BISMARCK — Kevin O’Leary, widely known as “Mr. Wonderful” from the reality TV show “Shark Tank,” was recently accused in a Colorado lawsuit of defrauding investors and misleading federal and North Dakota officials while investing the state’s $45 million Wonder Fund in HerdDogg, a livestock tech startup.

The lawsuit filed by entrepreneur Melissa Brandao alleges that executives at the company she founded pushed her out, stole her patents, and misrepresented the company’s financial position and prospects to investors. It also alleges
North Dakota Wonder Fund
officials were alerted to that information after investing in HerdDogg, took no corrective action, and were complicit in misrepresenting the company to the North Dakota state government and the federal government. She is seeking $350 million in compensation.

Listed defendants include HerdDogg, O’Leary Ventures, the Wonder Fund, and numerous individuals including O’Leary and O’Leary Ventures CEO Paul Palandjian.

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The North Dakota Wonder Fund, founded in 2023, is an investment program that uses federal money to provide early investment for small businesses in or impacting North Dakota. The fund is managed by O’Leary Ventures, a venture capital investment company owned by O’Leary.

Jeffrey Neiman, a lawyer representing the Wonder Fund, told the Tribune that the fund is confident the lawsuit will be dismissed. He said every alleged act of misconduct happened before the Wonder Fund’s involvement, and evidence will show that alleged misconduct by HerdDogg executives never occurred.

“Wonder Fund stands firmly behind its investments and its compliance with all applicable regulations and reporting obligations,” Neiman said in an email to the Tribune. “The company has been fully transparent in all of its dealings with the state of North Dakota and the federal government. There were no false statements, no misleading communications and no misrepresentations — period.”

The Tribune reached out to an attorney for O’Leary seeking comment and received no response from O’Leary.

Brandao alleges that the pattern of fraud that permeated HerdDogg started years before the Wonder Fund invested in the company.

HerdDogg
is a Nebraska-based company that makes ear tags for livestock designed to send live updates to ranchers regarding location and basic health of the animals.

Four years after founding HerdDogg in 2015, Brandao brought on a CEO and board of directors who controlled the company completely after she diluted her company shares to the point that she no longer had a majority stake in 2020.

She claims it became evident that the HerdDogg board and executives wanted to make the company look more successful than it was to receive a 100% buyout from a third party.

She alleges that when this proved unviable, HerdDogg solicited further investment to keep the company afloat using “a series of marketing materials aimed at prospective investors that wildly and fraudulently misrepresented the company’s financial position and expectations.” As an example, she said, company executives promised investors HerdDogg would increase its revenue from $150,000 to nearly $3.9 million between 2020 and 2021, despite no evidence to support that, and despite significant engineering, manufacturing and supply chain challenges facing the company.

Brandao alleges HerdDogg was in such dire straits that the company ran out of money in August 2022 and failed to make payroll. She said she was then removed from the company.

The suit claims that it was only after Brandao was removed from the company that she became aware HerdDogg executives had stolen two of her patents by forging her electronic signature to submit patent assignment documents to the U.S. Patent and Trademark Office assigning her patents to the company. A patent gives an inventor exclusive rights to make, use or sell their invention.

The defendants haven’t filed a response to that claim, and HerdDogg did not respond to a Tribune request for comment.

Brandao claims the Wonder Fund significantly
invested in HerdDogg in 2024
and tried to persuade the North Dakota Development Fund to do the same.

The Development Fund is a state-funded program that gives loans and investments to support new and expanding businesses in North Dakota. CEO Brian Opp told the Tribune that the fund never invested in the company. It is unclear how much the Wonder Fund put into HerdDogg. O’Leary Ventures did not comment, and the Commerce Department declined to provide the information.

The North Dakota Wonder Fund comprises $45 million in federal money allocated to the state as part of the State Small Business Credit Initiative. Only 10% of the funds allocated to the Wonder Fund may be used to support loans and investments in small businesses located outside the state, and North Dakota must give a reasonable explanation for each investment, according to
U.S. Treasury Department guidelines.

The lawsuit doesn’t indicate why or how the Wonder Fund took interest in the company. It does allege that “Wonder Fund’s potential willingness to have engaged in fraud with its HerdDogg investment may have been due to its intention to fraudulently earn management fees from the State of North Dakota while unlawfully obtaining access to and control over government incentive proceeds like the $45 million in U.S. Treasury funds that the State of North Dakota has entrusted to Wonder Fund, regardless of any direct return (or lack thereof) from the HerdDogg investment.”

The lawsuit accuses HerdDogg of having almost no presence in North Dakota. However, the company and Wonder Fund representatives indicated HerdDogg intended to expand its operations in the state — hiring personnel and exploring in-state manufacturing partnerships — to meet the investment requirements of the State Small Business Credit Initiative. Brandao alleges the company never intended to have a significant presence in the state and chose to move the majority of its manufacturing to Mexico instead of North Dakota.

”The company’s current operations are a sham meant to perpetrate a fraud on the U.S. Treasury and the state of North Dakota, by creating a false impression that HerdDogg is manufacturing products and employing productive workers in North Dakota in order to falsely certify compliance with the requirements imposed on one of the company’s principal A3 and A4 fundraising round investors, the Wonder Fund,” the lawsuit says.

“Although HerdDogg briefly hired one or more low-level remote employees in North Dakota and initiated preliminary discussions with potential in-state manufacturing vendors, the company ultimately took no material steps to establish a physical or economic presence in North Dakota.”

HerdDogg did enter into a manufacturing partnership with at least one North Dakota company. Beginning in June 2024, North Dakota-based company
Signum,
with more than 30 employees across its Fargo and Richardton locations, manufactured circuit boards and did “some” final-level assembly for several hundred units of HerdDogg’s base station, according to Signum President Doug Hauck. The base station relays the signal from livestock’s ear tags back to ranchers.

”In my estimation, they definitely have a presence here, because we’re doing the high-value manufacturing for them,” Hauck said.

He said Signum still has some inventory owned by HerdDogg, but the company is not actively manufacturing anything for HerdDogg. Hauck was unsure whether Signum will keep working with the company because he hadn’t heard from HerdDogg in about a month.

The lawsuit also alleges that by the end of the third quarter of 2024, HerdDogg had purchased millions of dollars of raw materials and significantly increased the amount of inventory the company claimed without corresponding increases in product revenue or customer engagement. This suggests either operational failure or intentional misreporting, the lawsuit alleges.

“The disconnect between HerdDogg’s asset reporting, cash burn, and operational results poses serious red flags,” the suit says. “The financials suggest a company artificially inflating its book value through unsold inventory, with no viable path to revenue — and possibly misusing investor or public funds to sustain a non-viable business model.”

The suit alleges that Brandao’s attorney informed Palandjian, the O’Leary Ventures CEO, in early 2024 that HerdDogg was lying in its assertions that it had uncontested rights to multiple patents, and informed him of other misrepresentations the company made to investors. Her attorney alleged that Palandjian responded with hostility, did not initiate any corrective action, refused to receive or review any further information concerning Brandao’s claims, and told Brandao that she would “never be permitted to communicate with defendant O’Leary directly.”

“From the time of their engagement with HerdDogg, O’Leary-affiliated defendants began participating in the use of wires and mails to transmit materially false representations to both private investors and public agencies, including the state of North Dakota and the United States Department of the Treasury, about the legitimacy, commercial viability and intellectual property ownership of HerdDogg,” the lawsuit says.