I write at the request of Brian Mullaney to help explain the circumstances that led to the voluntary U.S. Chapter 11 bankruptcy filing, on December 29, 2016, of the non-profit surgical charity WonderWork, Inc. (“WonderWork”), and its ultimate liquidation.
I was the attorney who represented WonderWork in its 3-year arbitration ordeal before a single American Arbitration Association (“AAA”) arbitrator, John Wilkerson, in what started out as a rather simple, straight-forward contractual dispute with the blindness charity Help Me See, Inc. (“HMS”), concerning the parties’ services agreement (the “Agreement”), executed in August 2011. Instead, over WonderWork’s objections, the arbitration was effectively hijacked by non- party Charles Wang (now deceased), and his Smile Train attorneys, and turned into a far-ranging personal attack and character assassination directed at Brian Mullaney and his tenure at and departure from The Smile Train, Inc. (“Smile Train”). These Smile Train issues were completely irrelevant to the contract issues between WonderWork and HMS and were clearly intended to adversely impact Brian Mullaney’s credibility before the arbitrator, in support of HMS, as orchestrated by Charles Wang, his personal attorneys, and fellow Smile Train subordinates and/or others controlled by Charles Wang, all in furtherance of Wang’s years’ old personal obsession with destroying Mullaney.
Wang’s Revenge
The fallout between Wang and Mullaney began in early 2010 when Mullaney, then the 10-year President and CEO of Smile Train, pushed the Smile Train Board to consider expanding Smile Train’s mission beyond cleft surgeries in order to take advantage of Smile Train’s ever-
growing unspent surplus of donations that by 2010 had grown to more than $135-million. Wang vehemently opposed a change in Smile Train’s mission (likely, given his business interests in China, where Smile Train performed the majority of its cleft surgeries), and demanded that the donation surplus remain in his control and be allowed to continue to grow, unspent. Wang’s opposition eventually resulted in Mullaney’s forced departure from Smile Train (orchestrated by Wang) in October 2010, once Wang gained control of the Smile Train board with his self- appointed subordinates and took over control of the charity.
The relationship between Wang and Mullaney deteriorated further in February 2011, after Mullaney had stepped down as President but remained on the Board of Smile Train, when Mullaney (and other Board members) opposed Wang’s proposed merger of Smile Train into the significantly smaller Virginia-based cleft surgery charity Operation Smile. Wang’s merger proposal was subsequently withdrawn in response to widespread negative publicity and universal donor opposition. Wang publicly blamed Mullaney for the failure of the proposed merger, although regulatory approval of the proposed merger, which would have been required, was far from certain.
The WonderWork-HMS Arbitration
WonderWork commenced the AAA arbitration against HMS in March 2013 to recover approximately $1.3-million in unpaid management fees that were still due to WonderWork under the parties 5-year services Agreement, following HMS’ premature termination of the Agreement after 11 1/2 months. Under the Agreement, WonderWork had been hired to build, manage and develop a direct mail marketing program for HMS, similar to the program Brian Mullaney had put together while at Smile Train, and to provide HMS with other specifically identified marketing services to improve HMS’ overall fundraising. HMS, which clearly regretted entering into the 5-year Agreement the moment it was signed and regretted also having to pay monthly management fees to WonderWork, terminated the Agreement, prematurely, before the end of the first year, purportedly “for cause,” which termination WonderWork disputed as being wholly contrived, unjustified and “without cause.” Instead of limiting the arbitration to this rather straight-forward contractual dispute between WonderWork and HMS, the arbitrator allowed Wang’s and Smile Train’s attorneys, who also represented HMS in the arbitration, to effectively re-litigate all of the personal disputes that Wang and Smile Train ever had with Mullaney – some decades old, even those disputes that had already been resolved by settlement and others that arose after Mullaney departed from Smile Train, as well as disputes with Mullaney that Smile Train commenced after the arbitration with HMS commenced – none of which was at all relevant to the contractual disputes between WonderWork and HMS under the Agreement.
As a result, over WonderWork’s repeated objections, the arbitrator permitted evidence and testimony, including excessive amounts of unsupported accusations of alleged personal
wrongdoing by Mullaney,1 based on nothing more than naked speculation, gross misstatements of decades-old facts and excessive unconfirmed hearsay allegations, all from Smile Train witnesses (including Wang and others that he controlled), on issues that went far beyond the scope of the dispute, and were intended solely to discredit and to impeach credibility and to cast aspersions upon Brian Mullaney, personally, and upon WonderWork by association. Virtually all of the witnesses who testified for HelpMeSee were, at the time, being paid directly or in-directly by Charles Wang.
