Jonathan Bilyk Nov. 15, 2013, 11:06am

Empire Today, an iconic Chicago area seller and installer of flooring and window treatments, has filed suit against two of its former top executives, seeking $25 million in damages from the pair the company alleges ran a fraud scheme that diverted millions of dollars in workers compensation reimbursements from insurance companies to their personal accounts.

On Monday, Northlake-based Empire Today LLC filed suit in Chicago's federal court against its former chief executive officer Steve Silvers and former chief financial officer Judd Feldman, as well Risk Partners, a New Jersey-based insurance brokerage firm.

Chicago attorneys Kevin D. Kelly and Katherine Heid Harris of Locke Lord LLP filed the suit on behalf of Empire, which is well known for its advertising that features the "Empire Man" character and a singing jingle of its phone number and name.

In the 15-count federal racketeering complaint, Empire alleges that its former executives and the insurance brokerage had conspired over eight years to defraud the company, various California-based subcontractors, insurance companies, and then concealed their actions from Empire.

Empire also accuses the two of breach of contract, misrepresentation, breach of fiduciary duty and unjust enrichment.

According to the complaint, the scheme began in 2005, about a year after Feldman, who maintains a residence in Buffalo Grove, was hired as Empire’s CFO.

Silvers, of Deerfield, officially served as CEO since 2009, but had served as Empire’s “senior most executive” since 1998 when he was named senior vice president of the company then known as Empire Home Services LLC.

At that time and during the ensuing years, Empire states in its suit that it used various subcontractors to install flooring and window treatments for its customers in California.

As part of the arrangement with those subcontractors, Empire agreed to pay the entire cost of workers’ compensation insurance premiums for those installers’ employees.

The premiums for those policies, known as “retrospectively-rated” policies, were based, among other items, on an estimate of the total number of hours the subcontractors’ insured employees would work during the policy period.

After actual payroll was calculated, the suit states that any overpayment made by Empire to the subcontractors was to be refunded by the insurance companies, back through the subcontractors, to Empire.

However, from 2005 to at least 2011, Empire alleges in its complaint that about $5 million of those refunds never made it back to the company.

Instead, Empire asserts in its filing that those refunds were diverted to Silvers and Feldman via shell companies the two men had created.

Under that alleged scheme, the two men, working with Risk Partners, created a company known as Pioneer Associates LLC to act as the holder of interest in a “captive” insurance company, associated with a Bermuda-based company known as Arlington Insurance, to reinsure employees of California-based Empire subcontractors.

From Pioneer, the insurance refund money from two insurers would then be directed to Silvers and Feldman, Empire claims.

To keep the alleged ruse secret, the complaint asserts that the executives used personal phone numbers and email addresses to communicate with insurers and others, and falsified contracts and company documents.

Empire said it failed to detect the actions because the two men were the highest ranking executives in the company, and controlled the flow of information.

The alleged scheme, however, was uncovered earlier this year after one of the insurers filed suit against Empire’s subcontractors, seeking to find out where its money was actually going.

Empire then launched an investigation of its own, using attorneys from the firm of Mayer Brown. That investigation led to the complaint filed earlier this week.

Upon uncovering evidence of the executives’ actions, Empire fired Silvers. Feldman had resigned in 2011 before the investigation began.

All told, Empire asserts that it is owed $18 million in damages under the Racketeer Influenced and Corrupt Organizations Act, as well as $4 million it had paid Silvers and $3 million it had paid Feldman in wages and other compensation during the time the two men were allegedly running the scheme.

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111 South Wacker Drive
Chicago, IL 60606

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