British Columbia

Tech startup founder was forced out of company so investors could make 'gobs of cash,' lawsuit claims

Kathryn Loewen says investors conspired to push Control Mobile Inc. into receivership before they bought her intellectual property and assets in a foreclosure sale for $1.8 million — and then had the company appraised at close to $90 million.

Kathryn Loewen says U.S. investors conspired to push Vancouver-based Control Mobile into receivership

Vancouver software developer turned entrepreneur Kathryn Loewen is alleging that her backers and business associates turned on her and stole her company, in a California-filed lawsuit. (Facebook)

A Vancouver woman who launched her own financial tech firm is suing her former backers, alleging that they stole the company from her.

Kathryn Loewen, a software developer turned startup entrepreneur, filed a 46-page civil lawsuit in California Superior Court on Jan. 22, accusing seven defendants of fraud and financial improprieties.

Loewen says her former investors conspired to push Control Mobile Inc., her Vancouver-based startup, into receivership, pushing her out. After that, she says, they bought her intellectual property and assets in a foreclosure sale for $1.8 million.

Loewen's complaint alleges that the new owner then had the company appraised at close to $90 million. That appraisal could not be verified.

Rise and fall

Having spent 15 years working in finance for companies including Apple and Toyota, and earning a master's degree in business administration from Royal Roads University in Victoria, Loewen developed a payment analytics tool and founded Control Mobile in 2013.

She designed apps to enable business owners to oversee operations from their phone, and lobbied Silicon Valley for funding. By 2015, Loewen had secured $1.2 million in venture capital funding.

Her civil lawsuit, which was later moved to the United State District Court of the Northern District of California, outlines how she was then allegedly pushed out of the company while her investors — whom she says manipulated a health crisis in her family to hasten her exit — set up secret deals to make "gobs of cash" once they got rid of her.

In May 30, 2016, Loewen says she was invited on a tour around San Francisco Bay on a 50-foot racing boat, stocked with "an abundance of alcohol," and was allegedly encouraged by her host, her first investor, to drink.

That's when she says she first met John McDonnell III, who had 20 years experience in finance and got involved with her company.

Kathryn Loewen founded Control Mobile in 2013. (Twitter/Innovate BC)

'Orchestrate a financial crisis'

But Loewen alleges that McDonnell and another principal "intentionally" kept her and other board members "in the dark" about promising business deals "so that they could ultimately orchestrate a financial crisis and take over the company."

In the complaint she alleges that McDonnell manipulated Control Mobile's cash flow to cause her "mental distress" and to "create and exacerbate" the company's precarious financial state. 

By November 2017, Loewen alleges she was urged to step down as CEO and McDonnell took over, saying he could get more funding in that role.

Behind the scenes, McDonnell and investor Michael Bradley began discussing "a number of lucrative and valuable deals" without telling her or the board, it's alleged.

On Nov. 18, 2017, four days after McDonnell took over as CEO, Bradley allegedly sent him an email reading, in part: "...upon selling this thing for gobs of cash and revolutionizing how small businesses are run, we go into making indie films."

Loewen alleges this email points to a plot to push her out while she dealt with a family crisis.

In December 2017 Loewen says she learned her niece was stricken with bacterial meningitis, and she "hung within seconds of death for weeks," leaving Loewen distraught and often absent from work.

While under this stress, she says she was blamed for the company's financial troubles, faced derogatory comments about her mental health and was accused of substance abuse problems.

Control Mobile was registered in Vancouver and rented an office space on Water Street. (Google Maps)

Alleged ouster

By February 2018, McDonnell had allegedly barred Loewen's return to work, and then accused her of $465,000 in "inappropriate" expenses.

In March 2018, Loewen says, McDonnell filed a complaint to Vancouver Police Department accusing her of fraud.

VPD did not answer questions about this, and no record of charges were filed in B.C.

In April 2018, Control Mobile went into receivership. Loewen's claim says McDonnell and his company bid and won it for $1.8 million, taking over in June. She says Control Mobile was appraised at $90 million just weeks later.

Seven defendants are named in the suit: John McDonnell III, the McDonnell Group, Jack McDonnell II, Tony Van Brackler, Michael Bradley, Gary Bender and Carneros Bay Capital.

Loewen is accusing the defendants, variously based in the states of California, Florida, Utah and Maryland, of breach of fiduciary duty, fraud, defamation and intentional infliction of emotional distress. She is also accusing McDonnell of defamation and slander.

She is suing for damages of an unknown amount. 

Neither the plaintiff nor the defendants' lawyers returned calls for comment.

The allegations have not been proven and the defendants have asked for more time to prepare a reply.


Yvette Brend

CBC journalist

Yvette Brend works in Vancouver on all CBC platforms. Her investigative work has spanned floods, fires, cryptocurrency deaths, police shootings and infection control in hospitals. “My husband came home a stranger,” an intimate look at PTSD, won CBC's first Jack Webster City Mike Award (2017). Got a tip?