Pittsfield has initiated legal action against United Aircraft Technologies and PathogenX, accusing them of misusing public funds intended for economic development. The city claims both companies accepted financial support but failed to fulfill commitments regarding job creation and operational relocation to the area. The funds in question were originally provided by General Electric following a settlement related to environmental contamination in Pittsfield and the Housatonic River.
City Solicitor Devon Grierson stated that both firms allegedly made false claims to secure funding and never intended to establish a real presence in the region. The lawsuits seek repayment of the funds, along with interest and legal fees. United Aircraft Technologies reportedly received $170,000 in city funding, while PathogenX accepted $70,000 but never registered to operate in Massachusetts as promised.
United Aircraft Technologies had initially generated optimism in the local manufacturing sector by promoting a new aircraft wiring clamp technology. Despite initial promises of relocation and job creation, the company allegedly never fully moved its operations to Pittsfield. PathogenX, on the other hand, was accused of operating as a “shell corporation” for personal financial benefit, with its founder Charles Berkeley named directly in the lawsuit.
City officials sent default notices to both companies in April, but no reimbursements were made. The legal action was filed in Berkshire Superior Court on June 13, and the defendants have not yet responded.
— news from The Berkshire Eagle
— News Original —
PITTSFIELD — The city is suing two companies it says took public funding but never followed through on their promises to open local operations and create jobs.
In separate lawsuits, the city accuses United Aircraft Technologies and PathogenX of breaking the agreement they signed to obtain a cut of the city ‘s Economic Development Fund, money General Electric gave Pittsfield after reaching a settlement for polluting land and the Housatonic River.
The lawsuits allege that both companies made fraudulent representations to municipal leaders to obtain funding, but didn ‘t actually intend to set up shop in Pittsfield.
“They made a lot of promises to receive the money from the city, and it seems like that was their sole intent,” City Solicitor Devon Grierson said.
Grierson said the city reported both to the office of Massachusetts Attorney General Andrea Campbell.
Hopes that United Aircraft Technologies could help buoy the region ‘s manufacturing sector were high when the company first started making waves in the Berkshires during the pandemic.
The company said it made a new type of wiring clamp for aircrafts that was meant to be lighter and capable of diagnosing failures in electrical systems. Promising to revolutionize wire maintenance using artificial intelligence and augmented reality, the company touted military and commercial applications, and counted the state of New York ‘s chief economic development agency among its early financial backers.
The profile of co-founders Evaguel and Daryian Rhysing began to rise in the Berkshires after they landed a small grant from Lever, the startup accelerator in North Adams, in 2019.
At the time, the company said it was located in the Quackenbush building in Troy, N.Y., where it subleased 254 square feet from the Rensselaer County Industrial Development Agency.
The Pittsfield City Council approved a proposal from then-Mayor Linda Tyer to give UAT up to $300,000 in Nov. 2020. As part of the agreement, the company pledged to relocate to Pittsfield, employ at least 13 employees start a paid internship program.
Tyer and the Rhysings toured what it billed as its first Pittsfield outpost at 273 Newell St. in 2021. A company sign hung on the wall, a 3D printer sat on a counter and airplane models rested nearby employee workspaces. The company said it moved to a larger space on North Street in 2023.
But the city ‘s lawsuit alleges UAT never formally relocated all of its operations to Pittsfield, and did meet staffing requirements.
By the time the company folded, it had taken $170,000 in city funding, the city says, and signed paperwork agreeing to pay the city back if it didn’t meet its commitments.
The city sent UAT and PathogenX default notices in April, but neither responded with a reimbursement, according to the claims.
The lawsuits aims to claw the GE fund money back, plus interest and attorneys fees, and were filed after it became clear they “were not going to be upholding their end of the bargain,” Grierson said.
Michael Coakley, the city ‘s business development manager, helped create the incentive packages. Companies that apply for an Economic Development Fund grant make their pitch before city and state development officials, he said, and submit financial information and business tax returns. A supermajority vote of the City Council is required for final approval.
By the time December 2024 rolled around, and UAT ‘s promises had not materialized, city officials contacted the Rhysings, and Daryian Rhysing emailed Coakley with an update.
He described a series of internal conflicts with board members and investors with the Hudson Valley Startup Fund, the lead backer in UAT’s $1.35 million financing round that closed in Feb. 2021.
Daryian Rhysing told Coakley that personal issues, financial setbacks and boardroom conflicts ultimately led to the company’s collapse and the termination of all staff.
He wrote that the company shut down due to financial strain from a canceled government contract — the company previously announced it won a $1.15 million contract from the U.S. Army.
He also blamed investors for having “derailed” the company, and said they falsely accused him of mismanaging funds.
Reflecting on his decision to leave the company amid escalating tensions, the founder wrote, “I realized my values were no longer aligned with the company’s direction.”
Leon Greene, the managing member of the startup fund and former UAT board member, confirmed to The Eagle that the company has ceased operations. He declined to comment further.
The Rhysings did not respond to requests for comment.
‘Shell corporation ‘ allegations
The second lawsuit involves PathogenX, which had been registered in Wyoming until the state shut it down for failing to submit and pay taxes, according to the lawsuit.
The company ‘s founder pitched a machine that could melt syringes into solid blocks that could be thrown out in normal garbage cans, obviating the need for traditional medical waste disposal.
Unlike the UAT case, which targets the company alone, Pittsfield’s lawsuit against PathogenX names its founder, Charles “Chuck” Berkeley, as the defendant.
That ‘s because UAT appeared to have assets and business operations in Troy as well as a corporate structure before its closure, Grierson said.
But Berkeley, according to Grierson, was the sole officer, director, president, treasurer and secretary of PathogenX — which the city lawsuit alleges Berkeley operated as a “shell corporation” for his own personal gain.
Berkeley, a Pittsfield native, did not respond to an email or phone call seeking comment. PathogenX also participated in an accelerator program run by the Berkshire Innovation Center in Pittsfield.
PathogenX accepted $70,000 in GE fund money, but never even registered to operate in Massachusetts, or employ eight local employees as it pledged to do in order to retain the funding, according to the city. This lawsuit also claims Berkeley made fraudulent claims to get the incentive.
Despite agreeing to repay the money if it didn’t meet that and other goals, Berkeley allegedly flouted the city ‘s first demand for reimbursement, the city claimed, setting the stage for the lawsuit.
The parties named as defendants in the lawsuits, both filed on June 13 in Berkshire Superior Court, have not responded in court.
Coakley said the process companies must go through to obtain this type of economic incentive from the city is thorough. He named a few success stories of companies that received GE fund disbursements, including Hot Plate Brewing Co. and Bousquet Mountain.
“I believe in every company that I bring to the council, and unfortunately some of them don ‘t make it for various reasons,” he said.
UAT agreed to offer its propriety mold they said was used to make their product to the city as collateral, according to Grierson.
Sinicon Plastics, the Dalton-based company that had previously been reported to be UAT ‘s manufacturer, did not respond to questions about whether the company had indeed manufactured clamps for United Aircraft Technologies or whether the partnership is still active.
If the suit is successful, Grierson said the city could seize the mold as a way to recover the funds.
Asked whether the mold itself holds any value, he said “we won ‘t know that until we engage in some discovery.”
“I ‘m not even sure if the mold exists,” he said. “This is all based on representations of the company. We ‘ve seen that it doesn ‘t seem that they were truthful in a lot of the things that they were saying.”