Jonathan Bilyk Feb. 5, 2014, 12:23pm

Empire Today, an iconic seller and installer of flooring and window treatments, was scheduled to enter into mediation last month with two of its former executives over claims they ran a scheme that diverted more than $5 million dollars in workers compensation reimbursements to their personal accounts.

On  Jan. 15, attorneys for the company and the former executives, Steve Silvers and Judd Feldman, filed a joint status report in the suit that was filed in November in Chicago's federal court.

In the report, Empire Today and the defendants confirmed they intended to take the matter to private mediation on Jan. 23. No further reports have been entered into the record since to indicate the success of the mediation session.

However, the report states that if mediation fails, Silvers and Feldman would likely ask the judge to dismiss the case.

It also notes the defendants deny Empire’s allegations, and contend “the workers compensation arrangement was disclosed to and approved by Empire,” despite the company’s assertions to the contrary.

Filed this past fall, the suit brought by Northlake-based Empire Today LLC alleges that Silvers, who formerly served as the company’s chief executive officer, and Feldman, the former chief financial officer, conspired with Risk Partners, an insurance brokerage firm based in New Jersey, over an eight year period to deceive and defraud Empire, various subcontractors and insurance companies.

The complaint centers on Empire’s use of “retrospectively-rated” workers compensation insurance policies. Under such arrangements, the company pays the entire premium for subcontractors’ workers compensation insurance policies.

Those premiums are based on an estimate of the total number of hours the subcontractors’ insured employees were expected to work within the policy period.

After actual payroll is calculated, any overpayment made by Empire is then refunded by the insurance companies, back through the subcontractors, to Empire.

However, Empire claims that beginning in 2005, Feldman, of Buffalo Grove, and Silvers, of Deerfield, diverted those refunds through a corporate entity the two created with the assistance of Risk Partners.

Empire --which is well known in the area for advertising that features the “Empire Man” character and a singing jingle of its phone number and name-- also contends that the  former executives try to conceal the diversion, using their positions within the company to create false information for others to see.

The alleged scheme was uncovered in early 2013, Empire claims, after one of the insurers filed suit against a subcontractor that eventually prompted it to hire a law firm to investigate the matter.

Silvers was fired when the allegations came to light. Feldman had resigned prior to the investigation.

Altogether, Empire asserts it is owed $25 million in damages, including $18 million under the federal Racketeer Influence and Corrupt Organizations (RICO) Act.

According to the Jan. 15 status report, the defendants have yet to appear in court, and have filed no counterclaims.

But, the report indicates Silvers may file a claim alleging his termination may have been in retaliation for his reporting of “insider trading activities.” He may also claim that Empire has breached his contract.

Empire is being represented in the action by attorneys Kevin D. Kelly and Katherine H. Harris, of Locke Lord LLP in Chicago.

Silvers and Feldman are represented by attorneys Nancy A. Temple and John M. George, of Katten & Temple LLP in Chicago.

And Risk Partners, which the report indicated was not party to the mediation, is represented by Chicago attorneys Kevin O’Hagan and Daniel J. Nolan of O’Hagan LLC.

A status hearing on the case was held Jan. 22, and the next status date for the matter is scheduled for March 5.

According to the most recent docket entry in the case, the defendants have until Feb. 21 to file an answer or otherwise plead and both parties have until Feb. 21 to file a proposed discovery plan.

U.S. District Court Judge Sara L. Ellis, who is presiding over the matter, also scheduled a March 5 status hearing.

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