MIAMI -- Vons Cos., Arcadia, Calif., and Pueblo International, Carolina, Puerto Rico, along with other entities, are scheduled to go on trial in U.S. District Court here next month on racketeering charges under the federal Racketeer Influence and Corrupt Organizations Act.
They are accused of documenting fictitious transactions with Premium Sales Corp., Aventura, Fla., a former grocery and nonfood diverter charged in separate civil and criminal suits with bilking investors out of $265 million between 1989 and 1993.
The civil suit leading to next month's trial was filed in 1993 by Kozyak, Tropin & Throckmorton here, receiver/trustee for Premium, which is seeking to collect damages to repay investors.
Gary Brooks, the attorney for one of the defendants, told SN the receiver is trying to recover as much money as it can by going after the companies with the deepest pockets -- Vons; Pueblo; Stanford Trading Co., a Dallas-based diverter, and County National Bank, the locally based financial institution that Premium used. He said the receiver has reached a settlement with three other food distributors, as well as with Premium's three principals -- Kenneth Thenen, Scott Thenen (his son) and Daniel Morris -- who have already turned over all their assets.
A Vons spokeswoman said the chain's attorneys have not yet determined what action to pursue in the matter. She noted, however, that Vons' alleged connection with Premium came through Eugene Shirley, an employee of Stanford Trading, a Dallas-based diverter who was assigned to Vons as an in-house diverter before joining Premium full-time.
Ramon Lloveras, vice president and general counsel for Pueblo, told SN the company is preparing for the trial, and Jeffrey P. Freimark, executive vice president of finance, said, "We are very confident with our position."
Allan Burholtz, president of Stanford Trading, said to SN last week, "It's an interesting aspect of American justice that parties representing the people that did the [alleged] bribing [the receiver/trustee for Premium] say it is my fault that a former employee of my company was bribed by them. And I'm prevented from cross-claiming that my company was damaged by their company making bribes."
Brooks, the attorney for Larry Robinette, vice president of County National Bank, said his client did not exceed his responsibilities in helping Premium deposit and withdraw funds. In addition, Brooks said, "If Robinette had been part of a conspiracy, why would he himself have invested in Premium and convinced other family members and his best friend to invest, when all of them lost hundreds of thousands of dollars?"
James Gilbride, the attorney representing Morris, said his client has already divested himself of all assets and has no resources to repay Premium's investors even if a judgment is entered against him in the civil suit.
Attorneys for the Thenens could not be reached for comment.
Three other defendants in the case have previously agreed to settle the charges against them before the trial, though those agreements must still be approved by the court: Fleming Cos., Oklahoma City, (on behalf of Malone & Hyde, its former Memphis, Tenn.-based subsidiary, since absorbed by other company divisions) for $20 million; Fry's Food Stores, the Phoenix-based division of Kroger Co., Cincinnati, for $5.1 million and the right to collect a like amount from its insurers; and Longs Drug Stores, Walnut Creek, Calif., for $13 million plus $1.5 million in insurance proceeds.
Fleming officials previously told SN they had agreed to a settlement because it "puts this matter behind us and is in the best interests of our shareholders, although we do not believe our former subsidiary, Malone & Hyde, had any responsibility for the alleged losses realized by the Premium investors."
Orlo D. Jones, general counsel for Longs, said his company had agreed to a settlement "because we felt it was in the best interests of the company and our shareholders." Representatives of Fry's could not be reached.
The losses to investors totalled $265 million plus interest of $100 to $125 million, observers told SN. Because prosecutors can seek triple damages under the RICO statute, the damages could total $795 million, which can be collected jointly or separately from the defendants, observers said.
A related case filed by the Securities and Exchange Commission against the same defendants -- plus nearly 100 other individuals and companies that funded Premium -- charges that the diverter engaged in fraud by selling unregistered securities issued by various funding entities to more than 1,500 investors and that the funding entities subsequently transferred the proceeds from the sale of the securities to Premium and other diverting enterprises controlled by Thenen and Morris.
Premium reportedly told investors that the securities would be used to finance diverting transactions -- transactions the suit says didn't always occur. The suit charges that employees of the defendant companies confirmed the false transactions. As a result, the employees and their employers "aided and abetted violations of the antifraud provisions of federal securities laws in that they either knew or through studied ignorance were reckless in not knowing of the fraud."
The suit states that the employees were paid fees by Premium to confirm diverting transactions that never actually occurred, including the following amounts: · To Mike Flynn, a diverter buyer for the Miami division of Fleming's Malone & Hyde subsidiary, at least $600,000.
To Charles Valvo, a grocery buyer for Pueblo's Xtra Supermarkets division here, more than $500,000.
To Dean Henrichs, a buyer at Fry's, at least $193,389.
To Eugene Shirley, the Stanford Trading employee assigned to Vons, at least $185,520.
To Mel Brink, corporate traffic manager at Long's before joining Premium full-time, at least $133,879.
To Gil Harding, vice president of grocery and general merchandise, Associated Grocers, Seattle, before joining Premium full-time, at least $83,400.
To Henry Geringer, inbound traffic coordinator at Fleming; Guy Benamati, transportation division superintendent at Fleming's northern California division; Harold Schumacher, traffic manager for Sun Diamond Growers, Pleasanton, Calif.; Nick Paun, a district services manager in Pleasanton for the Best Foods division of CPC International, and Patricia Dennis, a traffic supervisor at Lucky Stores' Buena Park, Calif., office, at least $5,000 each.
To Lang Lewis, a traffic department employee at Certified Grocers of California, Los Angeles, at least $2,500.
To Kelly Thomas, Fleming's Malone & Hyde division, and Maurice Durbin, a buyer at Associated Grocers, Seattle, unspecified sums.
SN tried to call the individuals listed above last week but could not reach them.
According to the suit, the fraud began in the late 1980s when Southern Merchandise Distributing, a company owned by Morris, filed for bankruptcy, leaving Fleming's Malone & Hyde subsidiary with an unpaid debt of more than $150,000.
The suit says Morris and Kenneth Thenen, partners in the newly formed Premium Sales Corp., made a deal with Malone & Hyde's Miami division, whereby Morris would pay off Southern's debt if the wholesaler would agree to falsely confirm to Premium's bank that it was purchasing goods from Premium.
