By Ameet Sachdev | A
private equity firm that controls Addison Professional Search has sued
the founder of the Chicago staffing company, alleging he looted the
company and engaged in other malfeasance.
Joel Katz, of Chicago, is accused of using company funds to pay for
travel, rental cars and cell phones for himself and his wife, according
to the suit filed Tuesday in Cook County Circuit Court. The complaint
also said that Katz stole company funds to pay a $441,000 personal tax
liability.
Katz did not return phone calls to his home.
Addison Professional Search, a privately held company specializing in the finance and accounting industries, is majority owned by Lake Capital, a Chicago private equity firm. In 2006, Lake Capital paid $28.6 million to buy about 70 percent of Addison, which was launched by Katz and his wife in 1999, according to the suit.
As part of the sale, Katz and his wife received nearly $13 million. Katz remained president and chief executive and gained a seat on the board, the suit said.
In the 31-page suit, Lake Capital tells how the relationship between the firm and Katz went sour a year after the deal closed. Katz began pushing the board to increase his compensation. He later worked with another board member, Randall Winters, to find new buyers for Addison Professional Search without informing the rest of the board, the suit said.
The economic downturn in 2008 hurt the company. Katz began working fewer hours and ignoring his duties as CEO, the suit said. Last December, members of Addison’s senior management demanded that the board fire Katz. Lake Capital’s directors proceeded to do so.
After his termination, the suit said, the company learned that Katz had given unauthorized salary raises to his wife and used company funds for personal purposes.
Lake Capital also alleges that Katz defrauded the firm by misrepresenting his compensation in the sale negotiations, which resulted in a higher purchase price. It also discovered e-mails between Katz and Winters that show that they placed their interest ahead of the company’s, the suit said.
Winters and his company, E.L.K. Capital Advisors, a Northbrook-based broker-deal, are also named as defendants. Winters said: “The claims and the facts that are presented are incorrect, untrue and without merit and intended to tarnish my reputation. I intend to defend myself and consider pursuing counter claims against Lake Capital.”
Reed Oslan of Kirkland & Ellis is representing Lake Capital and Addison Professional Search.
