Four former Las Vegas-area sports apparel manufacturing executives have filed for bankruptcy after the sale of their business resulted in acrimonious litigation with the buyer.
The May 31 Chapter 7 personal bankruptcy filings involved officials formerly with SFC USA Inc. and identified in court records as:
• William Dee Schoen, aka Jeff Newman, former CEO
• His spouse Carolyn Nadine Schoen, aka Lucy Newman, former office manager
• David Timothy Reichert, former president
• Kenneth Robert West, former vice president
As related in Clark County District Court records, the Schoens, Reichert, West and their company SFC USA filed suit Feb. 7 against CV Impressions Holdings LLC.
The suit said SFC (Supplier For Champions) was a locally-owned embroidery and printing company that did business in Las Vegas for more than 40 years.
The company specialized in making uniforms for sports teams and its assets were sold in May 2010 to CV Impressions Holdings for $3.39 million, plus up to $2 million in cash and equity and assumption of certain liabilities.
CV Impressions was controlled by LaSalle Capital Group L.P. of Chicago, which had acquired screen printing and embroidery companies in Indianapolis and Fort Collins, Colo., and intended to integrate the Las Vegas company into a national platform. The Las Vegas company’s brand name was PROWEAR.
LaSalle Capital calls this integrated company Cherry Vale Impressions dba Majestic 360.
In announcing the acquisition last year, LaSalle said: "Jeff Newman, Tim Reichert, Rob West and their team have built one of the most differentiated custom cut-and-sew operations in the industry. SFC will be an outstanding addition and enhance both our product capabilities and our West Coast presence, enabling us to take our business to the next level."
But seven months later the Las Vegas sellers complained in their lawsuit that after the sale they entered into employment agreements with the buyer and that the buyer then mismanaged the business, failed to fulfill financial obligations and then fired the four plaintiffs in January.
The suit alleged breach of contract, deceptive trade practices and other counts.
The buyer, CV Impressions Holdings, fired back with a counterclaim in April accusing the four former officials of racketeering, civil conspiracy and constructive fraud; and accusing their former company of securities fraud.
CV Impressions complained that during its due diligence of SFC, the SFC officials inflated the value of the company by:
• Displaying under false pretenses merchandise bearing the labels and logos of Disney, Disneyland Resort and American Idol and representing that the merchandise was manufactured by their company in Las Vegas.
• Creating the appearance of having certain inventory by displaying customer-supplied inventory, tearing off customer-supplied labels and re-labeling it.
• Creating the appearance of inventory by filling pallets with empty boxes and crates, shrink wrapping them and labeling them to appear to be inventory.
• Canceling production prior to a visit by the buyers and then resuming it to make it appear the business was busier than it actually was.
• Producing counterfeit bank statements and invoices.
CV Impressions alleged in the counterclaim it "transferred millions of dollars of funds to plaintiffs as a result of the false pretenses and fraudulent activity and has had to spend additional sums to preserve the existence of the business in hopes of avoiding a total loss."
Attorneys for the Schoens, Reichert and West filed court papers on May 25 denying the allegations and saying that while they acted in good faith, CV Impressions’ claims were barred "as a result of its prior wrongful conduct" and that CV Impressions hasn’t been injured in its dealings with the plaintiffs.
Clark County District Court Judge Elizabeth Gonzalez on April 26 issued a temporary order freezing the plaintiffs’ assets and requiring them to seek court approval to spend any money outside of normal living expenses.
Then on May 23 she granted the plaintiffs and their former company permission to pay a forensic accountant $10,000 and their attorneys $30,000 in preparation for continued prosecution of their lawsuit.
In their bankruptcy filings, the Schoens, Reichert and West all listed a potential lawsuit claim of $3.34 million by CV Impressions.
The bankruptcies will likely at least temporarily put the lawsuit on hold.