From Bay Street to Wall Street—How Dr. Raza Bokhari Navigated FSD Pharma Amid Deceit and Distractions
Dr. Raza Bokhari fumed at the news as he stared out of his window. As the CEO of FSD Pharma, Bokhari was no stranger to difficult situations, but this one was different. He had been at this for months now: the endless calls and meetings. The tense behind-the-scenes negotiations. The bitter disputes with the company’s founders.
Earlier in the day, Bokhari’s lawyers had dropped a bombshell: the founders’ legal team had just disclosed transcripts of what he thought had been private telephone calls— privileged conversations, really— that FSD’s CFO had secretly taped over five months as they discussed the company’s strategy for a proxy battle waged by two of the company’s founders. That one of his trusted executives would surreptitiously tape 128 hours of his unguarded comments was an unexpected betrayal. Though “traitor” was one of the kinder thoughts that crossed his mind.
The article you are about to read is the stuff of best-selling novels and binge-worthy dramas like “Super Pumped” and “Billions.” And while media, investors and other followers of the Canadian cannabis and U.S. pharmaceutical industries may think they know the story of FSD Pharma, there is more to it than has been told. Much more.
This is a story of trust amid rampant deceit, shifting alliances and abuses. It is a story involving experienced investors, executives and board members with lengthy track records of transforming companies colliding with impatient founders. Yet it is more than just another story of entrepreneurial ambition and greed run amok; it is also a cautionary tale for business partners who think they are trustworthy friends.
This story of founders initiating in-fighting among the insiders has caused FSD Pharma shareholders losses totaling several millions of dollars. Bokhari, a serial entrepreneur and a community leader is exposed to more than a few million dollars in personal losses and above all an economic opportunity loss which could potentially be more than a billion dollars.
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FSD Pharma (CSE: HUGE, NASDAQ: HUGE) is a Toronto-based biotech company. Today, the company claims to have three drug candidates for treating conditions including multiple sclerosis, major depression disorder and PEA inflammatory disease.
In 2018, however, FSD Pharma was a Canadian company claiming to cultivate high-quality, indoor-grown pharmaceutical-grade marijuana. They secured a growing license from Health Canada for a 25,000-square-foot growing facility in Coburg, Ontario. They had plans to add 220,000 square feet of growing capacity as part of a joint venture with Auxly Cannabis Group, Ltd.
FSD Pharma was among hundreds, perhaps thousands, of companies taking advantage of the burgeoning cannabis industry, enabled by the Canadian government’s legalization of recreational marijuana. At the time, the Canadian province of Ontario was a veritable boom town for the legalized marijuana industry, with new cannabis-inspired businesses filing for licenses daily. The industry was drawing entrepreneurs and investors—and their dollars—from around the world. And, as with any quickly emerging sector, it also drew plenty of speculators and flim-flam artists.
In May 2018, taking advantage of the intense interest in the sector, FSD Pharma debuted on the Canadian Securities Exchange (CSE) under the ticker symbol HUGE. Shortly afterward, the founders set their sights higher: a cross-listing on Wall Street. FSD Pharma as it existed in 2018 faced many hurdles in the path to listing on a U.S. exchange, not the least of which was the fact that cannabis was considered a Schedule 1 drug by the FDA, in the same class as ecstasy, heroin and LSD. FSD’s founders needed an advisor who was familiar with accessing the U.S. markets and had the vision to evolve the company into one that could pass legal muster and be attractive to American investors.
Raza Bokhari emigrated from Pakistan in 1991 with a medical degree from the University of Punjab’s Rawalpindi Medical College dreaming of pursuing a medical career in the United States. By all measures, he has realized that dream and then some. Bokhari also earned an MBA from the Fox Business School at Temple University in Philadelphia. This city has served as his home base for a 30+ year career in medicine, pharmaceuticals and technology that continues today.
Bokhari hasn’t practiced medicine since the early ‘90s, choosing an entrepreneurial path instead. He has focused his time and energies on starting, growing and selling healthcare businesses successfully acquiring and investing in financially distressed companies and transforming them into sought-after investments. This work takes significant capital, business acumen, relationships and, more than anything, discipline and calculated risks—all of which have typically paid off nicely for Bokhari.
