Lawsuit alleges Gearbox CEO Randy Pitchford improperly siphoned $12M for personal gain

A lawsuit filed in a Texas civil court alleges that Randy Pitchford, co-founder and CEO of Gearbox Software, improperly siphoned $12 million from that company for personal gain. The story was first reported by Kotaku, and is based on public court documents filed on Dec. 21, 2018.

The suit was filed by Wade Callender, former general counsel and vice president of legal affairs at Gearbox, and is made against Pitchford and Gearbox itself. In a remarkable 27-page complaint, Callender alleges that in 2016, at the same time that Gearbox was denying raises companywide, Pitchford secretly arranged a large payout for personal gain.

“It was Randy Pitchford himself who breached his fiduciary duties by exploiting Gearbox employees and property to fund Pitchford’s private cravings,” court documents state. “For example, while Randy was denying employee raises predicated on low cash reserves, Randy secretly saddled Gearbox’s employees with the burden of repaying a private, personal $12M ‘bonus’ that Randy Pitchford rerouted from Gearbox’s publisher directly to Randy’s side entity, ‘Pitchford Entertainment Media & Magic.’ Unbeknownst to Gearbox employees, Randy Pitchford arranged to shift the burden of Randy’s long-standing, multi-million dollar ‘bonus’ to the very same employees from whom he hid the arrangement.”

The lawsuit is part of a back-and-forth legal battle, with Gearbox and Pitchford on one side and Callender on the other. Callender’s suit was filed roughly one month after Gearbox itself filed suit against him in Collin County, Texas.

In a copy of the suit posted online, Gearbox alleges multiple improprieties by Callender. Allegations include the non-payment of a personal home loan, breach of contract related to tuition reimbursement, and the misuse of Gearbox’s credit card to purchase “family vacations, gun club memberships and firearms accessories, and trying to get six-pack abs.”

In civil suits such as these, it’s common for both parties to flesh out their case with damaging information on the other side. Both suits are peppered with personal attacks, but perhaps the most jaw-dropping aspect of Callender’s suit are his allegations that Pitchford left a USB drive containing “‘underage’ pornography” behind at a company event.

“On information and belief, Randy Pitchford’s USB drive contained much more than the sensitive corporate documents of Gearbox and business partners like Take-Two Interactive, 2K Games, Sega, Microsoft, Sony, etc.” states Callender’s legal team. “Upon information and belief, Randy Pitchford’s USB drive also contained Randy Pitchford’ s personal collection of ‘underage’ pornography.”

The complaint also alleges “Peacock Parties” thrown by Pitchford where “adult men have reportedly exposed themselves to minors, to the amusement of Randy Pitchford.”

Peacock is also the name of a small theater that Randy Pitchford maintains out of his private Frisco, Texas home. According to Guide Live, the entertainment website from The Dallas Morning News, it’s part of Pitchford’s effort to “cultivate a local variety arts scene.”

Both cases are ongoing. Polygon has reached out to both parties for comment. In a statement provided to Kotaku, a Gearbox spokesperson called the allegations against Pitchford “absurd, with no basis in reality or law” and the lawsuit “meritless.” Callender’s lawyer, in a statement provided to Polygon, would say only the following: “You’ll have to ask Mr. Pitchford what he did with his USB drive and the copy that he instructed others to destroy.”

The dueling suits come just a few months after Pitchford went public with accusations that his former assistant, John Wright Martin, had grifted the Gearbox founder and his wife out of some $3 million.

Update (6:35 p.m. ET): As Ars Technica reports, Randy Pitchford appeared on a magic-themed podcast one day after the lawsuit against him was filed by Wade Callender. On that program he corroborates some of the story about the lost USB stick. His explanation? The pornography was saved as research for a magic trick. From Ars Technica:

Pitchford talks at length about porn that he enjoys watching, including “camgirl” pornography, in which a host exposes themself to a live feed and takes requests and financial tips from consumers. Pitchford explained that he was “a consumer of this content.” He confirmed that he copied a specific video “to this memory stick” to, as he describes it, “work out the method” of how a camgirl host faked the act of female ejaculation.

Pitchford also went to Twitter, refuting the claims made by Callender and calling them an attempt at extortion.

“As a father,” Pitchford said in a tweet, “I find crimes against children to be especially repugnant. It is very painful that a former friend and colleague would lie to try to associate me with such vile behavior in his own greedy pursuit of money.”

Update (7:05 p.m. ET): In a statement to Polygon, Gearbox said it plans to file a grievance with the State Bar of Texas against Callender, calling his accusations “lies.” From Gearbox:

Gearbox will be filing a grievance with the State Bar of Texas against our former general counsel Wade for disciplinary proceedings for filing a lawsuit that includes accusations that he knows to be untrue. The lawyer’s rules of professional conduct expressly prohibit the filing of documents that are knowingly false. The tell is within Wade’s claim itself – his use of hedged lawyer language and clever application of quotation marks betray that he knows that the impression he is trying to create is based in lies. We imagine that he used the quotation marks and lawyer language in hopes that will give him some angles of defense when we inevitably take action against him for false statements. Wade is engaged in a shakedown and he’s clearly using deceit and lies to try to cause damage by promoting a narrative that he knows is false.

Gearbox also called the lawsuit allegations describing Pitchford’s USB stick “untrue” and referenced the previously mentioned podcast reported by Ars Technica. “The memory stick story in question is, of course, also untrue,” Gearbox said. “Wade himself knows that the allegation of the performer being ‘underage’ is false – that’s why he put that word in quotes.”

The developer also commented on Callender’s allegations about the “Peacock Parties” that the Pitchfords hosted. From Gearbox:

Every performance at The Peacock Theater is recorded. While we can’t immediately release these videos publicly prior to gaining consent from the performers, we can invite you to watch any or all of these videos in private for further validation. You will see that there is nothing to support what Wade has alleged and that Wade’s claims are false. Also, the fact is that there’s no such thing as a “Peacock Party.” This is terminology that the Pitchfords have never used and was made up by Wade in a further attempt to paint a sensational picture that is demonstrably false.

The other business related claims are also filled with lies and deceit and we will prevail when we tackle those in court.

Randy is shocked by the meritless allegations brought up by a former friend and colleague, to whom he has extended his personal funds multiple times to help him purchase a home, a car, and even fully finance his tuition and expenses for an executive MBA at Pepperdine.