CHICAGO (CN) – Bo Jackson, the first athlete to be named an All-Star in two major American sports leagues, won a preliminary injunction against a business partner who allegedly lined her pockets with millions of corporate earnings, disguising some as payments for chicken wings.
Vincent “Bo” Jackson achieved fame as the first athlete to be named an All-Star in both the National Football League and Major League Baseball. He played football for the Los Angeles Raiders and baseball for the Kansas City Royals, Chicago White Sox, and California Angels. He won the Heisman Trophy in 1985 and still holds the record for the fastest 40-yard dash ever recorded at the NFL Scouting Combine.
The court says Jackson attempted “to defy F. Scott Fitzgerald’s dictum that ‘there are no second acts in American life'” after a hip injury impaired his athletic career.
In this capacity, Jackson partnered with Valerie Littlechief to form a food-products distribution company called N’Genuity Enterprises. After several years of lending his celebrity to boost N’Genuity’s sales, but never getting a chance to review the company’s financial records, Jackson became suspicious.
He filed lawsuit against Littlechief in 2009, accusing her of using N’Genuity as her “personal piggy bank” and looting the company of millions of dollars through payments to related corporations and transfers to herself disguised as business expenses.
Jackson claimed in February that a fraud examiner he hired confirmed his allegations. Littlechief admitted that she was borrowing money from the company and paying it back without interest, but that any other inconsistencies resulted from bookkeeping errors.
Jackson asked the court for a preliminary injunction to prevent further diversions of funds and to stop a contemplated merger with a company Littlechief’s relatives own called Impact Marketing Group. He further asked the court to appoint a temporary receiver to monitor N’Genuity’s assets.
Last week, U.S. Magistrate Judge Jeffrey Cole granted Jackson’s request for a preliminary injunction to prevent the merger and for a temporary receiver.
Cole found it implausible that the “pattern of disguised transactions, always in favor of Ms. Littlechief and her family” could be the result of accounting mistakes.
Littlechief’s personal loans were often “recorded not as loans but as cost of goods sold and not properly classified until after the litigation began,” Cole said. One accounting entry was entered as a loan to Littlechief for almost $250,000, but was reclassified by senior management.
“Somehow, with a few strokes of a keyboard, this quarter-million-dollar receivable was ‘reclassified’ as ‘cost of chicken wings,'” Cole said. “The defendants also somehow confused the cost of chicken wings with $50,000 in legal expenses in September 2008,” he continued.
Another entry explained a check made out to a landscaping firm as the costs of selling bacon. “N’Genuity does not produce the food it sells; in other words, it’s not raising hogs on property that needs to be irrigated or landscaped,” Cole noted.
Further, when Littlechief attempted to explain why N’Genuity funds were used to pay her nanny, she claimed that N’Genuity employed the nanny as her personal assistant.
Littlechief contended that she always made a “conscious and consistent effort to segregate” her personal transactions from business expenses, and that any errors were not her fault. Citing precedent, Cole found that this claim “hovers on the brink of the preposterous.”
According to the judgment, the record shows that N’Genuity paid Littlechief Specialties, a company wholly owned by Littlechief and her relatives, over $1 million since it was formed in 2009. N’Genuity also paid the family’s other company, Impact Marketing, more than $5 million since 2005, but it is unclear what services Impact provided. On several occasions, checks were written directly to Littlechief rather than the intended corporation.
The court halted the proposed N’Genuity-Impact merger to protect Jackson’s shareholder interests.
“The defendants’ conduct has obviously reduced the value of N’Genuity,” Cole wrote. “If a preliminary injunction does not issue to stop further improper transfers to the defendants, any assessment of fair market value of the stock in a company would be rendered inexact and unreliable.”
“Given the diversions of funds and the concealment of documents and destruction of computers in this case, it is at least uncertain whether the statutory remedy would be adequate since one could not adequately evaluate the real value of N’Genuity,” he added.
Holding that “an injunction is clearly in the public interest,” the court said that “defendants cannot be permitted to evade liability for breach of their obligations as corporate officers and directors by engaging in a merger.”