To Bokhari, however, it has never been all about money. He has always felt obligated to give back to the communities, schools and causes that helped shape him. He has been an active member and benefactor of several of Philadelphia’s esteemed civic and philanthropic associations, including serving as vice chair of the World Affairs Council of Philadelphia, a nonpartisan, international affairs nonprofit that connects the City of Brotherly Love to the rest of the world, as well as a trustee of the Franklin Institute, a Philadelphia science museum and center of scientific research and education. Through his family foundation, Bokhari provided a substantial endowment to the Fox School of Business at Temple University, which has named the suite of Innovation and Entrepreneurship in his honor.
Bokhari also remains an active member of the Pakistani diaspora. Following the events of 9/11, Bokhari was one of 30 contributors to the Pakistan Human Development Fund (PHDF), an organization operating with the support of the United Nations Development Program to improve education and literacy, primary healthcare, access to social services and other assistance, primarily for women and children, in Bokhari’s native country, which remained a key U.S. ally in the region.
For the past three decades, Bokhari has maintained a vast network of entrepreneurs, investors, physicians and scientists, both within the ex-pat population as well as the wider business network. It was through Zeeshan Saeed, a member of the Pakistani diaspora, and one of FSD’s founders, that Bokhari first learned of FSD Pharma
In the mid-2010s, Bokhari was following the Canadian cannabis market and had been considering investments in the space. He knew that although the industry was at an all-time high in 2017 and 2018, the boom was unlikely to last, meaning companies like FSD Pharma needed to find ways to expand beyond the cultivation of cannabis for commercial research and consumer sale if they were to survive.
As a physician and investor in the life sciences and biotech space, Bokhari saw great promise in medicinal uses for cannabis and phytocannabinoids derived from it, knowing, of course, plant-based cannabinoids remained a deal-breaker for any financial sector activity in the U.S, including capital markets. This idea also generated a fair amount of skepticism and controversy in the broader market and medical community. To Bokhari’s reasoning, if a research company developed a synthetic compound that mimicked phytocannabinoids, it would be of immense interest to the pharmaceutical industry.
Meanwhile, FSD Pharma was recently listed as a penny stock on the Canadian Securities Exchange (CSE), trading under the ticker name HUGE. As its founders, Anthony Durkacz and Zeeshan Saeed, struggled to upgrade the stock to become institutional grade, they searched for an entrepreneurial executive who could help them reverse the company’s current trajectory. Through the Pakistani ex-pat community, one of the founders, Saeed arranged an introduction to Bokhari. With his reputation as both a successful entrepreneur and a turnaround artist well-known within the community, the founders believed Bokhari was just the executive they needed.
Bokhari, however, needed to reassure himself of the company’s viability and what opportunities it might have in attaining additional investment, as well as consider the best path to a public listing on a U.S. exchange. In abstract, FSD Pharma faced a tough road ahead: there were more than 200 cannabis-related companies listed on the Canadian markets, many of which had backing from Big Tobacco, global pharmaceutical companies and other well-known consumer brands, but only 11 were cross-listed on both Canadian and U.S. exchanges. It was an uphill task to cross-list FSD Pharma to a U.S. exchange. However Bokhari charted a pathway that would require his business acumen, an infusion of capital from his investment firm and close circle of friends, and assistance from his contacts in business and government that could realize the founders’ vision.
And so it was that Bokhari joined the FSD Pharma board of directors in August 2018.
Now a member of the FSD Pharma board of directors, Raza Bokhari got to the task at hand, meeting with investment advisors who could counsel the board, founders and other company execs on the best approach to applying to be listed on the NASDAQ exchange in the U.S. Starting in the fall of 2018, Bokhari developed a business plan that would result in the company divesting itself of the cannabis cultivation business.
As these discussions progressed in a positive direction, FSD Pharma announced Bokhari’s ascension to executive chairman of the board and chief executive officer.
