Letter to the Board
June 26, 2024
Dear Board of Directors of Lifeway,
Ludmila and I are hoping you are willing to have a short call or videoconference with us about the Board’s plans and next steps. We desire peace.
As we learned during the lawsuits filed by Lifeway against Ludmila and me, the management of the company and certain board processes have been delegated to Jason Burdeen. Here is some information that has probably not been shared with you:
- Lifeway spent millions in legal fees pursuing two lawsuits against us that Lifeway chose to voluntarily dismiss rather than receive a ruling on the merits.
- Julie Smolyansky is demanding that Ludmila “gift” her over 1 million shares. This is her public position in her response to the lawsuit Ludmila filed after Julie and Jason used Company information to block her from selling shares through a 10b5-1 plan. Julie’s personal attorney sent a litigation threat to the broker that was going to sell Ludmila’s shares. Ludmila filed this lawsuit days before Lifeway filed its first lawsuit against us in April 2023. We think Julie and Jason’s desire for shares has been a driving reason for using the Company’s resources to file lawsuits against us.
- Despite my prevailing on the breach of fiduciary duty claim filed by the Company, the Company refused to indemnify me for the legal fees I incurred as required under IL law. As the board should be aware, my lawyer sent a demand last year that was ignored. What this means is that if another investor (like a hedge fund) or even the Company itself sues the directors for breach of fiduciary duty, you have set the precedent that no advance of legal fees or indemnification is permissible.
- Last year, a hedge fund became the fourth largest stockholder in Lifeway and launched an activist campaign. Its press releases were very critical of Julie (link:https://www.globenewswire.com/news-release/2023/06/08/2684694/0/en/David-Kanen-President-of-KWM-writes-letter-to-CEO-and-board-of-LWAY-calling-for-a-sale-of-the-company-Mr-Kanen-also-stated-his-intention-to-vote-his-shares-in-favor-of-the-director.html). I don’t believe the board was fully informed of this activist campaign, with Dorri McWhorter reading the release for the first time during her December 2023 deposition. This campaign was why Jason Burdeen caused Jason Scher to finally approve the engagement of Kroll. The Company, at Burdeen’s direction then hired two very expensive law firms to become engaged in activism defense, Wilson Sonsini and Latham & Watkins. Jason Burdeen was the company’s point person for directing these law firms.
- Jason Burdeen also took a primary role in directing the lawsuits and serving as the “corporate representative” for the Company in the federal court lawsuit filed in April 2024. He submitted several false affidavits and lied in sworn statements under oath on behalf of the Company. All to try to continue pressuring my mom and me for his and Julie’s personal interest. Lifeway had to drop the federal court lawsuit last month when a federal judge ruled the following: “Mr. Burdeen has little credibility left in front of this Court based upon the multiple declarations he has filed in this case and what he said in his deposition. His story keeps changing. His story under oath keeps changing, and that diminishes his credibility.” (May 14, 2024 Transcript at Page 5). Full Ruling: https://purecultureorganics.com/wp-content/uploads/2024/05/Lifeway-Vs-Pure-Culture-Organics-Document-31.pdf
- Other activist investors have taken stakes in Lifeway. Following the release of the company’s second quarter financial results, the Company’s stock has traded downward substantially from its recent highs to about $13 a share as of this letter. But it’s business as usual with Jason and Julie running a microcap public company. Collecting cumulative 7-figure annual compensation packages for Julie and Jason is not a forever plan, even though for Jason Burden, however, it is his forever nest egg.
An initial preemptive first step for the Board to consider is an anti-nepotism policy for directors and officers. The CEO delegating much of her role to her husband is imprudent and should be addressed. - Even though Lifeway has now filed two lawsuits against Ludmila and me, we have not filed any lawsuits against Lifeway.
- As an offensive tactic when I would not agree to recent demands by Jason Burdeen, Julie just days ago filed a restraining order against me. The alleged threats of violence were those made in the email the Board cited as a basis to fire me from more than 6 years ago. So by law I am not allowed to communicate with her. The Board never saw the other part of the email chain where Julie wrote similar threatening things to me. Some members are probably not privy to a particular vicious audio threat leveled against me in 2020, although some may have been directed to ignore its existence. The board is probably unaware that for a time Northwestern Hospital banned Julie from its property because of threats and 4 letter names hurled against hospital employees and other family members at Northwestern who would not give her my medical records, nor would allow Mr. Burdeen access to the ICU room. Because I have to in response to this most recent filing, I will file Julie’s prior emails in the court record. Those emails do not paint me, Julie, or the Board in a good light, but I have to respond to this filing.
Thank you,
Edward Smolyansky