"Deep split at Upper Crust" June 13, 2012|Jenn Abelson, Globe Staff
The embattled Upper Crust pizza chain, already under federal investigation for its labor practices, is now riven by a nasty battle for control of the company among its co-owners, who are accusing each other of misusing corporate funds for personal extravagances such as a private airplane.
The fight is spelled out in a complaint and counterclaim filed in Suffolk Superior Court by Upper Crust co-owners Joshua Huggard and Brendan Higgins on one side, and founder Jordan Tobins on the other.
Two slices and I'm done.
In April, Huggard and Higgins sued Tobins, accusing him of looting the upscale Boston pizza chain by charging more than $750,000 in personal expenses to the company, including buying a Cessna airplane. They asked the court to force Tobins to surrender his stakes in Upper Crust and its related businesses.
The pair also alleged that Tobins misused corporate checks for a down payment on a home, falsely claimed personal trips to the Cayman Islands and Nantucket as business expenses, and put his wife on the Upper Crust payroll even though she did not work for the company. The partners said that Tobins’s “reckless spending” endangered Upper Crust’s finances at a time it was waging an expensive legal defense over its labor practices.
“Instead of focusing on the Upper Crust business, in the last three to four years Jordan has spent more time on his yacht, in his vacation home, playing with his Cessna airplane (which he purchased for himself with Upper Crust funds), and in Florida (where there is an Upper Crust Pizza location which he claims is owned and operated by his father) than in the office or working on Upper Crust matters,” Huggard and Higgins alleged in their complaint.
“When Jordan did attend to Upper Crust business, he was a disruptive force, often yelling and threatening employees.”
Their lawsuit also lists two others as defendants: Tobins’s wife, Stefany, for allegedly wrongfully receiving more than $27,000 in payroll checks from Upper Crust, and the company’s former chief financial officer, David Marcus, for allegedly improperly transferring funds to Tobins, misclassifying personal charges as business expenses, and concealing the details from Higgins and Huggard.
Tobins, who has been placed on leave from Upper Crust over the accusations, issued a strong response in a counterclaim that denied the allegations, and asserted that Huggard and Higgins had “unlawfully seized control of the Upper Crust business, causing tremendous damage to their partner and imperiling the business itself.”
He said Huggard and Higgins themselves engaged in “rampant misuse of corporate assets,” including making personal trips to Florida, Aruba, Atlantic City, and the Foxwoods casino in Connecticut.
“The core allegations against Mr. Tobins are pure fabrications, and they represent a feeble attempt to gain control of the company Mr. Tobins founded, built, and financed,” said Scott Ford, a lawyer for Jordan and Stefany Tobins.
“Joshua Huggard and Brendan Higgins were as much a part of the financial operation of the companies as was Mr. Tobins, and they too took distributions to purchase personal items for themselves and their significant others,’’ Ford said. “Mr. Tobins has been attempting to resolve the dispute so that his companies and the Upper Crust brand, which he owns, will continue to thrive.”
Robert Goldstein, a lawyer representing Marcus, said the lawsuit’s allegations against his client are baseless and completely without merit.
“Dave Marcus is a respected professional with a tremendous skill set, and looks forward to disproving the plaintiffs’ spurious allegations,” Goldstein said.
The bitter internal dispute comes after years of mounting pressure on Upper Crust’s operations.
The chain is under investigation by the US Department of Labor over alleged violations of wage and hour laws. And several former employees have filed civil suits accusing Upper Crust of mistreatment.
The company allegedly relied on low-paid illegal workers from a small village in Brazil to expand the chain to 18 restaurants over the past decade, according to a Globe investigation published in 2010.
Related: The Boston Globe's Slice of Brazilian Pizza
What I have noticed around here is all the pizza places are now run by Hispanics.
Former employees have accused the business of routinely exploiting Brazilian workers by underpaying them for long workweeks, and later rescinding overtime compensation ordered by the Labor Department.
Upper Crust has denied accusations made by former employees, but in their lawsuit filed against Tobins, Higgins and Huggard state: “Jordan’s reckless spending and abusive behavior caused the Upper Crust to incur significant legal bills to defend itself in civil suits and with the Department of Labor.”
Franklin Levy, a lawyer representing Upper Crust and Huggard and Higgins, said Tobins remains on leave indefinitely, and discussions are continuing with the federal labor agency over a potential settlement on its allegations.
Huggard and Higgins, who own 40 percent and 15 percent of the company, respectively, state in court documents that a forensic accounting of the business is ongoing, and estimate that the misuse of funds by Tobins could exceed $1 million.
They are requesting the court take control of Tobins’s 45 percent stake in the business as well as several limited liability companies related to Upper Crust’s operations that are controlled by him.
Because Upper Crust faced a cash crunch, Huggard and Higgins stated, they had to pour their own money into the company, borrow from relatives, and cut their own pay to keep the business going.
The Globe reported in April that Upper Crust owed nearly $150,000 in unpaid meals taxes from about 10 of its restaurants, and last week the pizza chain said it closed a location on Commonwealth Avenue near Boston University.