Against all odds, Bokhari was optimistic about the prospect of FSD Pharma’s listing on NASDAQ. But he knew that to do this, significant changes in company operations would be needed. He developed a five-point plan to prepare the company for a U.S. listing that included, pivoting the company in pharmaceutical R&D, disengaging from all cannabis business in the United States, recruiting a world-class independent board, strengthening the C-Suite with experienced executives and raising, milestone-based, $100 million in additional capital.
To facilitate the company’s expansion into the United States, Bokhari arranged for one of his companies to advance $4.5 million as unsecured working capital and also made available qualified human capital to staff the company. In November 2019, FSD Biosciences filed for incorporation in Delaware to conduct pharmaceutical R&D as a wholly owned subsidiary of FSD Pharma after successfully completing the acquisition of Prismic Pharmaceutical in the United States for $17.5 million through a stock exchange. And by September 2020, the company had shuttered its cannabis operations and relinquished its grower’s license back to Health Canada.
One of Bokhari’s first actions as executive chairman of the board was to establish a first-class, predominantly independent board of directors, rather than one that would rubber-stamp the management’s request or those of the founders. Working through his network, Bokhari proposed—and the founders and existing board approved,– new directors including,
• Dr. Larry Kaiser, MD, FACS – managing director at Alvarez and Marsal and the former president and CEO of Temple University Health System;
• David Urban – a longtime government consultant and political advisor to former presidents and U.S. senators and representatives;
• James Datin – an experienced entrepreneur and investor. As president and CEO of contract research organization BioAgilytix, he brought extensive knowledge of pharmaceutical R&D and clinical trials;
• Robert Ciaruffoli – founder and chairman of Broad Street Angels, an investor network focused on early-stage start-up businesses with significant growth potential. A certified public accountant, Ciaruffoli had served as the chair and CEO of the accounting firm Parente Beard/Baker Tilly.
By the fall of 2019 – less than one year after Bokhari took the helm – FSD Pharma had completed the acquisition of a U.S. based pharmaceutical R&D company, Prismic Pharmaceutical, recruited a world-class independent board of directors, built a C-suite of experienced pharma R&D executives, raised additional capital. Bokhari personally invested nearly $2 million in the initial $4.5 million round. By all accounts, FSD Pharma was operating on all cylinders and ready to debut on the U.S. capital market.
On Jan. 9, 2020, the first shares of FSD Pharma traded under the NASDAQ ticker symbol HUGE. It had taken Bokhari less than a year since stepping in as CEO in February 2019 to accomplish the founders’ goals to list on a U.S. exchange. The founders rewarded Bokhari for achieving these milestones by giving half of their Class A supermajority voting shares. Saeed even suggested to rename the company BSD Pharma from FSD Pharma.
Following FSD Pharma’s launch on NASDAQ, the company continued to make progress in advancing the clinical R&D program. The board unanimously supported securing a shelf registration of $100 million to raise additional capital through offering registered securities and authorized exploring acquisition targets.
In March 2020, as the Covid 19 pandemic began to gallop, Bokhari realized that its lead compound, ultra micro PEA (FSD 201) could stabilize mast cells and down-regulate the cytokine storm, an extreme inflammatory response that the COVID 19 virus elicited and was the primary basis of morbidity and mortality during the COVID-19 pandemic.
Bokhari reached out to his contacts in the U.S. government and Capitol Hill, which included the office of the Vice President, who was the head of the task force to combat the Covid-19 pandemic. Bokhari’s efforts got the attention of the United States Food & Drug Administration (FDA). In June 2020, FSD Pharma submitted an investigational new drug application (IND) to use its micro-PEA-derived agent, FSD-201, as an early treatment for COVID-19, and in September 2020, the FDA approved a Phase 2 trial to treat hospitalized COVID-19 patients with respiratory symptoms.
The progress of FSD Pharma was positive on all fronts; the company’s COVID-19 Phase 2 trial was gaining traction, and the groundwork was underway to conduct trials on three continents. Institutional fund-raising picked up and the company had raised an additional $30 million and was on track to raise an additional $40 million through use of an ATM Financing instrument. An independent analyst from Brookline Capital had begun to cover the stock and had given market guidance of $10 and a strong buy rating for FSD Pharma in the fall of 2020.
