MISSOULA — The trustee overseeing the Chapter 7 bankruptcy of a Montana-based appliance and electronics store has filed a lawsuit against the company’s former CEO and CFO, arguing their actions drove “a moderately successful company into financial ruin” and caused its employee stockholders to lose $9.2 million.
Trustee Richard Samson filed the lawsuit in U.S. District Court in Missoula on Aug. 30, KECI-TV reported Tuesday. The lawsuit also lists 10 unnamed defendants.
The lawsuit alleges CEO George Manlove of Park City, Utah, and CFO Paul Nisbet of Missoula caused Vann’s Inc. to pay $600,000 per year above market prices in rent for four properties that housed Vann’s stores and were owned by LLCs of which Nisbet and Manlove were members. The secretary of state’s website lists Nisbet as the registered agent for the LLC that owns properties in Bozeman, Missoula and Lolo and lists Manlove as the registered agent for a property in Helena. The Helena Vann’s store closed in early 2012 and the building remains empty.
The lawsuit also alleges Vann’s paid more than $350,000 in personal expenses for Manlove, including at least $97,000 for tuition and other expenses, for Manlove to receive a master’s in business administration while he intended “to use his new degree to depart from Vann’s and pursue other opportunities.” Other personal expenses include interior decorating costs, iTunes purchases, Apple Store purchases, casino trips and nearly $50,000 in credit card charges.
The lawsuit alleges Manlove and Nisbet depleted Vann’s cash flow and prevented it from holding adequate reserves.
“As a result, when the market for home appliances underwent a contraction, Vann’s Inc. had insufficient cash flow or reserves to weather that storm,” the lawsuit alleges.
At that point, the lawsuit alleges, Manlove and Nisbet pursued ill-conceived business ventures that destroyed the value of the company, including purchasing and making substantial improvements to real estate in Deer Lodge, losing more than $400,000 in a failed online outdoors, equipment and clothing store and investing in the music industry and an online sales site.
A message left on an answering machine for a phone listing for Manlove in Park City, Utah, wasn’t immediately returned Wednesday afternoon, while a phone number for a Paul Nisbet in Florence was disconnected.
The lawsuit alleges Manlove and Nisbet failed in their duties as the company’s executive employees, the only trustees of the company’s employee stock ownership plan and as members of the board of directors and that they acted to maximize their own financial gain at the expense of the corporation and its shareholders — its employees.
It seeks compensation for the employees’ stock losses.
Pete Vann founded the company in Missoula in 1961. It became 100 percent employee-owned in 2005.
Manlove stepped down as CEO in June 2012. Vann’s Inc. filed for bankruptcy in August 2012 and was sold for $4.5 million in November.
Former Vann’s Acquisition CEO Greg Regelbrugge said Pete Vann wanted the new company to buy the buildings leased by the stores in Missoula and Hamilton. Vann told the Missoulian in May 2013 that the new owners sought a 40 percent reduction in the lease price for the buildings, including one in Kalispell.
Vann’s Acquisition LLC has since closed stores in Hamilton, Missoula and Kalispell. It still has stores in Bozeman and Billings.