SED Sued By Former CEO

In the suit, filed Nov. 3 in the Superior Court of Dekalb County, Ga., Mark Diamond alleges he was fired by SED&'s board of directors July 25 in retaliation for his actions to investigate a shareholder complaint about alleged financial improprieties at the publicly traded company, based in Tucker, Ga.

The papers state that a shareholder, unnamed in Diamond&'s lawsuit, filed a March 2 complaint that alleges “resources [were] improperly lavished on the Diamond family,” thereby reducing shareholder value. Among the shareholder&'s complaints are an allegation that Jean Diamond, Mark&'s mother and chairwoman of the board, personally received $4.4 million from a life insurance policy that the company paid for and therefore should have benefitted from, the suit states. It also states that the shareholder was concerned about “golden parachute provisions of members of the Diamond family as well as the sale of a vehicle to Mrs. Diamond at less than fair market value,” which the shareholder saw as evidence of resources that were improperly received.

The life insurance policy was for Jerry Diamond, Mark&'s father and co-founder of SED, who killed himself June 12, 2003. In the suit, Mark Diamond alleges that his father committed suicide because he was “depressed and anxious about an inquiry letter received from the Securities and Exchange Commission regarding alleged improprieties by SED.”

The lawsuit also states that Mark Diamond substantiated “many of the allegations of the shareholder.” Diamond, who worked at SED for 18 years, could not be reached for comment.

SED acknowledged the lawsuit but has not responded to it, said Mark DiVito, vice president of operations at SED.

“Mr. Diamond was removed by the board as CEO and subsequently to that, SED has taken steps to improve the operations of the company. We are seeing positive results from changes that were made,” he said.

DiVito declined to detail those changes, citing the active litigation. However, he added, “We are doing well. [The lawsuit] is an unfortunate situation but something that companies have to do sometimes.”

One solution provider said his opinion of SED could be determined by the outcome of the lawsuit and any subsequent investigation.

“If we based decisions on allegations, nobody could function. But if [the lawsuit] went forward, it would definitely play on how I looked at the company,” said Lou Tucci, president of POS Computer, a Frisco, Texas-based solution provider.