Things for FSD Pharma, its founders and shareholders could not have had a more promising outlook. But as often happens, founder remorse, personal self-interest and greed gave birth to distractions and disputes.
In November 2020, one of the founders, Durkacz approached Bokhari, asserting his concerns about the company’s low market capitalization and trading volume of the company, despite all the positive milestones the company had achieved during the year. Durkacz asserted that FSD must consider an acquisition target—Lucid Psycheceuticals Inc. This Canadian psychedelic company aspired to use the properties of psychedelic mushrooms to develop therapies to treat neurodegenerative diseases. Durkacz thought the company was operating in a “hot space” and would draw the attention of retail investors that would then rally the stock and give a much-needed lift to the company’s market cap and stock price.
Bokhari and other key executives, including the CFO, Donal Carroll, and Chief Medical Officer Dr. Edward Brennan, conducted preliminary due diligence on Lucid. During their inquiry, the executives found that Lucid was a notional startup, founded just weeks earlier, with its products not even in the pre-clinical stage. Indeed, many of these proposed psychedelic compounds were merely ideas.
Additionally, it came to light that Durkacz, who brought the deal to Bokhari, had a nontrivial investment in Lucid, which incensed the independent directors who were not appreciative that Durkacz did not fully disclose his vested interest in Lucid.
Bokhari was also more concerned with the fact that none of Lucid’s products were yet in clinical trials; this did not fit within FSD’s business model, which focused on more derisked technologies and treatments further along in the R&D process. Another objection to acquiring the company, however, was that, as part of its NASDAQ application, FSD Pharma had committed to its directors and officers (D&O) insurance underwriters that it would refrain from any work with cannabis or other mind-altering substances. That Lucid’s treatments, in the company’s own words, were based on, and “inspired by, the mechanisms of action of psychedelics” would place the company’s D&O insurance coverage in jeopardy, Bokhari believed.
After his discussions with the independent board members, the Pharma R&D team and other professional advisors, it was clear that the deal did not have majority support. Bokhari declined to put the deal up for a board vote and declared that FSD Pharma would not make an offer for Lucid Psycheceuticals at this time. This infuriated the founders.
Bokhari stared at the email. It was December. 16, 2020. A few days earlier, Bokhari had informed the founders that he would not formally present the Lucid deal to the board, leaving the door open to revisiting the deal after Lucid has made more progress in its research. In no uncertain words, Durkacz, who had brought the opportunity, made it clear that he viewed the decision to pass on Lucid as an unmitigated mistake. And that Bokhari would pay—professionally and personally—for the decision. The excerpts of the email read:
“… This acquisition is favoured by the Company’s two largest shareholders. If the Directors fail to comprehensively consider the potential transaction, if they fail to vote independently and if they fail to act in the best interest of the Company, the shareholders will commence a claim against those rogues, and will immediately vote to remove them from the Board in a very public manner.
“If any member of the Board is uncomfortable with the sector, they are invited to resign. If the Board dismisses this potential transaction without justifiable reasons, merely on the instructions of the CEO, we will remove these Directors and pursue actions against those individuals.
“At this point, all we are asking is for this acquisition to be fairly considered and voted on at a Board Meeting.”
The founders wanted to present the Lucid opportunity to the board personally and put it to a vote as soon as possible and called their own board meeting for Dec. 22, 2020.
They received notice from FSD Pharma counsel that a majority of the board members were unavailable that day due to approaching holidays and the fact that Bokhari was undergoing major abdominal surgery on Dec 21, 2020. The FSD Pharma counsel also informed the founders that a board meeting was planned for Jan. 21, 2021, to discuss Lucid, among other agenda items.
This was not acceptable to Durkacz and Saeed. On Jan. 4, 2021, the founders formally requisitioned a special shareholder meeting to be held no later than March 15, 2021.
The proxy fight for control of FSD Pharma had begun.
As executives and shareholders took sides, Bokhari vowed to hold no prisoners. In strategy discussions with legal counsel and FSD’s CFO, Bokhari threatened—often in language peppered with profanities—to terminate FSD’s president, Zeeshan Saeed, for insubordination.
