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Lawsuit: Former CompUSA Executives Stole Millions

Source: The Miami Herald

Posted on 10 Jan 2012

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The Fiorentino brothers were aggressive entrepreneurs who grew a small direct-mail catalog company into what is today CompUSA, a national electronics chain owned by a Fortune 1000 company. Then greed got in the way.

Nearly nine months after Gilbert, Carl and Patrick Fiorentino were physically escorted out of the Miami headquarters of the company they started in 1987, the first official account of their transgressions has emerged in a lawsuit that was filed by CompUSA’s parent company in Miami-Dade Circuit Court.

The suit tells a classic tale of executives feeding at the corporate trough. The allegations include stealing electronics worth millions of dollars, taking family and friends on company-sponsored trips, negotiating kickbacks from vendors, and using employees for personal errands on company time.

Their employees and vendors eventually grew tired of the games and turned them in. A whistleblower investigation disclosed last March launched the demise of the Fiorentino brothers. Carl and Patrick were fired; Gilbert signed an agreement that separated him from the company.

The lawsuit by the New York-based parent company Systemax, and TigerDirect — the Miami-based operating company that bought the CompUSA brand in 2008 — accuses Carl and Patrick Fiorentino of unjust enrichment, civil conspiracy and breach of fiduciary duty. Also accused in the suit are several others who allegedly aided them in their crimes: three low-level formerTigerDirect employees with connections to the executive suite, a Taiwanese vendor and its owner, and a Miami yacht maintenance company and its owner.

“Carl Fiorentino is the poster child for personal greed and unethical corporate conduct, having intentionally stolen and wasted million of dollars of money and other assets,” the lawsuit claims. Carl was TigerDirect’s president; Patrick was a vice president. Systemax bought TigerDirect in 1995.
Systemax and TigerDirect are seeking “millions of dollars in damages.” While the lawsuit doesn’t put an exact value on the damages, a report filed by CompUSA with the Miami-Dade Police Department in July estimated $17 million in electronics had been stolen. No criminal charges have been filed in the case.

A Systemax spokesman said the company would not discuss the lawsuit filed Friday by local counsel Michael Marsh of Akerman Senterfitt.

Carl Fiorentino’s attorney, Silvia Pinera-Vazuez, said late Friday she had not seen the lawsuit but that her client intends to dispute any allegations of wrongdoing and file a counterclaim.

Patrick Fiorentino could not be reached for comment.

Conspicuously missing as a defendant is former Chief Executive Gilbert Fiorentino. He reached a deal in May 2011 with Systemax to resign and surrender $11 million in assets in exchange for not being fired and a promise his bosses couldn’t sue him for his job-related actions. However, Friday’s lawsuit repeatedly refers to a “former senior executive of TigerDirect” whose alleged actions mirror those of Gilbert Fiorentino detailed in a previous Miami Herald article.

Gilbert Fiorentino’s attorney, Daniel Gelber, declined to comment Friday since his client is not named as a defendant in the suit.

Still, Friday’s suit may not be the end of legal action against the company’s founders. The Securities and Exchange Commission said in June it initiated a formal investigation into matters discovered during the whistleblower investigation.

The fall from grace for the Fiorentino brothers came as little surprise to many company insiders.

A corporate culture of “fear and intimidation” started with Gilbert Fiorentino and permeated both TigerDirect and CompUSA, employees said in a previous Miami Herald report. Vendors described a “pay for play” model where suppliers who paid the most money got the most exposure on the websites or in stores, even though sales didn’t justify the costs. But the Fiorentinos ruled with a tight fist and vendors said they had little choice if they wanted to work with the company.

Several insiders contacted by The Miami Herald in summer 2011 said fear of losing their jobs and contracts kept them silent for years. Many of those details appear in the lawsuit, which describe patterns of “wrongful, unethical conduct.”

“Carl and Patrick Fiorentino, aided and abetted by the other Defendants, engaged in a long-term scheme to divert millions of dollars in company assets for their own personal use and the use of their family and friends,” the suit states.

