From D CEO May 2019Subscribe
What began as a heartwarming tale—a videogame-obsessed kid grows up to develop games himself, co-founds a successful video game company, and hires his childhood friend as the company’s general counsel—has turned into a bitter, acrimonious shootout waged not in the theater of a gaming console, but in a Dallas courtroom. And although it’s not unheard of for companies and their top in-house counsels to part ways, the dispute between former Gearbox Software top lawyer Wade Callender and his former employers, including CEO and childhood friend Randy Pitchford, has devolved into an ugly clash colored by allegations of a “secret bonus,” corporate credit card misuse, and even “underage porn.” Robert Bogdanowicz, a partner at Dallas’ Calhoun, Bhella & Sechrest, says this type of rancor is uncommon. “Even when a CEO and their general counsel have differences or part ways under less than cordial circumstances, it rarely erupts in one or both airing any dirty laundry,” he says.
Like some of the games Gearbox is known for, the story of the Callender/Pitchford relationship has a quaint beginning. They were childhood friends in Maryland during the early 1980s who shared a love of videogames. Callender stayed on the East Coast, earning his law degree at Catholic University before clerking for a federal appellate judge in Washington, D.C., and serving as a Navy JAG officer. Pitchford headed west, attending UCLA before getting into video game development and eventually co-founding Gearbox in 1999. The Frisco-based company has been wildly successful, quickly moving from making videogames for the likes of Valve Software to creating its own brands, like the popular Borderlands franchise and the Brothers in Arms series.
The childhood friends were reunited in 2010, with Callender’s hiring as executive counsel for Gearbox. A year later, he would be promoted to general counsel and vice president of legal affairs. But between that time and Callender’s alleged July 27, 2018 resignation, the parties have wildly divergent descriptions of the former GC’s tenure. According to Callender, he served “with distinction,” stewarding the company through the departure of co-founder Brian Martel and the consolidation of Gearbox’s ownership between Pitchford and remaining partner Stephen Bahl, a class action lawsuit, and other legal challenges. Callender’s lawsuit asserts that he was rewarded with a 3 percent equity stake in the company, a one-third ownership in a new entity (The Hatch LLC), and other benefits. Yet during his entire tenure at Gearbox, Callender maintains, Pitchford would “constantly harass” him for his Christian beliefs.
“It’s going to be a long process, but we believe the truth with prevail.”Barry Moscowitz
In his lawsuit, Callender also claims that in November 2016, Pitchford told him that he had reached a private “side deal” with Take 2 Interactive, the publisher of Gearbox’s Borderlands franchise, for a $12 million “executive bonus” paid directly to a Pitchford entity, “Pitchford Entertainment Media Magic LLC.” Callender says he raised concerns about the bonus with Pitchford, but was rebuffed about that and about documenting the alleged verbal reassurances about increasing Callender’s compensation and equity. Ultimately, disillusioned with what he describes as “unrelenting tyranny,” Callender says he attempted to commence negotiating an “exit strategy” with Pitchford, only to have Pitchford preemptively announce that Callender had resigned.
Like a videogame teases new expansion, Callender’s lawsuit promises revelations of “unthinkable acts” on Pitchford’s part “that will become clear throughout discovery and trial.” But the suit hints at a few, like the allegation that in 2014, Pitchford misplaced a USB drive containing sensitive Gearbox company information and the CEO’s “personal collection of ‘underage’ pornography.” The suit goes on to allege that Pitchford holds events at the private theater in his home where “adult men have exposed themselves to minors, to the amusement of Randy Pitchford.”
‘Worst Kind of Betrayal’
Callender’s shocking claims have been met with vehement denials and fierce opposition. Barry Moscowitz, the partner at Dallas-based Thomson Coe Cousins & Irons who is leading Gearbox’s and Pitchford’s defense, calls Callender’s allegations “absurd,” “really disgusting,” and “the worst kind of betrayal.” Moscowitz says it’s a betrayal that’s both personal and professional: “It’s first of all a factual betrayal, because what Callender is saying is false. But it’s also the personal betrayal of a longtime friend, as well as the betrayal of a client whose lawyer has violated attorney-client privilege,” he says.
In November 2018, Gearbox filed a lawsuit against its former GC in Collin County; that lawsuit has now been transferred to Dallas County, joining the lawsuit that Callender filed last December. Gearbox is suing Callender for, among other things, breach of contract, conversion, unjust enrichment, fraud, and breach of fiduciary duty. According to the lawsuit, Gearbox made a $300,000 cash loan to Callender in April 2014 so he could purchase a $900,000 home in Frisco. Payments on the loan were deducted from Callender’s “grossed up” monthly earnings. But in March 2018, Callender demanded that the payments cease, leaving a balance owed of more $136,000. Gearbox accuses Callender of not only reneging on the loan but destroying the signed loan agreement.
Pitchford and Gearbox also claim that Callender persuaded them that he could add value with an executive MBA from Pepperdine, eschewing local MBA programs. They say that Gearbox paid the entire cost associated with the MBA, including tuition and “hotel and first class airfare to Southern California multiple times per month”—to the tune of over $125,000. On top of that, Gearbox maintains that in 2017 and 2018, when Callender “found himself involved in contentious litigation regarding personal matters in Maryland,” it paid for the GC’s legal fees and expenses totaling more than $50,000. Gearbox also alleges that Callender abused the corporate American Express account by “charging unapproved, wholly personal expenses” that included family vacations to Disneyland, memberships to gun clubs like the Frisco Gun Club, and “trying to get six-pack abs” through charges to “sixpackshortcuts.com.” The most expensive such abuse, says Gearbox, came on Callender’s last day of employment when he obtained an increase on the American Express line of credit for the purpose of making a $17,000 payment to his Maryland attorneys, incurred the charge, and then “emptied his office and resigned as general counsel” without repaying the expense as promised.
In response to the allegations of Pitchford’s alleged USB drive of “underage porn,” Pitchford himself addressed that in a December 2018 appearance on “The Piff Pod,” a podcast about magic (Pitchford is a former professional magician and longtime magic aficionado). On the podcast, Pitchford explains that, far from a “collection,” the drive contained a “camgirl” video, whose host used the handle “Only 18” and who was demonstrating an adult-oriented magic trick that fascinated the CEO. As for the supposedly lewd behavior at parties thrown by Pitchford, it apparently eluded the Dallas Morning News entertainment critic who wrote a glowing review in June 2016 of the world-class magicians and entertainers that Pitchford and his wife spotlighted at the “Peacock Theater” in their home.
Callender was the first to pursue legal action after his employment ended, filing an Oct. 27, 2018 charge of religious discrimination with the Texas Workforce Commission’s Civil Rights Division and the Equal Employment Opportunity Commission. And although Gearbox may have drawn first blood in the courts with their lawsuit and temporary restraining order that has since been dissolved, the very first line of Callender’s petition makes it clear that he’s not pulling any punches, calling Randy Pitchford “a manipulative and morally bankrupt CEO who shamefully exploited his oldest friend.”
Barry Moscowitz replies that it’s Callender who is the “manipulative liar,” making “false and salacious allegations while hiding behind a term of art like ‘upon information and belief.’” Callender’s attorney, James Bell, says that it “makes no sense” that Gearbox “suddenly sues its most valued executive for supposedly resigning while Gearbox was pouring money and resources into him.” About the only thing the warring sides seem to agree on is that this case is likely to go all the way to trial.
John G. Browning is an attorney, award-winning journalist, and book author.