27-Oct-17 – Was it honest mismanagement or did the CEO and majority shareholder of Restaurant.com purposely drive the company nearly to bankruptcy so he could profit more from stock he owned?
A lawsuit filed on Thursday in Cook County Circuit Court accuses River North resident Dr. Kenneth Chessick of lining his pockets with money that belonged to the company and its shareholders.
Adnan Adamji and Steven Schnall are also shareholders in the company and Adamji was its Chief Information Officer from 2004 to 2016. They say the year before Chessick took over as CEO, Restauarant.com generated $15 million in profits, selling discounted gift certificates to restaurants nationwide. The first year Chessick was in charge, according to the lawsuit, the company lost more than $8 million and continued to spend more than it earned every year. All the time, Chessick allegedly paid himself more than $1 million annually.
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“In 2012 and beyond, Kenneth Chessick (left) has continued to institute drastic changes to the Restaurant.com business model,” say Adamji and Schnall in their lawsuit, “resulting in dramatic losses in revenue and profit.” |
They say he fired the company’s sales people and employed telemarketers instead. He stopped doing email marketing campaigns and started selling gift certificates valued at $10 instead of $25. By May 2013, nearly 6,000 restaurants had dropped out of the program, according to the lawsuit.
“The company is in poor financial health at present and may be on the brink of bankruptcy,” say the two shareholders. “This was a designed plan by Kenneth Chessick to seize control of the company and further dilute the value of other shareholders’ stock.”
| Adamji (right) and Schnall believe Chessick planned to turn the business around before selling it, but earlier in the year, he offered the company for sale for $10 million, which they say would go almost entirely to Chessick. Other shareholders would receive “nothing or virtually nothing.” |
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They are suing for breach of fiduciary duty and seek punitive damages.
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Company plagued by lawsuits and complaints
On February 1, 2017, the Chicago Better Business Bureau issued an alert to consumers and businesses about a “pattern of complaints” against Restaurant.com, which is based in Arlington Heights. Most of the complaints were not from people who purchased gift certificates online but from restaurant owners who said they were signed up to honor the certificates without their knowledge. Some owners said they felt obligated to sell their food at a discount when presented with the certificates.
The company recently lost a six-year federal lawsuit filed by two residents of New Jersey over fine print on gift certificates that were in violation of state law. Gregory Bohus and Larissa Shelton were awarded just $1,100 but Restaurant.com was told to pay $190,648 in attorneys’ fees. A satisfaction of judgment was filed on April 20, 2017.
Restaurant.com is also one of three defendants being sued by an Illinois resident who said he received spam from them on his mobile phone. That case is still in the discovery phase, with parties exchanging information prior to trial.
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Lisa Klein of Courthouse News Service assisted with this story.