The “flagrant” misconduct alleged in the lawsuit includes:

•  Theft and waste of company property: Carl and Patrick Fiorentino and others orchestrated a “scheme” that resulted in the theft of computers, laptops, televisions, cameras and other valuable merchandise from TigerDirect’s inventory, without any compensation. They also converted vendor “incentive points” into merchandise for their own personal use.

This merchandise was often passed on to Carl’s children, other family, friends and vendors doing personal work for the Fiorentinos.
Products were typically stashed in closets, loading docks and “other surreptitious storage locations” at company headquarters. Sometimes recipients visited the office to pick up the merchandise. In other cases, Carl Fiorentino arranged for the stolen products to be taken from the various hiding places and secretly loaded into his truck or sports utility vehicle. Patrick Fiorentino even walked out with concealed stolen merchandise.

The Fiorentino’s allegedly got help from Andrea Fongyee, a longtime former personal assistant to Gilbert Fiorentino, and Gerdy Carballos and Yoendi Perez-Cruz, TigerDirect employees who served almost exclusively as handymen and gophers for Gilbert Fiorentino. All three are defendants in the suit, which claims they helped with the storage, transportation and delivery of the stolen merchandise.

Fongyee’s attorney, Robert Barrar, said Saturday that “his client did absolutely nothing wrong.’’ Carballos said Friday he knew nothing about the allegations and has previously said any personal work he did for Gilbert Fiorentino had nothing to do with the company. Perez-Cruz could not be reached for comment.

Carl Fiorentino is also alleged to have pressured vendors into sponsoring personal events for him, as well as taking family and friends on various company- and vendor-sponsored trips. These guests had no connection to the company and charged “substantial” amounts in alcohol and other expenses that were paid by Systemax, TigerDirect and their vendors.

Also named in the suit is Nelson Fernandez Jr. and his Miami company Glass-Tech, which provides yacht maintenance. The suit alleges they took

TigerDirect merchandise, gift cards and incentive points in exchange for maintenance and other services provided to a former senior executive’s private yacht. Fernandez could not be reached for comment.

•  Payment of salary and benefits to the Fiorentinos’ mother: Carl and Patrick Fiorentino and “another former senior executive” are accused of putting “their mother” on the payroll and the corporate health insurance, although she had no job responsibilities at the company. When she was removed from the payroll, they used corporate money to pay her COBRA premiums.

The brothers also allegedly inflated their own salaries to continue funneling salary payments to their mother. Fongyee allegedly facilitated this activity.

•  Overcharges by vendors and kickbacks: Carl Fiorentino is accused of allowing vendors like Chih-Wei “Eddy” Kuo, the owner of Rici International, to overcharge TigerDirect for merchandise. The Taiwanese company, which made private label electronics for TigerDirect, billed at “grossly excessive prices, far exceeding what it would have been reasonably billed in arms-length negotiations,” according to the lawsuit.

In exchange Carl Fiorentino got kickbacks for the difference between what TigerDirect was billed and what it “reasonably” should have been charged, the suit contends.

“These kickbacks represented outright theft by Carl Fiorentino, Kuo and Rici,” states the suit.

Carl Fiorentino had a “personal relationship” with Kuo and directly controlled all negotiations with the vendor regarding the price and quantity of merchandise. TigerDirect has been the Taiwanese company’s largest customer since its founding.

Unlike other vendors, Fiorentino had to be copied on all correspondence with Kuo and Rici. Fiorentino allegedly turned down attempts by other employees to seek better prices from the vendor. But after Carl Fiorentino’s firing, TigerDirect negotiated prices with other vendors that sometimes were less than half of what Kuo previously charged. TigerDirect no longer does business with Rici.

While Patrick Fiorentino was not implicated in the Rici situation, he allegedly took a boat inverter as a kickback from another unnamed company vendor.

•  Destruction of company property

When Carl Fiorentino sensed that the company was on his trail, he attempted to “cover up his misconduct,” according to the suit. He accessed company computers and hard drives to obtain and alter information. He “materially altered” emails before they were turned over to those conducting the investigation of his conduct. Shortly before his termination, Fiorentino removed computer towers from TigerDirect’s offices.
The suit claims Carl and Patrick Fiorentino “took all of these actions intentionally and maliciously, wantonly, willfully, in bad faith.’’