Financial deals designed to benefit TriEnda co-founder Curtis Zamec's family helped bring down the company and forced its sale, according to a lawsuit filed in Cuyahoga County, Ohio.
The plastic pallet manufacturer once had an active operation in the former Thomson plant, 3301 S. Adams St., in Marion. The company's new owners still claim an interest in equipment left in the facility.
The complaint alleges Zamec caused TriEnda to refinance its debt "solely so that it could make a $6.9 million payment to his family, concealing the transaction from its business partners, and incurring professional fees of more than $1 million in the process."
It further alleges this "reckless self-dealing" created financial difficulties that led to TriEnda's sale to Spara Logistics, LLC, in 2011. Spara is not a party in the complaint.
The complaint for breach of contract, breach of fiduciary duty and violations of Wisconsin law was filed Dec. 20 on behalf on Zamec's former business partners, Neil and Donald Kruschke. They seek $2.49 million in damages.
It reports the Portage, Wis. plastic pallet manufacturer had "a great deal of financial success" in 2008. At that time, it entered into an exclusive five-year supply contract with a Netherlands-based plastic pallet manufacturer that was estimated to earn it $1.2 billion in revenue.
Though it was not mentioned in the lawsuit, this was the same year TriEnda announced its intent to start an operation in the former Thomson plant that would hire 340 workers by 2012. Marion and Indiana both offered incentive packages that included tax credits, grants, infrastructure improvements and training assistance to draw a $20.3 million capital investment into the Thomson plant.
According to the lawsuit, Zamec and his partners engaged in discussions to sell the company in 2009, which he reportedly had a "strong desire" to do in order to use the proceeds to make a distribution to his wife's trust.
However, Zamec allegedly failed to disclose that he already transferred half of his ownership in the company to the trust. His wife was seriously ill and passed away that year.
The suit then alleges Zamec engaged in a refinancing that caused the company to redeem $6.9 million from his wife's trust. The company also paid an investment banking firm around $1 million in fees and an unknown amount to another firm for a financial report detailing how to redeem the shares.
Neil and Donald Kruschke, who controlled 36 percent of the company through their entities Plastic Pallet, LLC, and Centurion Pallet, LLC, were allegedly not told about any of these transactions and were no prorated for the proceeds. The suit charges that this violated Wisconsin law and constituted a breach of contract.
Jon Pinney, an attorney at the Cleveland, Ohio law firm Kohrman, Jackson and Krantz P.L.L., which is representing Zamec's former business partners, said the refinancing affected the company's ability to pay its debts.
"The allegations set forth that the redemption put the company in financial harm," he said.
Pinney said he could not comment further other than on what was detailed in the complaint.
The Marion TriEnda operation went idle after it laid off its workers in 2010.
Thomson plant landlord Lester Lee said it he knew something was wrong with the company when they quit production, but initially there was no indication of financial trouble.
"It's not unusual for (companies) to retool," he said.
The company was sold in an asset sale in June 2011 to Spara. Zamec is listed as chairman and president of the company in the complaint, but the Chronicle-Tribune was unable to confirm this from Spara.
Spara has entered a lawsuit in Grant County brought forth by Thomson plant landlord Lester Lee against TriEnda that alleges the company defaulted on its lease when it failed to pay rent in March and April 2011. It seeks more than $2 million in damages and Lee is holding machinery in the building as "security" in the lawsuit.
Spara claims that it bought the machinery in the assets sale and it is being unlawfully detained.
H. Joseph Certain, an attorney at Kiley, Harker and Certain, 300 W. Third St., representing Lee, said he was unaware of the Ohio lawsuit but called it an "interesting development." He said he did not know the cause of the company's failure to pay its lease.
"It obviously came from other financial difficulties in the company," he said.
Charles Herriman, an attorney at Spitzer, Herriman, Stephenson, Holderead, Musser and Conner, LLP, 122 E. Fourth St., representing Spara and the former TriEnda in the lease lawsuit, said it was his understanding that Zamec was a Spara employee. He said Spara was still trying to bring jobs into Marion and attorneys were working on various options to settle the dispute, including an agreement with Lee.
"It would be our hope to be able to resolve the dispute by agreeing to a lease that would bring jobs into Marion," he said.
Lee said that the equipment was still in the building and he has been in contact with Spara. He said he was continuing to hope to draw new tenants to the site and demolition work on the north end of the building should be completed by the spring.
Pinney said his law firm was committing discovery to determine Spara's exact role in the Ohio complaint and additional parties could be added to an amended complaint. He said that he expected a response from Zamec's attorneys later this month.
TriEnda sued the Netherlands plastic pallet manufacturer in 2010 and was awarded $7.18 million in 2011. The suit said the right to collect on the judgment apparently transferred to Spara and Zamec after the company's sale.