These discussions, conducted via phone or video conference due to the ongoing pandemic, were presumed to be privileged and confidential com- munications among executives, board members and outside counsel. What Bokhari did not know until nearly a year later was that one participant in these sessions, Carroll, the CFO, was secretly recording these calls to use against him.
Bokhari and the independent board members thought their decision to contest the proxy notice was in the best interest of the shareholders, and Bokhari himself, being among the largest shareholders, worked feverishly to keep control of FSD Pharma. The dissident board members, represented by the two founders sought every possible way to seize it from them. They began to question and cast aspersions on every measure the company took. Moves such as establishing a U.S.-based bank account in late 2020, which became possible once FSD Pharma had divested from all its cannabis-related activity were positioned by the dissidents as end-runs around the company’s internal controls, or worse yet, misappropriation of funds.
In February 2021, the board assembled to refresh an at-the-market (ATM) offering to raise an additional $20 million, which was approved by the board in July 2020.
The dissident shareholders viewed this ATM offering as an attempt by the board to dilute the value of the Class A and B shares they held, prompting the founder to file and amend an application in the Superior Court of Ontario, to confirm the March shareholder meeting and to include an order to prevent Bokhari from raising additional capital. The amendment also called for the court to appoint an independent chair, for future shareholders’ meetings.
This application was ruled on by Justice McEwen of the Superior Court of Ontario in Toronto on March 5, 2021, setting May 14, 2021, as the date of a joint annual shareholders meeting and a special meeting of shareholders requested by the dissidents. The ruling stated that both sides of the proxy dispute would agree upon an independent chair. Justice McEwen however dismissed the dissidents pleading to suspend ATM financing.
As Bokhari prepared for the May 14, 2021, joint meeting of shareholders, the FSD board of directors approved a new licensing agreement to treat gastric ailments in cats and dogs for $750,000, expanded the Phase 2 COVID-19 trial in Eastern Europe and authorized the acquisition of a majority stake of Periovance, a late-stage biotech life sciences company valued at $75 million that had just completed a Phase 3 trial to treat periodontal disease and was actively pursuing commercialization approval with the FDA.
To appoint an independent chair; the FSD approved and Bokhari submitted a list of more than 10 suggestions, including former Speaker of the House Paul Ryan, U.S. Sen. Rick Santorum and former Secretary of State Gen. Colin Powell. The dissident shareholders proposed one person, Carol Hansell, a Toronto-based communications consultant familiar with board governance matters. The dissidents were in no mood to find common ground with the company. They brought an application in the Superior Court of Ontario on April 23, 2021, seeking an order to appoint Hansell as the independent chair of the joint meeting.
In response to the dissidents’ application and on the advice of the company’s legal counsel that the company must have an independent nominee in place to put forward before the court, Bokhari began working down FSD’s list of suggested independent chairs. Ultimately, Bokhari secured Santorum’s interest in facilitating the meeting and FSD counsel began working with the former senator’s legal team on the financial and other negotiations that would culminate in a payment of $75,000 to secure Santorum’s participation.
Upon learning of the conditions of the Santorum contract and citing unwarranted concerns that it fell outside the scope of normal business, the CFO Carroll refused to execute the $75,000 transfer, prompting Bokhari to alert him that he would be placed on leave for dereliction of duty. Another executive later made the payment.
The May 14 shareholder meeting was held as planned, with Hansell serving as independent chair. The Shareholders elected the dissidents’ slate of directors, wiping the FSD Pharma board, including Bokhari. He received a letter from the new board that same day placing him on temporary paid leave pending an investigation into his actions. Without giving Bokhari any notice to show cause, the new board would ultimately terminate him for cause on July 27, 2021.
After 30 years as an entrepreneur, Raza Bokhari had a robust set of processes, philosophies and strategies he drew upon in running companies. Like any seasoned executive, he had trusted advisors he could rely on, vendors and partners that he could count on to deliver and practices that had benefitted his companies. One of these was an executive employment contract that he’d developed over the years.
