MANHATTAN (CN) — Taking the CEO it ousted in August to court, iPayment says a $12.1 million embezzlement scheme operated right under Carl Grimstad’s nose while he focused on writing off visits to strip clubs, high-end escorts and golf courses.
“Although the sordid details of his tenure as CEO of iPayment are still under investigation, it has now become clear that Grimstad used the company as a piggybank for himself and for his wife, defendant Jessica ‘Gigi’ Grimstad,” the complaint states, filed on Feb. 22 in Manhattan Supreme Court.
The New York-based payment-processing company was named as a defendant in the same court to a short-lived lawsuit Grimstad filed roughly a week after he was fired on Aug. 26.
Though Grimstad has since dropped his case, the Upper East Sider had tried to accuse iPayment of buckling to a boardroom coup by the New Jersey-based hedge fund Chatham Asset Management.
IPayment now scoffs that there is no chance of its former chief recovering legal expenses as it is Grimstad who owes a “significant damages to cover the financial and reputational harm that he has inflicted on the company. The 17-page countersuit paints a lurid portrait of a nearly $450,000 spending spree by the ex-CEO and his wife.
It began as soon as Grimstad left Nashville in 2011 to join iPayment’s Manhattan offices, according to the complaint, which notes that the CEO hung his hat during that transition period at the ritzy Mark Hotel, billing his new employer for $288,000 in expenses.
“While Grimstad was entitled to reasonable relocation and hotel expenses associated with his transition from Nashville to New York, charging over a quarter of a million dollars in hotel expenses to cover such a move was excessive,” the complaint states.
Saying it quickly learned that “this was merely one of numerous egregious examples of Grimstad feeding at the iPayment trough,” iPayment recounts a bill for more than $10,000 to clothe Grimstad’s chauffeur and bodyguard. The CEO also allegedly expensed more than $70,000 that wife Gigi spent at Bergdorf Goodman and other high-end department stores.
“Gigi Grimstad is a bit player on the New York social scene, having been transplanted from Nashville to New York, where she now runs a family design business,” the complaint says.
IPayment says $60,000 of its money went to that company, GS Design Concepts.
While the company says clothing expenses were common for both Grimstads, described by an online social zine as a “Fashion First Family,” it notes that it was the CEO alone who diverted company dollars on sex and golf.
In late 2007, according to the complaint, Grimstad went with another unnamed officer of the company to a Las Vegas strip club called The Spearment Rhino, spending $4,000 for “certain sexual activities” with an escort in his hotel room.
“In 2008, the escort was hired as an employee of iPayment, despite lacking any apparent qualifications for the job for which she was hired,” the complaint states. “Shortly thereafter, the escort’s mother was also hired as an employee of iPayment.”
Calling Grimstad’s golfing habit “prodigious,” iPayment estimated that the CEO played more than 400 rounds of golf between April 2013 and November 2016, averaging more than 100 rounds a year.
Distracted as Grimstad was, iPayment claims, the CEO did not notice that company employees, principals and outside contractors embezzled millions of dollars between 2008 and 2012.
“As a direct result of the 2008-2012 embezzlement, the government initiated an investigation of the company and of certain of the principals involved in the misconduct,” the complaint states. “Upon information and belief that investigation continues to this day.”
The Securities and Exchange Commission and the Manhattan District Attorney’s office declined to comment.
Seeking unspecified damages and restitution, iPayment accuses the Grimstads of four counts of breach of contract and unjust enrichment.
The company is represented by Tariq Mundiya at Willkie Farr & Gallagher.
Marc Kasowitz, a partner at Kasowitz Benson Torres & Friedman, represented Grimstad in his now-discontinued suit against iPayment. The lawyer did not immediately respond to an email request for comment.Follow @bleonardcns
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