Frisch’s Restaurants Inc. has filed a civil lawsuit against a former company officer, claiming that he took $3.3 million from the company “over a multi-year period,” Frisch’s said Tuesday.
The Cincinnati-based operator of Frisch’s Big Boy restaurants claims that a former assistant treasurer, Michael Hudson, forged payroll documents and created false documents and other accounting entries to divert company funds into his personal accounts.
“While we were saddened to learn of these unlawful and fraudulent acts carried out against the company by a trusted and longtime employee, we took swift action as soon as we discovered the fraud,” Frisch’s CEO Craig Maier said in a statement. “As a precautionary measure, the company is implementing an additional layer of checks and balances in our accounting system to protect against this type of fraudulent behavior in the future.”
“We will devote as much of our human and financial resources as are necessary to conclude this episode promptly and efficiently,” Maier said.
The lawsuit was filed in the Court of Common Pleas for Hamilton County, Ohio, and seeks restitution. Hudson “has assumed full responsibility for his fraudulent actions” and resigned, Frisch’s said in a statement Tuesday.
Frisch’s said it has notified law enforcement agencies “and is evaluating the impact of the fraud on its reports on internal controls over financial reporting.” At this point, the fraud is not expected to have “a material impact” on Frisch’s reported net income for each of the past three fiscal years and the first fiscal quarter of 2015, which ended Sept. 23, 2014, the company said.
Frisch’s operates 95 restaurants, mostly in Ohio, Kentucky, Indiana and Tennessee. In addition, licensees operator 26 units. The company reported $209.2 million in revenue in its 2014 fiscal year ended June 3, and net earnings of $9.4 million.
According to the complaint, Hudson worked for Frisch’s for 32 years, and in 2004 was promoted to assistant treasurer. In that position, he supervised certain accounting records, including the submission of payroll to US Bank, before payroll is directly deposited into employees’ accounts.
Frisch’s claims that Hudson created a fictitious, separate payroll file that directed funds into his own personal accounts, but not into the accounts of other employees. According to the complaint, funds were directed into at least three personal bank accounts controlled by either himself or his wife, Pamela Hudson, also named in the complaint.
The complaint also states that Hudson created false accounting entries to circumvent Frisch’s internal controls.
Frisch’s says in its lawsuit that the funds were used to purchase 19 pieces of property in Hamilton County and Clermont County, Ohio, in the Cincinnati area, for him, his family and businesses they own or control. The complaint also names the affiliated businesses, H-3 Development in Cincinnati and WPMH Properties in Fairlawn, Ohio.
In addition to the properties, the lawsuit claims Hudson used the funds to buy vehicles and jewelry.
Contact Jonathan Maze at [email protected].
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