Suit Alleges Financial State of Company Was Misstated : Litigation: A minority investor in an Anaheim-based firm with franchise rights to quick-printing centers asserts in federal court that he was misled and securities laws were violated.
A minority owner of an Anaheim-based company that owns the franchise rights to American Speedy quick-printing centers in California, Europe and Asia has filed a $1.5-million lawsuit charging the company and its officers with misrepresenting the company’s finances and violating federal and state securities laws.
San Diego investor H. Lindley Grubbs, who bought 111 shares in Kaiser International Inc. in July, 1989, for $750,000, filed suit in federal district court in San Diego last month. Grubbs is also asking the court to cancel an outstanding promissory note of $375,000, which he pledged as partial payment for his Kaiser International shares.
The suit accuses company Chairman Joseph P. Kaiser and William J. Culp, president and chief executive, of making false or misleading statements about the company’s financial condition and other company information before Grubbs’ investment.
Culp denies any wrongdoing and predicted that the case will be settled without a trial.
“This thing will never go to court. This lawsuit will be dropped by the end of the week,” he said. “It will be settled out of court.”
Culp said he, Kaiser and Kaiser’s brother, Robert, each own a third of Kaiser International, which is the holding company for Speedy International-Asia Inc., Speedy International-Europe Inc. and Kaiser Printing Inc., all headquartered in Anaheim.
Culp would not comment on the financial condition of his private company, Kaiser International, and its subsidiaries. He said, however, that the companies are current with their debts, which he would only say runs into “several millions of dollars.”
Culp said the debts were incurred beginning in 1988 when Kaiser International bought from American Speedy Printing Centers Inc., in Bloomfield Hills, Mich., the franchise rights to several overseas markets, including Japan. Officials at American Speedy declined to comment on the matter, citing the pending lawsuit.
Grubbs, who was unavailable this week for comment, operates an American Speedy franchise in San Diego.
In the suit, Grubbs alleges that before becoming an investor Culp had told him that Kaiser International had paid American Speedy $5 million for franchise rights to several Asian countries. After buying into the company, Grubbs says, he learned that Kaiser International did not obtain the quick-printing franchise rights in Asia until June, 1990--11 months after Grubbs’ investment.
The suit claims that Culp had used Grubbs’ note to secure loans to obtain the Asian franchise rights.
Grubbs claims that Culp failed to disclose Kaiser International’s “substantial long-term debt” until after his investment, which he would not have made had he known of the existing debt. Grubbs said Culp painted a rosy picture of Kaiser International’s performance but Grubbs found later that the company lost $289,758 in 1988 and nearly $1.2 million in 1989, the most recent financial figures available.
Grubbs alleges also that Culp misrepresented the management and ownership of Speedy International-Asia. He claims that Culp gave him a “confidential business plan” before his investment indicating that American Speedy’s president and chief executive, Vernon G. Buchanan, was a director in Speedy International-Asia. The suit says Grubbs later found that Buchanan was neither a shareholder nor director of the Kaiser subsidiary.
The suit comes at a time when Kaiser International is aggressively selling American Speedy franchises abroad through joint ventures. Speedy International-Asia signed a 50-year pact in May, 1990, with two major Japanese corporations--Canon Sales Inc. and Maruzen Co. Ltd.--to open hundreds of American Speedy franchises in Japan.
Two months later, Kaiser International acquired the American Speedy master franchise for Europe as part of Culp’s plan to build a global quick-printing network, tying together customers in Asia, Europe and North America through quick printing services.