One of the key aspects of this contract was an arbitration clause. Arbitration, in Bokhari’s view, had been the simplest way to achieve an outcome that, if not agreeable to all parties, was at least fairly adjudicated by an objective third party. The company often paid less than complete severance, and the former employee typically received their compensation faster than had they had a full court hearing.
Bokhari made sure that his employment contract with FSD Pharma included a similar arbitration requirement, not that there was any expectation at the time that it would be required. The clause included language that, in the event he was terminated without cause, Bokhari was entitled to two times his maximum compensation for his time with the company. Based on his stock grants, FSD Pharma owed him approximately $30 million, by Bokhari’s and company’s accounting and consistent with the company’s filing with SEDAR.
The new leadership at FSD Pharma disagreed. They maintained Bokhari had been terminated for cause, citing breaches of his fiduciary duties to the company, including claims he had breached court orders, improperly issued shares and attempted to misappropriate company funds—all of which Bokhari steadfastly refutes, believing that all his actions before his summary dismissal were known to, discussed and approved by FSD’s Board.
The arbitrator, selected and agreed to by both parties, Justice J. Douglas Cunningham, heard depositions and presumably read documents submitted by both sides. The tranche of documents submitted on behalf of FSD Pharma and the founders included cherry-picked transcriptions from 128 hours of dialog secretly recorded by Carroll, during strategy sessions and other calls between Bokhari, the former CFO Carroll and assorted other executives and legal counsel from January through May 2021.
These selected transcripts purposely did not paint Bokhari positively and were meant to mislead the reader. The submitted passages focused mainly on negative and, sometimes, included aggressive statements made in the heat of a moment. They disparaged the founders. And, on paper, they appeared more like the words of a man on a warpath than of a passionate CEO executing his fiduciary duty in fighting off a corporate raid. The statements were akin to Bokhari yelling at someone who cut him off on the freeway. It might feel good to spit out a few expletives and threaten the other driver, but he would never carry through.
Bokhari and his legal team knew the submitted transcripts were a very small subset of the recorded conversations, selected to position him in a negative light. Obtaining transcripts of the remaining recordings—more than 128 hours—was both cost and time prohibitive, given the timeline of the arbitration. Bokhari’s legal team submitted a halfhearted objection to exclude the transcripts, which was unsuccessful and continued to focus on the law and statutes.
The ruling, when it came, was mind-blowing. Not only did the arbitrator rule for the company – negating the $30.2 million severance owed to Bokhari - he did so not by stating that the company was on solid legal ground in dismissing Bokhari for cause but instead found amongst other things that other judges had found Bokhari to be in breach of court rulings regarding the appointment of the independent chair.
Intriguingly, no such formal orders of breaches or contempt of court exist nor were any brought into evidence by the company before the arbitrator. The arbitrator, relied on flawed findings and ordered Bokhari to pay FSD Pharma for the costs the company apparently incurred in fighting his claim, an amount in excess of $2.8 million. The arbitrator continued his overreach and also ordered Bokhari to pay the company back the $75,000 paid to Santorum, as well as the legal fees paid to Santorum’s lawyer; In addition, the arbitrator, in apparent judicial interference, ordered Bokhari to pay back the amount the company paid to the dissident founder, Anthony Durkacz, as a cost awarded by the superior court of Ontario.
It was clear in the arbitrator’s 174-page ruling (almost unprecedented in its length) that he had been swayed by a combination of a personal dislike of Bokhari and his behavior and acceptance of the biased and misleading narrative fed to him by FSD Pharma’s legal team.
The ruling was rife with personal opinions and un-pleaded, unfounded and self-authored arguments that painted Bokhari as arrogant and condescending; a man who would stop at nothing to get the upper hand rather than as an experienced executive working in the best interests of FSD Pharma and its investors, at the risk of costs to himself, personally. The arbitrator’s ruling is peppered throughout with phrases such as “Bokhari’s lack of credibility” and descriptions of the evidence put forward by his legal team like “nonsense” and “defies (sic) credibility.”