Unfortunately, Smile Train’s efforts at character assassination worked, as, in finding for HMS, the arbitrator stated in his final award, without legitimate basis to do so, that he found Brian Mullaney to be “not … credible” and his purported conduct “reprehensible,” even though neither Brian Mullaney nor Charles Wang or Smile Train were parties to the arbitration which was solely between the two public charities WonderWork and HMS.2
In response to WonderWork’s arbitration demand for $1.3-million in unpaid management fees,3 HMS asserted several never-before complained of counterclaims, including a demand that WonderWork turn over to HMS all of the charitable donations that WonderWork had received from its Founding Donors (approximately $8.1-million) during the period that the Agreement was in effect.
These never before asserted complaints and counterclaims were initiated by HMS only after it dismissed its original attorney (a solo practitioner), and retained the same attorney, Vincent Sama (together with his at the time 400-attorney international law firm, Kaye Scholer, LLP, n/k/a Arnold & Porter Kaye Scholer LLP), who had defended Charles Wang, personally, in the several shareholder litigations brought against Wang following his departure from Computer Associates concerning Wang’s role in the $3.3 billion accounting fraud that was found to have occurred at Computer Associates under Wang’s watch. Vincent Sama also served as Charles Wang’s personal attorney in his efforts to remove Brian Mullaney and his management team from Smile Train.4 Attorney Sama and his law firm also continued to represent Smile Train
1 During the course of the arbitration, Smile Train and HMS witnesses falsely accused Mullaney of purported blackmail, witness tampering, income tax evasion, bribery, fraud, perjury, expense account abuse and suspected theft of millions of dollars of charitable donations – none of which was documentable or supportable by any real evidence. Unfortunately, these naked allegations had the desired effect upon the arbitrator, who clearly did not believe Mullaney’s repeated denials of wrongdoing or the documentary proof that exculpated Mullaney.
2 Indeed, the first 40 paragraphs of the award speak only of the disputes between Mullaney and Smile Train and make no mention whatsoever of HMS or of the Agreement with WonderWork.
3 The parties Agreement required all disputes to be resolved by AAA arbitration before a single arbitrator.
4 The cooperation between Smile Train and HMS, against WonderWork, began even before HMS had served its notice seeking to prematurely terminate the Agreement in August 2012, as representatives of Smile Train (including Wang and Smile Train’s attorneys) began meeting with HMS months before apparently to share information and strategy to assist HMS’ efforts to avoid its obligations to WonderWork under the Agreement.
(while representing HMS in the arbitration) with respect to the several new lawsuits that Smile Train filed against Mullaney after he left Smile Train, including litigations that Smile Train commenced both in the US and the UK (commenced by UK counsel) after the arbitration commenced. As a result, testimony concerning all of these post-Agreement claims were allowed into the arbitration, over the repeated objections of WonderWork, to further prejudice Brain Mullaney’s character in the eyes of the arbitrator. In addition, several Smile Train witnesses, including Charles Wang (who testified for 2 days), and other witnesses employed by or controlled by Wang (including Smile Train’s direct mail vendor, who after testifying adversely to WonderWork, reportedly received an increase in his contract fees from Smile Train) appeared and testified in support of HMS and against Mullaney and WonderWork, even though Smile Train had no direct interest in the outcome of the arbitration, other than the personal destruction of Brian Mullaney.
Smile Train, and its attorneys, were very influential in the arbitration proceedings,5 especially once Sama and his law firm replaced HMS’ prior solo attorney. The Smile Train influence particularly manifested itself in the new, and never before complained about, counterclaims that HMS asserted after Sama and his law firm got involved. Included among the never before asserted complaints that manifested only after the arbitration commenced, was a rather remarkable contention, argued by HMS’ new attorneys, without support in the Agreement or in any other document, that asserted that HMS had the exclusive right to all $8.1-million in start-up donations that WonderWork received during the life of the Agreement. HMS claimed a very tortured interpretation of the Agreement’s plain contract language to argue that the words “only client” as used in the Agreement, really meant “exclusively” and “24/7,” to claim that WonderWork had no right to conduct its own start-up fund-raising activities while providing services to HMS under the Agreement (even though nothing in the Agreement expressly prohibited start-up fundraising by WonderWork, and the intent to conduct start-up fundraising was repeatedly disclosed to HMS both before and after the Agreement was signed without complaint prior to the arbitration).