Tobins, in his counterclaim, states that forcing the founder out of the multimillion-dollar business he built has undermined creditors’ confidence in Upper Crust, and resulted in creditors filing suit seeking to collect on their debts.
“The full extent of the damage caused by Huggard and Higgins to the business is not yet known,” the counterclaim states.
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"Upper Crust accused of scheming on pay; Affidavit from CFO claims checks forged, pay slashed" by Jenn Abelson | Globe Staff, June 19, 2012
After being ordered by the government to pay employees nearly $350,000 in overtime, executives at Upper Crust devised a scheme to wrest the money back, including cashing forged checks and slashing workers’ wages, according to the pizza chain’s former chief financial officer.
Upper Crust founder Jordan Tobins “yelled and screamed about the investigation” after the US Department of Labor informed the Boston chain it owed money to more than 100 employees, David Marcus said in an affidavit filed on Friday in Suffolk Superior Court in a lawsuit brought by former workers over back pay.
“Among other things, Mr. Tobins said words to the effect of ‘This is my company’ and ‘The employees are not going to take my money,’ ” Marcus, who worked at Upper Crust until last summer, said in court records.
Marcus’s testimony is at odds with what Upper Crust has maintained about its employment practices. The company has repeatedly denied accusations for the past several years that it rescinded overtime compensation ordered by the labor agency.
And it is a reversal from what Marcus said under oath last year, when he still worked as chief financial officer and claimed there was “never” any discussion about having employees pay back the money.
Then he perjured himself.
These new allegations may complicate an ongoing Labor Department investigation into the matter and the former staffers’ suit. The troubles at Upper Crust, which won praise from area foodies and corporate titans like Jack Welch, also highlight the treatment of immigrants who provide cheap labor for businesses in the service economy.
And remember, it's a job a lazy American kid, working in a pizza parlor.
Upper Crust’s sales and high growth depended on a steady flow of illegal laborers from the impoverished village of Marilac in southeastern Brazil, according to a Globe investigation published in 2010.
Their jobs helped inject money and hope into the town, but the relationship soured over time, employees said, because the restaurant’s management began routinely exploiting the Brazilian workers by underpaying them for long work weeks while the owners indulged in personal luxuries.
Marcus’s about-face comes in the middle of a fierce battle for control of the gourmet pizza empire between Tobins and co-owners Joshua Huggard and Brendan Higgins. The pair recently sued Tobins, accusing him of charging the company more than $750,000 in personal expenses, including the purchase of a plane, and placed the founder on administrative leave in March.
David Berman, Tobins’s lawyer, denied Marcus’s allegations in his new affidavit and said the chief financial officer was the sole liaison between Upper Crust and the labor agency.
“After Jordan’s first brush with the DOL, the last thing he wanted was another brush. He wasn’t going to do anything to bring back the DOL or a lawsuit,” Berman said.
Franklin Levy, who is representing Huggard and Higgins, said Marcus’s statements are “completely contrary to a sworn deposition that was taken of him. Apparently one person has two versions of the truth.”
Levy also noted that the former Upper Crust workers are no longer opposing Marcus’s motion to dismiss the charges against him in the civil lawsuit.
Marcus’s attorney declined to comment.
The former executive left the company on his own, his attorney has said. Berman said Marcus abruptly resigned last summer after being visited by federal officials at his home.
The Department of Labor launched an investigation into Upper Crust in 2009 after several immigrant employees took their complaints about working conditions to the agency.
Later that year, it ordered the pizza chain to pay nearly $350,000 to about 120 employees for uncompensated overtime.
Several former employees have filed a civil lawsuit seeking class-action status that claims Upper Crust management, after making the lump restitution payments for overtime, told workers they would have to pay it back if they wanted to keep their jobs. There is a hearing set for Tuesday to schedule a trial date.
“Upper Crust plotted and carried out an illegal scheme to recoup back wages that the DOL ordered it to pay its workers,” said Shannon Liss-Riordan, an attorney representing the former employees.
“This scheme has been confirmed now by three managers of Upper Crust. We are hopeful this evidence will bring us closer to a resolution of the case, so that we can get the workers back their money, as well as compensation for the workers who lost their jobs because they didn’t go along with the scheme.”
Upper Crust co-owners allegedly decided to recover the money they were supposed to pay employees by turning the hourly workers into “managers” and putting them on salaries at a reduced rate, according to the affidavit filed by Marcus and previous interviews with former employees and other managers.
Tobins told senior managers that employees who did not agree to this arrangement would be fired, Marcus said in court records.
Tobins also instructed one manager, Luciano Botelho, to endorse and cash checks for workers who were no longer in the country and return that money to the business, Marcus said.
Botelho declined to comment.
Berman, Tobins’s lawyer, said Botelho told his client that some employees in Brazil were happy with their experience at Upper Crust and did not want the money so Botelho returned the cash from the checks to Marcus. Berman said he is not sure what happened to the money that was given to Marcus.
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