Judge rules for Variety
A Superior Court jury ruled on Thursday that a Henderson-based corporation should recover $887,889.37 that corporate attorneys said were misplaced by acts of embezzlement, fraud and unfair trade practices by a now bankrupt contractor company.
Superior Court Judge Henry W. Hight Jr., presided over the trial, and final documents with his signature on the ruling were still in his possession on Friday.
In a complex case that involved the N.C. Supreme Court and the Court of Appeals, Variety Wholesalers sought the fund recovery from Ark Royal Capital, LLC, of Houston in a trial that lasted two weeks. Variety is the owner of Roses, Maxway, Super 10 and other store chains.
Representatives with Variety Wholesalers, headquartered at 218 S Garnett St, Henderson, did not return requests for comment on Friday.
The original filing of the case on Jan. 6, 2009, named Salem Logistics Traffic Services, LLC, of Winston-Salem, as the defendant.
The jury had to rule in the majority on a series of three questions to reach a verdict for Variety to recover the funds:
• Did an agreement exist between Variety and Salem that money sent by Variety was intended to pass through Salem services to the freight carriers serving Variety’s 14-state retail store operations? That would mean the money was not Salem’s property.
• Was Ark Royal notified in good faith of that agreement involving a Wachovia account that the Ark corporation controlled?
• Did Variety catalogue properly the source of funds and fund amounts?
The case files included thousands of court ruling, actuarial and ledger documents added to the court record over the four years the case was fought.
In 2009, Variety documents noted a loss amount of about $700,000, and laid accusation against Salem Logistics that named aggravations because of embezzlement, larceny, false pretenses, fraud and unfair and deceptive trade practices.
The original suit sought restitution of damage “by reason of defendant Salem Logistics’ embezzlement and conversion, which is in excess of $10,000, as well as any consequential damages and punitive damages together with reasonable attorney’s fees,” according to court documents.
Variety set up a research-and-fiduciary-duty trust account for the case, and included restitution of costs associated with Variety staff work on investigating and reporting on the case in its claim against Salem.
Salem Logistics failed under bankruptcy, according to court records in the case.
Court documents noted that the state Supreme Court became involved to answer questions of the original agreement between Variety and Salem, and its applicability to Ark Royal.
Ark Royal, an investment company providing asset-based loan arrangements to businesses, entered a finance loan agreement with Salem in March 2006, giving them a revolving line in exchange for interest in Salem assets, including the Wachovia account where Variety money went.
Documents named Salem Board of Director Allison Hanslik and research analyst David Pearson as involved with Variety’s July 2007 “freight agreement” that included a letter detailing how fund transfers would be conducted.
“By that letter, Salem requested that Variety send the amounts on the master invoices directly to the Wachovia account, but did not inform Variety that the account was actually controlled by Ark,” a court filed case narrative stated.
The Thursday ruling made no mention of additional punitive or consequential damages, attorney fees or staff costs originally sought from Salem Logistics.
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