As a result, in its post-hearing submissions HMS claimed that all $8.1-million of the start-up donations that WonderWork received from its Founding Donors during the life of the Agreement should be turned over to HMS, because HMS claimed that each of these donors was somehow “misled” into donating to WonderWork, when, according to HMS, these Founding Donors had instead intended to donate to HMS (even though each Founding Donor had a long and sustained relationship with Brian Mullaney, especially his father and none had ever heard of
5 More Smile Train witnesses than HMS witnesses gave testimony at the arbitration. Smile Train witnesses Charles Wang, Roy Reichbach and Priscilla Ma (2 days each) gave extensive testimony in support of HMS, all directed at Mullaney’s relationship with Smile Train, both before and after he stepped down as President and CEO, and all designed to defame Mullaney’s character in the eyes of the arbitrator. Smile Train former board members Bob Bell (1 day), Rob Smits and Mark Atkinson (2 days each) also testified at the arbitration, although both Smits and Atkinson testified in support of WonderWork as rebuttal witnesses in an effort to rebut the attacks upon Mullaney’s character.
HMS prior to making their donation to WonderWork).
The Arbitration Awards
After 49 hearing sessions, at which 16 witnesses testified and over 1,000 exhibits were marked into evidence, and after receiving several hundreds of pages of post-hearing submissions summarizing the arguments of each side, arbitrator Wilkinson issued two extraordinary arbitral awards, both of which, from their content made clear that arbitrator Wilkinson had simply ignored all of the proof, evidence and testimony presented by WonderWork, and instead adopted the entire HMS “story” (influenced by Smile Train) almost verbatim – indeed the first award liberally “cut and pasted” large portions of HMS’ post hearing submissions, almost verbatim.
The first award, issued on October 13, 2016, awarded HMS approximately $8.3 million (comprised of the $8.1 million in Founding Donor donations made to WonderWork during the life of the Agreement, plus additional purported contract damages related to unfulfilled but rejected pledges, as adjusted for management fees for July and August that were still owed to WonderWork) plus approximately $2.78 million in interest. Thereafter, on December 21, 2016, the arbitrator issued a separate second award of attorneys’ fees and costs in favor of HMS in the amount of $4,706,553.18 (HMS had demanded $5,883,191.47),6 plus an additional award of
$149,563.99 in arbitrator and AAA fees, costs and expenses.7 Together, the two awards aggregated over $16-million.
The sheer magnitude of the award and the wholesale almost verbatim adoption by the arbitrator of HMS’ attorneys’ arguments together with a complete ignoring of WonderWork’s valid legal and factual positions, is difficult to explain, and perhaps can only be reconciled in either one of two ways. Either, Arbitrator Wilkerson developed a severe animus against Brian Mullaney, personally, whose personal character was repeatedly and unfairly attacked, without proof, throughout the 49 hearing sessions by each of the HMS and Smile Train witnesses, and who the arbitrator described in his award, unnecessarily and unfairly, as “not …credible” and “reprehensible,” that prejudiced his final decision against WonderWork; or, worse, Arbitrator Wilkerson had an improper (and perhaps illegal) bias in favor of the HMS claims. All of WonderWork’s defenses, arguments and explanations, supported by the direct evidence and testimony of WonderWork’s witnesses that rebutted many of the findings, were blatantly ignored in the final award. Instead, the final award, “cut and pasted” from the HMS legal papers submitted at the conclusion of the hearing sessions, contained hundreds of factual and legal errors, and repeatedly quoted from Smile Train/HMS’ attorneys’ unsupported conclusions and
6 A sum that was almost 6 times the amount of attorneys’ fees and disbursements incurred by WonderWork in connection with this 3-year arbitration ordeal.
7 The result of this additional award was that WonderWork was forced to pay 100% of the arbitrator and AAA fees for both sides – $149,563.99 paid by WonderWork and the additional award concerning the $149,563.99 paid by HMS, plus 80% of HMS’ billed legal fees, as well as its own.
arguments. As an example, the award contained the statement that WonderWork had failed to comply with discovery orders “from the beginning to the end of the arbitration,” which was a complete falsehood, and was but another fiction advanced by the Smile Train/HMS attorneys in their post-hearing submissions that was blindly cut and pasted into the final award by the arbitrator, perhaps in an attempt somehow to justify the harsh result. In truth, the only discovery order ever issued by the arbitrator during the course of the hearings ruled that WonderWork had in fact complied with its discovery obligations. Somehow this was forgotten in the final award.
WonderWork’s efforts to vacate the awards on appeal, proved unsuccessful,8 and on December 29, 2016, WonderWork was forced to file for Chapter 11 bankruptcy protection.