Why would the arbitrator go to such an extent to disparage Bokhari and bring into question his credibility as an individual and as an executive in complete disregard of his 30+ year track record? His achievements in business have been well documented. Over the years, Bokhari has won several accolades and awards, and the Fox School of Business & Management at Temple University has named the Innovation and Entrepreneurship suite after him. Is it possible that the excerpts of transcripts from secret recordings made by Carroll had poisoned and manipulated the octogenarian arbitrator?
Companies owned and operated by Bokhari have won awards for rapid growth and for being among the best places to work based on employee feedback. Had Bokhari routinely acted in the manner described by the arbitrator, he and his companies would not have the high employee retention record they have enjoyed, let alone multiple people who have worked for him for more than two decades. Indeed, his longest-serving employee has been with him for 32 years.
Bokhari is appealing the arbitrator’s decision on several counts. Not the least of which is the ruling that he was terminated for breaching a court order—as no such formal order exists.
The appeal also claims that Bokhari was treated unfairly. The ruling was biased against him, as it does not directly address Bokhari’s arguments that showed he was constructively dismissed, was never given the 30-day notice required in his employment contract to repair any material breach, nor did it consider, under the business judgement rule, that until Bokhari balked at the Lucid acquisition, Bokhari had the support and confidence of FSD Pharma leadership and its former board of directors, which included the founders, Durkacz and Saeed.
Most importantly, the appeal to set aside the arbitrator’s award also focuses on seeking relief that the arbitrator, while acknowledging the noteworthy credentials of the independent board members, declared them a “rubber stamp” board that provided no oversight to Bokhari. Even if assumed to be accurate, it is unusual that Bokhari as CEO should be punished, terminated for cause, and denied his severance for the board’s actions—or inactions.
The appeal is set to be heard later this year.
Bokhari has a profound sense of accomplishment regarding his time at FSD Pharma. He brought the company from a debt-laden Canadian cannabis startup to a publicly traded pharmaceutical R&D company on NASDAQ. He associated the company with world-renown advisors on its board of directors. And under his leadership, FSD Pharma expanded its research into new therapies, including an early treatment for COVID-19. To do it all over again, he wouldn’t change a thing.
When he thinks back on his time at FSD though, he does wonder about the connections between the founders, legal counsel, Canadian credit union bankers, and some of the people who played a part in the independent chair decision as well as the arbitration process. Whether directly or indirectly, could those connections have somehow included conflicts of interest that compromised the impartiality and outcome of a review process that is proving so costly to him and him alone? Why didn’t his legal team work harder to get the secret tape recordings dismissed from evidence or ask for a disclosure from the opposing counsel and the arbitrator of their involvement in other active, and recent matters?
Bokhari is surprised that a reputable international law firm that conducted the investigation, did not interview Bokhari. The summary of its findings, which were disclosed in a company press release dated July 27, 2021:
• Declared Bokhari was breaching court orders, while no formal order of breach resulting in contempt of court exists.
• Improper issuance of shares, while this was pleaded by the founders as dissidents in the Ontario court of Justice McEwen, who dismissed the pleading in his ruling of March 5, 2021.
• Attempts to misappropriate company funds, while this was May 6, 2021, board-authorized intra-company transfer of funds that was never completed.
How did the investigating law firm conclude that these actions constituted cause or breach of duties that, with notice, could not be explained or repaired?
While he awaits the outcome of the appeal and remains optimistic about his chances to have the arbitrator’s ruling set aside, Bokhari has another reverse takeover of a clinical-stage pharmaceutical company focused on a novel minimally invasive treatment of skin cancer in the works and with it, another opportunity to build a team, build a business and create value for investors.
Most of the independent board members, which include a former global CEO of Siemens Medical, a former CEO of Temple Health System, and a former CEO of the accounting firm Parente Beard/Baker Tilly, the C-suite executives, the lawyers at Bennett Jones and Paul Weiss, advisors and other stakeholders that had helped Bokhari resuscitate FSD Pharma are assembling again to assist him in this new venture, which is expected to become a reporting issuer on Toronto Stock Exchange.
By all accounts, it is a testament to Bokhari’s credibility and a vote of confidence in his acumen as an executive chair of the board and chief executive officer.