This case involves commercial litigation arising out of the alleged theft of $11 million stolen from a building and construction materials distributor. The distributor’s lumber supplier allegedly overcharged the distributor for lumber, stole proprietary information, and misappropriated company opportunities. The CFO of the distributor brought in a sole lumber supplier with whom he had an intimate relationship. The CEO of the supplier agreed to charge the distributor a certain price for the lumber but allegedly charged the company much more. The company was not aware of the overcharging because the CFO did not require the supplier to provide backup supply invoices to verify the price he was charging. In addition to the overcharging, it was also alleged that the CFO diverted brokerage lumber business to the supplier’s benefit, as well as his own benefit. After saving up millions of dollars, the CFO of the distributor left the company and started a company that was exactly the same as his former employer. The former CFO allegedly brought in his former employer’s plant managers as officers of his company and hired the former CEO of the lumber supplier as his exclusive and sole supplier. An expert CFO was sought to comment on best business practices when leaving one company and going on to another company.
Question(s) For Expert Witness
1. Please describe your experience serving as a CFO?
2. How might a CFO breach their duties to a former employer in terms of starting a competitor company?
Expert Witness Response E-271625
I serve as a consultant for private equity firms and recently as the interim CFO for an energy organization. I served as vice president and CFO of an industrial products manufacturer for 10 years. Prior to that role, I worked in multiple finance executive positions for a Fortune 500 company. I also served as CFO and led the transition of a an international printer from being a Rockwell division to a stand-alone LBO public debt company. I was previously the group controller for a packaging company that provided egg packaging for the poultry industry. We also serviced the industry in Europe and Australia, but the companies outside of the US did not compete directly with the US. In addition to employment agreement contractual duties, the CFO has fiduciary duties to the owners and the board of directors. Most CFOs are also CPAs and members of the AICPA, state CPA society, and organizations such as FEI. All of these organization and licensing authorities have codes of ethics. In addition, the willful intention to mislead or deceive should be considered as fraud. Non-competition clauses are normally specific about industry or competitors or a geographic area. This can vary by industry and the type of company within an industry.
About the author
John Lomicky
John Lomicky is a J.D. candidate at FSU Law with a multidisciplinary background. He earned his Bachelor's degree in Neurobiology and Near Eastern Studies from Georgetown University and has graduate degrees in International Business and Eurasian Studies. John's professional experience includes working in private equity as an Associate at Kingfish Group and in legal business development and research roles at the Expert Institute. His expertise spans managing sales teams, company expansion, and providing consultative services to legal practices in various fields.