Smile Train’s Harassment Began Even Before Commencement of the Arbitration
Smile Train began harassing WonderWork even before the arbitration with HMS was commenced. Shortly after the Agreement with HMS was signed, Smile Train began taking steps to disrupt WonderWork’s efforts to provide services under the Agreement. Once Smile Train had become aware that WonderWork had entered into a contract to build and develop HMS’ direct mail program, Smile Train began threatening its vendors that it would cease doing business with such vendors if the vendor continued to provide services to HMS because of HMS’ relationship with WonderWork and Mullaney under the Agreement. HMS’ direct mail vendor and the website design company that WonderWork was using to design a new website for HMS, both resigned their contracts with HMS under threats from Smile Train that Smile Train would stop using such vendors for Smile Train business. Before eventually joining forces with HMS to work against WonderWork, Smile Train also complained to HMS about a HMS direct mail mailer that WonderWork had designed for HMS, claiming that the HMS mailer used the same “concepts” that prior Smile Train mailers had used – i.e., before and after photos, thank you mailings and an objection to stating in the HMS mailer that Brian Mullaney (who signed the HMS mailer) had previously worked at Smile Train as its CEO and President (true statements).
Later, after joining forces with HMS to plot WonderWork’s demise, Smile Train sent a baseless cease and desist letter to WonderWork concerning a WonderWork mailer.
WonderWork responded to the letter with proof disputing the Smile Train claims as being without merit and Smile Train never followed up or pursued the matter further. Even though the Smile Train letter (addressed to WonderWork) had no impact on WonderWork’s ability to provide services to HMS under the Agreement, HMS used the Smile Train letter to WonderWork as a pretext to allege a default of the Agreement and pointed to the letter as one of the purported “for cause” bases for its premature termination of the Agreement. As evidence of their cooperation against WonderWork, on the same day that Smile Train sent its letter to Wonderwork, Smile Train also secretly forwarded a copy to HMS for its use in its termination
8 See Brief for Respondent-Appellant, dated July 10, 2017, filed on behalf of WonderWork by appellate and bankruptcy counsel, Cater Ledyard & Milburn LLP, which provides confirmation of the above concerning the interference of Smile Train and Charles Wang with respect to the contractual dispute between WonderWork and HMS, as well as confirmation of the absurdity and unfairness of the arbitration awards that resulted.
letter. Thereafter, Smile Train continued to plot with HMS against WonderWork, as Smile Train (including Wang and board member Reichbach) and Smile Train attorney Sama, began meeting secretly with HMS and its attorney (before being replaced by Sama) to plan the HMS defense against WonderWork’s arbitration demand.
Smile Train’s Harassment of Mullaney Continued After the Arbitration Commenced
In addition, after the Agreement was terminated, Wang and Smile Train, by the same attorneys who were representing HMS in the arbitration, commenced and prosecuted several additional litigations against Mullaney while the HMS arbitration was pending. The first, was a litigation brought by Smile Train against Mullaney that challenged Mullaney’s right to publish and circulate a book written by Mullaney concerning his prior positive experiences at Smile Train, even though Mullaney had filed a copyright registration for the work.9 The papers that Smile Train filed to commence the litigation contained admittedly false statements concerning the circumstances of Mullaney’s departure from Smile Train. The litigation was settled by Mullaney when he could not afford to pay the legal fees that would have been required to defend against the claims alleged. Even after the case was settled, Smile Train repeatedly asserted baseless claims that Mullaney had violated the terms of the confidential settlement agreement that resolved the case.
After the HMS arbitration commenced, Smile Train also brought another litigation against Mullaney in the UK, filed by Smile Train UK, asserting that all the compensation that Mullaney had received from Smile Train UK while a director of Smile Train UK, all of which was approved at the time by Smile Train US, was a technical violation of UK Charities law that required certain technical formalities to be followed as a pre-requisite to allowing such compensation to directors. Even though the payment of compensation to Mullaney by Smile Train UK, as an allocation of his entire Smile Train compensation, was done for accounting purposes and for the benefit of Smile Train US, and even though such payment had been approved at the time by both the US and UK Smile Train boards, as well as its US and UK auditors and solicitors, Smile Train refused to correct the technical defects that would have allowed the compensation to be made compliant with UK Charities law, and sued to recover the sums from Mullaney. The UK litigation resulted in a final order directing Mullaney to return the sums received from Smile Train UK but acknowledged that Mullaney had a claim over against Smile Train US for the amount of his compensation that he was required to return. Clearly, the UK litigation was meant solely to harass Mullaney who was forced to incur substantial UK legal fees to defend himself, and ultimately to return the approximately $1-million in compensation that he had rightly earned.
