Irate at iPayment

Ousted founder alleges Chatham plot

The founder of New York-based iPayment is suing over his ouster, alleging a hedge fund engineered a boardroom coup as part of a plot to gain control of the company.

Carl Grimstad claims the payment-processing company violated his employment agreement last week, when it fired him without the required 90 days notice. Grimstad said his termina- tion immediately went into effect on Aug. 26.

Although he’s suing iPayment, Grimstad’s main beef is with New Jersey-based Chatham Asset Management.

The hedge fund has seats on iPayment’s board and holds a “significant” portion of iPayment’s debt and equity, according to the suit filed in New York state court.

Grimstad alleges that Chatham is trying to gain control of the company in a debt restructuring process that will wipe out the company’s shareholders.

Grimstad contends that he was the “sole obstacle” to Chatham completing its “illegal scheme to enrich itself” to the detriment of other investors, according to the complaint.

iPayment said Thursday that O.B. Rawls, who had served as co-president, will be stepping into Grimstad’s shoes on an interim basis. Rawls, who joined iPayment earlier this year, will be focusing on refinancing the company’s junk-rated debt load.

The company said Grimstad will stay on as a board member and will be paid through his 90-day notice period.

Chatham has a history of investing in distressed debt. The fund was one of the creditors behind the nowclosed Atlantic City Revel casino.