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Seagate sues eSys and Vikas Goel for millions

(SINGAPORE) The feud between global disk-drive giant Seagate Technology and its former Singapore-based distributor eSys Technologies has taken a new turn.

Seagate's Singapore arm has sued eSys and its founder Vikas Goel for millions of dollars in the High Court here.

And eSys has indicated that it intends to counter-sue, though no counter-claim has yet been filed.

The development comes after Seagate dumped eSys as its largest distributor, concerned that eSys may have 'falsely claimed credit for sales'.

BT has learned from documents filed with the High Court that Seagate Singapore International Headquarters (Seagate) is suing eSys for more than US$4.25 million (S$6.49 million) and that Seagate and affiliates are suing Mr Goel for about US$60 million (S$92 million).

The suits were filed in mid-December in the High Court by Seagate's lawyers Allen & Gledhill, and BT understands that the parties have met at pre-trial conferences since then.

Seagate is suing eSys for breaching their Asia-Pacific distribution agreement, saying eSys has failed to pay what it owes Seagate.

Under the April 2004 agreement, eSys was to buy computer disk drives and other computer-related items from Seagate, while Seagate was to sell and deliver such items to eSys.

Seagate claims eSys accepted US$4.25 million of products from Seagate but has not paid - and has refused to pay - what is owing to Seagate.

Seagate claims it has suffered 'loss and damage' as a result.

It is suing eSys for the US$4.25 million it says is owing, plus interest on that sum, as well as legal costs and any other relief the High Court sees fit to award.

Seagate and its affiliates - Seagate Technology International, Seagate Technology LLC and Maxtor International - have also sued eSys founder and managing director Mr Goel. They have based their claims on a deed of guarantee he gave them in October 2004.

In that deed, Mr Goel agreed to 'unconditionally and irrevocably' pay these companies on demand any amounts owing or unpaid by eSys, arising out of the supply of goods by these companies to eSys.

He also agreed to indemnify Seagate against all claims, liabilities, losses and damages and costs arising out of such indebtedness.

Seagate is claiming from Mr Goel the US$4.25 million it says is owing from eSys, plus interest, costs and any relief awarded by the Court. This means it is looking to claim at least US$4.36 million.

Similarly, Seagate Technology International is claiming US$6.41 million, Seagate Technology LLC is claiming US$7.35 million and Maxtor is claiming US$41.68 million from Mr Goel.

In total, the four plaintiffs are looking to claim about US$59.8 million from him.

When contacted, eSys declined to comment on the lawsuits except to say the claims are 'premature and erroneous'.

A statement from the company said: 'eSys has a complete defence and, if necessary, will also file substantial counter-claims which far outweigh Seagate's claims. The matter is now in the hands of our solicitors Drew & Napier and we are confident our position will prevail.'

eSys declined to say how much it will counter-claim, if it does file such a claim.

The Seagate-eSys saga first made the news in the United States in November when Seagate Technology said it had fired eSys as its distributor 'on concern that it falsely claimed credit for sales'.

Seagate said in a regulatory filing that eSys officials had refused to let Seagate auditors examine sales records because a review could reveal irregularities related to an incentive programme. Seagate also said eSys owed it about US$50 million.

eSys denied Seagate Technology's allegations of wrongdoing and said the requested audit had been 'intrusive' and 'would not be justifiable to our worldwide business partners under normal business practices'.

It said it would pay the amount owed, adding that 'eSys has a long history of meeting its commercial liabilities in full, and intends to continue this record'.

eSys accounted for about 5 per cent of Seagate's revenue, while Seagate contributed about 30 per cent of eSys' business.

Mr Goel was also embroiled in another legal suit. He was sued by Karma International and its subsidiary, Swiss-registered CHS CPO, for allegedly having conspired with other parties to defraud the two companies.

Mr Goel was subsequently cleared of all fraud allegations, and Karma and CHS CPO dropped the suit.