Smile Train also commenced a lawsuit against its former intellectual technology vendor (who also provided services to WonderWork) arising from the failed merger with Operation Smile purportedly in order to determine whether Smile Train’s computers were improperly
9 These same Smile Train attorneys also stifled Mullaney’s efforts to publish a second book concerning his experiences at WonderWork, by threatening the planned publisher with litigation.
accessed to release purported confidential material, including donor lists, to opponents of the merger. As part of that litigation, Smile Train (by the same attorneys who were representing HMS), filed repeated court proceedings seeking to subpoena Mullaney to provide testimony concerning his opposition to the merger and whether Mullaney had any Smile Train donor records in his possession, forcing Mullaney to incur additional legal fees to limit the scope of the subpoena, including appellate costs, in the midst of dealing with the HMS arbitration.
Ultimately, Smile Train obtained Mullaney’s deposition, but it was limited to inquiring solely about Mullaney’s experiences with the vendor’s services while President of Smile Train.
Smile Train’s Harassment Continued Even After WonderWork’s Bankruptcy Filing
The persecution of Mullaney by Charles Wang and his Smile Train/HMS attorneys continued even after WonderWork filed for US Chapter 11 bankruptcy protection. HMS, by the same attorneys who had represented HMS in the arbitration and who continued to represent Smile Train and Charles Wang, personally, repeated challenged WonderWork’s bankruptcy filings and filed repeated motions for the appointment of a Trustee to take control of WonderWork away from Mullaney. Once again, the tactics of HMS were to attack Mullaney personally – now supported by the bogus statements contained in the arbitration award – and to attack WonderWork’s management and accounting procedures. These attacks caused the debtor to incur enormous legal and other professional fees in responding to HMS’ attorneys’ attacks.
Although the bankruptcy court initially denied HMS’ request for the appointment of a Trustee, the court ordered the appointment of an Examiner to examine the legitimacy of certain of the financial complaints that HMS kept alleging. As a result, the Bankruptcy Court appointed Jason
R. Lilien, an attorney with the law firm Loeb & Loeb LLP, as Examiner, who claimed to be independent and unconnected with any party or creditor in the bankruptcy. Lilien, in turn, retained his law firm, Loeb & Loeb, to act as his attorney to assist in the Examiner’s investigation of the financial issues concerning WonderWork on which the bankruptcy court sought additional information.
After several months of examination by the Examiner’s accountants and attorneys, and several hundreds of thousands of dollars of incurred fees, the Examiner issued a 277-page report, dated October 25, 2017, that was very critical of Mullaney concerning his methods of operation at Wonderwork, both pre- and post-bankruptcy. The Examiner’s negative conclusions subsequently formed the basis for the bankruptcy court’s appointment of a Chapter 7 Trustee in the WonderWork bankruptcy, for purposes of liquidating WonderWork. However, after the Examiner’s report was issued, the Examiner’s law firm, Loeb & Loeb LLP, made a disclosure in the bankruptcy court purportedly to “correct” its prior filing of alleged neutrality. That post- report filing disclosed that Loeb & Loeb LLP had previously represented and was still providing legal services to a company (NeuLion, Inc.) controlled by Charles Wang and his wife, and that some of the same Loeb & Loeb attorneys who were involved in writing the report for the Examiner, apparently had also worked on matters for Charles Wang and Roy Reichbach, while they controlled NeuLion. This subsequent disclosure, described by Loeb & Loeb as a mere “oversight,” although not acted upon by the bankruptcy court, calls into serious question the so-
called impartiality of the Examiner’s negative findings against Brian Mullaney, and causes one to wonder whether any undue adverse influence was again asserted by Charles Wang in the Examiner’s Report’s accusations of misconduct, solely to damage Brian Mullaney.
As to the substance of the Examiner’s reported complaints concerning the day-to-day management and accounting procedures of WonderWork, both pre- and post-bankruptcy, I have no personal knowledge as I was not involved in such matters, nor was I ever retained to provide any legal advice concerning such procedures. As noted above, my involvement with respect to WonderWork was limited to my work on the HMS arbitration and the related work concerning the post-arbitration Smile Train litigations, as reported above; I had no involvement in WonderWork’s day-to-day business operations as a public charity.
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I hope that the above sheds some light on the painful and unjustified circumstances that have resulted in the complete destruction and devastation of so worthwhile a charity as WonderWork, which until its demise had been providing so much good to so many needy and impoverished children and adults.
Joseph Vogel