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Deep split at Upper Crust

Co-owners’ lawsuits allege misuse of funds

Founder Jordan Tobins is on indefinite leave. Founder Jordan Tobins is on indefinite leave.
By Jenn Abelson
Globe Staff / June 13, 2012
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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.

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. 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.

Jenn Abelson can be reached at abelson@globe.com. Follow her on Twitter @jennabelson.

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