The former general counsel of a merchant cash advance company is suing the chief financial officer of its parent company claiming documents had been altered to allow for bonuses in 2017 and 2018.

Steven Berkovitch filed suit Dec. 6 on behalf of Five Hole LLC against Oded Segev in Delaware Chancery Court over allegations of breach of fiduciary duties, unjust enrichment and conversion. Berkovitch is seeking a court order requiring an independent audit of Five Hole's  2017 and 2018 finances, disgorgement of all bonuses improperly paid in 2017 and/or 2018, removal of Segev as CFO, and awards to be determined by the court.

In 2015, Pearl Capital Business Funding LLC, a company owned by Five Hole, hired Berkovitch to be its general counsel and in the same year, Five Hole's CEO, Solomon Lax, asked him to buy a 0.33% membership, or $68,000, into the company. According to the complaint, Lax allegedly promised to Berkovitch that there would be a return on investment for all Five Hole members.

Berkovitch says he has not yet received any kind of return on his investment.

Before Berkovitch was hired, Pearl hired Ariel Bouskila as associate general counsel to assist in collecting advances to merchant cash advances companies that were in default. In 2016, Berkovitch and Bouskila told Pearl they wanted to do collections for other MCACs. Pearl allowed the formation of the law firm Berkovitch & Bouskila but created an entity, ABF Servicing, which allowed them to get revenue from Berkovitch and Bouskila.

The agreement the law firm had with Pearl was that Berkovitch & Bouskila would lease employees from ABF and ABF would receive a percentage of revenue brought in from non-Pearl clients. Pearl agreed to provide the law firm with an extra bonus if the recovery exceeded a certain threshold. The law firm exceeded the threshold, which is not listed in the complaint, and it allegedly did not receive the promised bonus.

Under the service agreement, in 2017, the law firm was owed at least $392,285.37. Pearl only paid the firm $50,000, according to the complaint. Segev, Five Hole's CFO, allegedly told Berkovitch in January 2018 that Five Hole "failed to properly account for that expense in its 2017 financial statements."

"Segev later explained that he refused to revise Pearl's 2017 financial statements because accurately reflecting the amount due to B&B for 2017 would have lowered Five Hole's Earnings Before Interest, Taxes, and Amortizations (EBITA) for 2017," the complaint says.

If the EBITA had been properly calculated, the complaint argues, Segev and the other members of the executive committee of Five Hole would not have received their bonuses in 2017.

On Jan. 5, 2018, Segev wired a $100,000 partial payment to the law firm and in April 2018, Five Hole paid the remaining balance. The complaint says Segev calculated the $100,000 amount so it would not catch the eye of auditors.

Berkovitch claims that he went to the director of human resources and the chief credit officer at Pearl about Segev's alleged bookkeeping issues. They both dismissed him. Berkovitch has also sent a letter to Lax, and the board of managers at Five Hole. The letter showed the alleged financial impropriety, its effects on Five Hole and demanded that Five Hole fire Segev. The letter also asked Five Hole to hire an independent auditor to review its 2017 and 2018 financial statements.

Berkovitch is represented by Marc Casarino and Nicholas Wynn of White and Williams in Wilmington, Delaware. A representative for the law firm said it does not comment on ongoing litigation.

Counsel for Segev was not listed on the docket. Segev could not be reached for comment on Tuesday.

This is not the first time Berkovitch has made these allegations in court. He previously filed suit against Five Hole and Segev making similar claims in Kings County Supreme Court in New York. That case was dismissed in August, according to the online docket.