with healthcare titans like the medical research wing of the University of California at San Diego (UCSD) and EmpowHER.com, a women’s health resource website. On a Crowdfunder.com listing aimed at attracting investors, the company even claimed at one point to be on the verge of launching a pilot study in conjunction with UCSD’s Antiviral Research Center (AVRC) — the folks responsible for the HIV PReP studies — to include as many as 150 patients.

There’s no there there

The SDGLN investigation has uncovered that the startup company’s claims of partnerships with UCSD and EmpowHer.com are false, as are its claims to have been ready to launch a pilot study.

In an emphatic denial of any partnership, Jeanette Reckell, EmpowHer.com’s office manager, stated matter-of-factly “We should not have been listed [as working with the company]” and there is no existing partnership or plan to pursue any.

In an equally clear denial of any partnership with Staples or his company, Jacqueline Carr, director of communications and media relations with UCSD Health Sciences, told SDGLN that “UC San Diego Health Sciences does not have a contractual partnership nor any clinical trials or research awards with EXUSMED.”

According to Scott Lafee, director of media relations at UCSD, there was one meeting between Staples’ team to discuss pursuing a joint grant, but no further action was taken and none is expected.

Yet at an investor meeting in October 2014, Angela Kosteliz, a one-time consultant for EXUSMED told SDGLN that Staples continued the lie, telling shareholders and investors that the UCSD partnership was very real, as was the pending pilot study.

In fact, in an email exchange with SDGLN Staples again defended his claims of a UCSD partnership saying that a Maile Ann Young Karris is an advisor to the company and oversees a clinical trial for UCSD and identified her as being part of “roughly 8 months’ worth of meetings.”

SDGLN reached out to Dr. Young, who is a medical provider at UCSD’s Owens Clinic. Dr. Young was on maternity leave when we reached out, but she eventually responded through UCSD’s Carr repeating UCSD’s claims that there is no partnership with PMH.

Not even close

According to the company’s website, PMH has “completed R&D and patent-protected technologies that will accelerate therapy, lower healthcare costs and create a better healthcare experience for patients and their physicians.”

The website also says “PMH is currently partnered with various entities for piloting proof of concept and is preparing to launch commercially in early 2015.”

However, according to the company’s largest investor, that rosy picture is far from accurate.

“Strategic partnerships and alliances are non-existent, non-functional, or severely damaged,” he wrote in in a strongly worded letter he sent to the board taking the company’s leadership to task. In the letter the investor outlined a series of reasons why the company is in trouble.

“The originally proposed products are unfinished and cannot be completed without further funding,” the letter said. Complicating matters, the investor said is that “Pending litigations are growing and will keep the company mired in legal issues for the anticipatable future.” The letter also explained that “Any new funding will first go to resolve litigations instead of proposed product and services.”

In the letter, which was written to resign from the company’s advisory board, the investor, who still maintains his investor shares, went on to directly question the company’s executives. “Leadership at minimum has proven gross negligence and incompetence in corporate management and at worst, opened the door to criminal indictments,” he wrote.

Not everyone who has invested or loaned money into the company is negative on its outlook or about the leadership, however.

According to Nicole Shounder, one of the company’s investors who funded the company to the tune of $42,000, things could be worse. In an email exchange with SDGLN, she wrote: “I will say given all of the hits this company has sustained from outside and within, if the business plan wasn’t solid and didn’t have the leadership in place it does to hold it together through all of this and still have a product that can be held dormant but executable with funding, that’s impressive.”

No San Diego IndieFest payment either

In January 2014, the company signed an agreement to be the title sponsor of San Diego IndieFest, the iconic music festival. However, SDGLN has learned that the contract was contingent upon the company closing Series A financing, which is a critical early-phase funding of start-up companies.

IndieFest organizers were promised that the funding was imminent. But Exusmed has yet to receive the millions of dollars often associated with Series A money, and as a result the company never made good on its commitment and IndieFest 2014 never happened.

In a press statement in July 2014, IndieFest organizers Danielle LoPresti and Alicia Champion cited their desire to relocate the festival from Liberty Station to City Heights as the primary reason the 2014 edition of the music festival would not materialize, as well as personal family and health issues.

In an email to SDGLN, Champion asserted that IndieFest never made a formal request for the funds from the company but had every reason to believe that should they have done so, the money would have been given immediately.

Where that money would have come from, however, remains a mystery.

Former employees waiting for pay

Nearly a dozen employees worked for PMH in its various iterations, and as far as our investigation can show, very few of them ever received any compensation of substance, if any at all.

Through a formal request for records from the State of California, SDGLN has obtained documentation from the California Department of Labor that shows the company has six complaints against it for non-payment of employee wages.

In one case, the Department ruled directly for the plaintiff, former employee David Chua, for $25,758.25. According to the Department of Labor documents, Chua has yet to receive any money from the judgment and a lien against the corporation is making its way through San Diego County Superior Court.

In two other cases, former employees Rica Ramon and Roman Burtyk reached settlements with the company in October 2014 during hearings facilitated by the Department of Labor.

Burtyk told SDGLN that he negotiated a settlement with Staples for $36,000 to be paid in full no later than Dec. 31, 2014. As of Jan. 20, 2015, the company has yet to make any payments on the settlement. Burtyk told SDGLN that the $36,000 was a significant discount. Since the money was not paid on time, the Department of Labor will impose a series of penalties bringing the total amount due to $82,000.

SDGLN has heard from two more former employees who say they too will be filing their disputes with the Department of Labor with claims totaling more than $200,000 combined.

While employees may well be owed hundreds of thousands of dollars, it does not appear any of them will ever see a dime.

On Aug. 6, 2014, Deputy Labor Commissioner Mark Meeker makes a damning notation in one of the case file for David Chua: “Defendant concedes to owing a portion of the claim but [the company] has no money to negotiate with. They anticipate they will receive funding in the future and will reach out to settle if they can.”

In his email, however, Staples remains constant.

“It is and always has been this company’s intention to honor these claims as the company is able,” Staples wrote. He continued, saying the company is “doing everything within its capabilities to honor our obligations.”

Burtyk told SDGLN that he never expects to see the money owed him and said a recent conversation with Staples confirmed his fears.

After the deadline to pay his claim had passed, Burtyk says Staples reached out to apologize. “He said that he was financially devastated and was going to have to file bankruptcy. He said he was the victim of a conspiracy lead by [investors and former employees] to smear him,” Burtyk said.

What’s next?

With the deadline passing to make good on labor settlements, a series of court actions will follow aimed at recouping the money owed to former employees, meaning the company on life-support is going to soon need a defibrillator.

However, liens or judgments against a company that doesn’t have any money is like “trying to get blood from a turnip,” one former employee remarked.

As for other investors, at least three seem resigned to having lost the money and never expect to see it again. Since civil action against a company that doesn’t have money to pay the judgments already filed against it doesn’t make much sense, investors tell SDGLN they can only hope for justice.

“They [Staples and CFO Ray] need to be wearing orange jumpsuits,” the main investor told us, “both of them.”

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(Editor's note: Articles written by San Diego Gay & Lesbian News and its contributors may not be reprinted without the written consent of Hale Media. Any lifting of quotes or republishing of any content published by SDGLN must be accompanied by a proper link back to our original story and full credit to the author and this online media source. To receive written consent, contact SDGLN Editor in Chief Ken Williams at editor@sdgln.com.)