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Airport, train concession operator accuses former CFO of fraud; seeks millions in repayment of years of salary, bonuses

By Jonathan Bilyk | Oct 24, 2014

The Westchester-based company that operates the Jamba Juice, Red Mango and Rocky Mountain Chocolate Factory concessions at O’Hare International Airport and the Dunkin Donuts in Union Station, as well as other famous brand concessions in airports and train stations across the nation, has accused its former chief financial officer of fraud and other offenses in falsely inflating its earnings to artificially boost his bonuses.

On Oct. 15, The Grove Inc., headquartered in suburban Cook County, filed suit in Cook County Circuit Court against Robert L. Ireland, who had been terminated as the company’s CFO this past summer.

In the four-count complaint, The Grove, or TGI, alleges fraud, breach of contract and breach of fiduciary duty against Ireland, saying he abused his position to improperly alter his employment agreement and manipulate the books to put himself in line to collect hundreds of thousands of dollars in bonuses TGI claims he didn't earn.

He had served as CFO of TGI and its subsidiary, Star Foods LLC, since 2000.

In addition to its six concessions it runs at O’Hare and Union Station, the company operates concessions as franchise operators of such ubiquitous brands as Wendy’s, Auntie Anne’s, Jersey Mike’s and others, at a dozen airports and train stations in Atlanta, Orlando, Dallas, Las Vegas, Newark, New York, Philadelphia and Houston, among others.

The complaint notes Ireland was “highly compensated” for his work overseeing TGI’s books, asserting that from 2004 to 2013, TGI paid Ireland more than $3.3 million, with his annual salary climbing from $172,000 in 2004 to as much as $630,000 in 2012, before declining to about $400,000 in 2013.

However, in 2009, the company contends Ireland renegotiated his employment agreement, with negotiations centered on what he could earn in “phantom equity,” based on the company’s earnings, should he be terminated without cause or resign, or if the company was sole or went public, among other possibilities.

In late 2009, Ireland and Michelle Dukler, TGI’s chief executive officer, signed an agreement, according to the complaint.

But, after signing that agreement, TGI alleges that Ireland either transplanted Dukler’s signature page onto a new agreement or inserted new language into the agreement without her knowledge or consent.

The new language, which TGI asserts Dukler did not approve, entitled Ireland to 3-percent of 7.5 times the company’s earnings should he resign after November 2016, or 44 percent of 3-percent of 7.5 times its earnings should he resign before that date.

Earlier this year, TGI hired a consultant to review its operations and finances, which the company claims revealed irregularities in its accounting. Specifically, the suit states, the audits determined Ireland had overstated the company’s earnings by at least $2.5 million, prompting overpayments of bonuses to him and TGI’s chief operating officer, who had a similar bonus provision in his contract, of about $660,000 between 2004 and 2013.

Shortly after TGI launched a forensic audit and it became apparent the investigation was focusing on him, the company asserts Ireland “abruptly attempted to tender his resignation” on June 20.

“The timing was suspicious to say the least, as it appeared that Ireland was attempting to avoid the financial consequences of the inevitable termination for cause that was to come,” TGI states in its complaint, which notes the company fired Ireland on July 3.

TGI contends Ireland’s alleged misconduct cost it the ability to properly operate and grow its business, as the inflated earnings reports did not reflect the company’s reality and paid him large amounts under false pretenses.

“If TGI had been aware of Ireland’s surreptitious and self-serving activity, it would have terminated his employment immediately,” the suit states.

In its suit, TGI is seeking repayment of at least the more than $3.3 million it paid Ireland in salary and the $660,000 it paid in bonuses to Ireland and the COO, based on Ireland’s earnings calculations, from 2004 to 2013, plus punitive damages.

The plaintiff company is represented by attorneys Michael D. Karpeles and Tiffany S. Fordyce of Greenberg Traurig LLP in Chicago.

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