Taco Bell Denies Allegations in Suit That It Spied on Chicago Franchisee

Taco Bell Corp. on Thursday denied allegations that it tried to infiltrate a Chicago-based company in 1991 to spy on a fast-food franchisee.

In a suit filed in U.S. District Court in Chicago, franchisee Richard L. Cohn alleges that Taco Bell tried to gain access to his company illegally in 1991 by recommending that he hire a Houston-based Taco Bell executive to help run nine Chicago-area franchises.

The suit alleges that Cohn hired Dirk Smith, who subsequently taped and made notes of confidential conversations with Cohn, including talk of possible litigation against Taco Bell. Cohn’s suit, filed in August, alleges that the illegal activities were part of a plan by Taco Bell to push him out of the Chicago market.

Taco Bell Vice President Jonathan Blum on Thursday said that the allegations of corporate spying are “absolutely and unequivocally false. . . . Taco Bell doesn’t condone the use of such tactics, nor do we use them in any of our restaurants or operations.”

“Taco Bell has flourished . . . by building on a foundation of the highest and soundest business practices,” Blum said. “We will vigorously defend against these charges through the judicial system.”

Smith, who now owns a fast-food company in Houston, on Thursday denied spying on Cohn for Taco Bell. Smith acknowledged that he had taped some conversations with Cohn but said he did so as part of his attempt to prove that the Chicago businessman reneged on a promised compensation package.

“Kohn hired me, offered me a lot to come to work . . . and then he retracted everything,” Smith said. “Cohn absolutely knows that what he’s accusing me of is false,” he said, adding that he was angry and that led him to record the conversations.

Cohn’s bid to prove that Taco Bell wanted to force him out of business in Chicago suffered a setback earlier this month when a U.S. District Court judge dismissed a charge that Taco Bell illegally encroached on Cohn’s sales territory. The judge ruled that Cohn’s franchise agreement did not prohibit Taco Bell from opening restaurants near his.