URBANA, ILL. (CN) - Sports Publishing, of Champaign, claims it was defrauded of millions of dollars by law school graduate Eric Lefkofsky and the company he controls, InnerWorkings, which used profits from a string of securities frauds "to steal money from Sports Publishing," "gain a stranglehold on the company," disrupt its business, and "force the company to sell itself to InnerWorkings for millions less than its net worth."
The federal complaint claims that "Lefkofsky has left a trail of defrauded investors since graduating from law school in 1994. His first victim was the City of Columbus, Wisconsin. They backed his idea to take over a clothing maker with promises he would create jobs using 'proprietary' software. Instead, he laid off workers and the company filed for bankruptcy protection."
Plaintiff claims Lefkofsky used the money he got to create an Internet start-up company called Starbelly, which he promoted and sold for huge gains, again with false claims that it had "proprietary software. ... despite a due diligence investigation by Ernst & Young and others that showed Starbelly's software was neither 'proprietary' nor even functional".
It claims Lefkofsky and his cohorts then gained control of Starbelly's suitor, HA-LO Industries, "and drove it into bankruptcy, but not before enriching themselves. Securities fraud and bankruptcy litigation against Lefkofsky and [Richard A.] Heise [Jr. - Lefkofsky's alleged cohort, who is not named as a defendant in this lawsuit] and HA-LO quickly followed. Discovery in those cases revealed e-mails from Lefkofsky in which he admitted HA-LO should engage in securities fraud."
The complaint then quotes from these allegedly emails.
Sports Publishing says it published more than 800 books and had annual income of $8 million to $10 million a year before the defendants conspired to ruin it, again by promising that they had "proprietary software" that could save it 10 to 20 percent a year. Instead, they allegedly drove up the plaintiff's print costs by 55% over market prices "to create the maximum disruption to Sport's Publishing's business in order to force the company to sell itself to InnerWorkings for millions less than its net worth."
Here are the defendants, whom Eric Lefkofsky controls, through his wife and his corporations: Eric Lefkofsky, Elizabeth Lefkofsky, Steven Zuccarini, Nicholas Galassi, Eric Belcher, Orange Media LLC, and InnerWorkings Inc.
In its RICO complaint, Sports Publishing demands punitive damages for fraud, conspiracy and unjust enrichment. It is represented by Daniel Pope of Urbana.
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