After last week disclosing a 9.3% stake in e-trading operation eSpeed and calling for a formal split from interdealer broker Cantor Fitzgerald, investment advisor Chapman Capital has demanded that eSpeed's board of directors retain an independent auditor to review the two entities' joint services agreement (JSA).
The escalation of the public spat between Cantor Fitzgerald and eSpeed's largest shareholder follows a recent Appeals court ruling against the firm's long-running patent dispute with rival broker Icap.
The ruling found that Cantor's electronic bond trading patent was unenforceable due to the firm's "inequitable conduct" in the prosecution of the patent. Specifically, Circuit Judge Kimberly Moore wrote in her 17-page ruling that Cantor's "declarations included material false statements and were submitted with an intent to deceive".
Robert Chapman, managing member of Chapman Capital, argues that as a result of the ruling, eSpeed itself may continue to incur significant licensing and other expenses, or may relinquish significant market data and other revenues, unnecessarily for the benefit of Cantor Fitzgerald.
"Given that eSpeed's board of directors apparently has approved CEO Howard Lutnick's decision to have eSpeed expend extraordinary sums on this patent litigation alone, purportedly for the benefit of eSpeed itself, it would be egregiously canting for eSpeed's doard to reject Chapman Capital's demand that a fraction of such legal costs be expended to scrutinise the legitimacy and fairness off all significant inter-company agreements and policies."
Cantor Fitzgerald and eSpeed have so far declined to comment on the Chapman campaign.