By Dan Primack
October 26, 2010

Highland Capital Partners may no longer own a piece of Cash4Gold, but it still has plenty of headaches related to America’s favorite precious metals refinery.

A former business partner of Cash4Gold is suing Highland for fraud and various breaches of contract law, according to a complaint filed last month in a Massachusetts court. Also named as a defendant is Gaurav Tewari, a Highland principal who allegedly served at one point as acting chief operating officer of Cash4Gold.

The plaintiff is Marlboro Investment Group, which last year acquired certain assets of an online performance marketing network called Hydra Group, as part of a receivership. Marlboro later sold Hydra’s business assets to Adknowledge, but retained most (if not all) of Hydra’s legacy litigation.

According to the complaint, Hydra began providing advertising services to Cash4Gold in late 2008. Specifically, Hydra worked on a cost-per-acquisition (CPA) model, whereby it got paid for each “completed first-page lead submitted by consumers.”

Beginning in March 2009, however, Cash4Gold allegedly stopped paying its invoices. The following month, Hydra threatened to stop providing advertising services, unless it received payment on the $1.8 million in delinquent fees. In a phone conversation that allegedly included Gaurav Tewari — plus a series of emails — Hydra was promised that Cash4Gold would become current on its balance and also would use Hydra as its exclusive online marketing affiliate. Hydra accepted the terms, and continued providing its services to Cash4Gold.

But Cash4Gold did not make its payments, according to the complaint, and Hydra ended its Cash4Gold campaign in June 2009. In addition, Hydra alleges that “at the same time he was making the Representations to Hydra, Tewari was instructing Cash4Gold to contract with one of Hydra’s competitors.”

Highland has not yet filed a response to the Marlboro lawsuit, but did provide the following statement from outside counsel: “Highland believes that this case lack any merit.”

There also is a related suit in Southern California, in which Cash4Gold is listed as the defendant. Jared Gordon, Marlboro’s in-house counsel, says that the suits were split geographically because Marlboro had no standing in California to sue Tewari, a Massachusetts resident.

Gordon adds that Marlboro may file an amended complaint that also names General Catalyst Partners as a defendant. Highland and General Catalyst invested in Cash4Gold at the same time, via a combined $40 million investment. General Catalyst did not respond to a request for comment.

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