Sofaware Founder Cleared to Sue Check Point for $5.1 Million

Check Point seems to have acted in bad faith and CFO perjured himself, judge says

A Tel Aviv court has agreed to let Sofaware co-founder Itai Bogner sue Check Point Software Technologies (NASDAQ: CHKP) by proxy.

The type of lawsuit in question is when a shareholder sues on behalf of the company against a body that caused it damage.

Tel Aviv District Court Judge Danya Kareth-Meyer ruled that Bogner could sue Check Point for $5.1 million in alleged damage to Sofaware.

Bogner claims that Check Point, which owns 60% of Sofaware, is behaving belligerently, and withholding monies due for use of Sofaware technology and products. He adds that Check Point is effectively paralyzing Sofaware.

Because he had been active in the Sofaware board of directors, to ensure it stood up for Sofaware rights, Bogner claims - Check Point began moves aimed against him personally.

For instance, Bogner claims, Check Point prevented Sofaware from giving him a bonus, even though all other company workers received one.

Check Point owes Sofaware $5.1 million, Bogner says.

Check Point rebutted that Bogner's lawsuit is another link in a log chain of actions he has taken, together with fellow Sofaware founder Adi Ruppin, to disrupt the company's business.

The data security company claims that Bogner's real goal is to induce Check Point to buy out his shares in Sofaware at an inflated price, which would not be in its best interest.

But Judge Kareth-Meyer ruled that the evidence in the case indicates that Check Point violated the technology usage license it signed with Sofaware.

Also, she wrote, suspicions arise that in response to Sofaware's demand that Check Point pay its debts, Check Point changed its interpretation of the agreement into a "product distribution agreement" that significantly reduced its bill.

In her ruling, the judge leveled criticism against Check Point for its actions in its capacity as Sofaware's controlling shareholder. The evidence indicates that Check Point acted in bad faith, she said, and should have acted at a much earlier stage to nip the trouble with Bogner in the bud. In fact, the judge concluded, Check Point ignored Sofaware's communications and to this day never delivered practical answers to Sofaware's allegations.

Check Point added insult to injury, she wrote, when its chief financial officer Eyal Desheh - who also served as Sofaware chairman and as a director - denied that any negotiations had taken place. That utterly contrasted with the minutes of a Sofaware board meeting, the judge said.