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Buffett Spared, But Others Not in Mart Suit

August 6, 2010 by · Leave a Comment 

Warren Buffett was spared from giving a deposition in the lawsuit brought by a former executive who said he was wrongly dismissed by the recreational vehicle unit of the billionaire’s Berkshire Hathaway Inc., Bloomberg reported

As first reported on Wednesday (Aug. 4) by RVBUSINESS.com, U.S. Magistrate Judge Christopher Nuechterlein in South Bend, Ind., made the ruling Aug. 2 and said Berkshire CFO Marc Hamburg may be questioned by lawyers for the plaintiff, Brad Mart.

Mart said he was fired from the Elkhart, Ind.-based Forest River Inc. after bringing allegations of fraud to executives, including to Buffett in six phone conversations. Mart had requested Buffett’s deposition to combat Omaha, Neb.-based Berkshire’s claim that it should be dropped from the lawsuit for lack of jurisdiction.

“Even Mart’s own recount of the conversations reveal that Buffett communicated that he did not get involved in personnel matters and that Mart should seek an audience elsewhere for relief,” the judge wrote.

Buffett, Berkshire’s CEO, isn’t accused of wrongdoing. His deposition was requested to help determine facts of the case. Buffett didn’t respond to an e-mailed request for comment sent to an assistant.

Berkshire, the parent company, doesn’t do business in Indiana and shouldn’t be subject to courts in that state, it said in the June 1 request for dismissal. Mart said Berkshire’s control over Forest River submits the firm to Indiana law and Buffett’s statements could help show that.

Hamburg

Hamburg’s deposition was requested by Mart “to probe the full extent of the parent-subsidiary relationship,” Nuechterlein said. “The court considers it appropriate to grant Mart’s request.”

Berkshire had previously offered a deposition with Hamburg in exchange for Mart’s renouncing his request for depositions of other executives including Buffett.

Buffett, 79, bought Forest River in 2005 and left its CEO, Peter Liegl, in charge of the unit. Mart, who helped arrange the $800 million sale to Berkshire, was fired last year after he went to Buffett and accused Liegl of fraud, according to the April complaint. Liegl’s lawyer, Jeanine Gozdecki of Barnes & Thornburg LLP, denied the charges and is seeking a dismissal.

Liegl required Forest River to buy parts at inflated prices from a company he owned and appropriated cash from factory vending machines, Mart said. Liegl also reneged on a promise to make Mart CEO, according to the complaint. Mart alleged in the suit that Liegl threatened his life.

Allegations

“There is no legitimate basis to the allegations of the threats or the fraud,” Gozdecki said last month. “We will vigorously defend these claims on behalf of the company and on behalf of Pete Liegl.”

Mart’s request to depose Jeff Rowe, Forest River’s director of human resources, was granted by the judge. An application to question Forrest Krutter, Berkshire’s secretary, was denied.

“It appears that this request is more likely to lead to an impermissible fishing expedition than targeted, jurisdictional discovery,” Nuechterlein said of the request to depose Krutter.

Krutter had no comment. Stephen Kennedy, a lawyer for Mart, declined through an assistant to comment.

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Mart’s Attorney Seeks Buffett’s Deposition

July 26, 2010 by · Leave a Comment 

Stephen Kennedy

Stephen Kennedy

Judge Christopher Nuechterlein has heard the opening salvos in a request by former Forest River Inc. president Brad Mart to order billionaire Warren Buffett deposed in Mart’s wrongful-dismissal lawsuit.

Jeanine Gozdecki

Jeanine Gozdecki

Attorneys for Mart and Forest River appeared today (July 26) before Judge Nuechterlein, U.S. Federal Court, in South Bend, Ind. The request is “before the court,” a court official told RVBUSINESS.com, but no indication how soon the judge will rule was given.

Buffet’s Berskshire Hathaway Inc. owns Forest River.

Mart petitioned for a deposition of Buffett to demonstrate the parent company’s role in his firing, according to a June 17 motion in the court. Omaha, Nebraska-based Berkshire, one of the defendants named in Mart’s lawsuit, has said it wasn’t involved in the dismissal. In a July 6 brief, Berkshire asked the court to protect Buffett from questioning, Businessweek reported.

Mart’s lawyer is Stephen Kennedy, of Kennedy Clark & Williams PC in Dallas, who made the deposition request and argued his client’s position today in court. Kennedy spoke first, followed by Cary Lerman, of Munger Tolles & Olson LLP, Los Angeles, attorney for Berkshire Hathaway. Ron Lipinski, an attorney with Seyfarth & Shaw LLP, Chicago, spoke on behalf of Forest River and Pete Liegl.

Ron Lipinski

Ron Lipinski

Today’s hearing focused on Buffett and Berkshire Hathaway, jurisdictional thresholds and the standards the court should apply in the case.

The judge gave no outward statement outward indication how he would rule, other than saying he would issue his decision “soon.”

The request to depose Buffett, the world’s third-richest person, escalates a conflict that already includes Mart’s allegations of fraud and threats of violence at Forest River, the Elkhart, Ind.-based recreational vehicle maker. Mart’s chance of winning a settlement may improve if the judge orders the deposition.

Buffett isn’t accused of wrongdoing. His deposition would help determine facts of the case, and may lead to his testimony at trial.

The court may withhold an order for a deposition of Buffett, at least temporarily, and direct Mart to seek discovery through affidavits and interviews with lower-ranking Berkshire employees, lawyers said.

Cary Lerman

Cary Lerman

Mart requested Buffett’s deposition to combat Berkshire’s claim that the firm should be dropped from the lawsuit for lack of jurisdiction.

Berkshire, the parent company, doesn’t do business in Indiana and shouldn’t be subject to courts in that state, the company said in a June 1 request to dismiss the case. Mart said Berkshire’s control over Forest River submits the firm to Indiana law and Buffett’s statements can help show that.

Buffett, 79, bought Forest River in 2005 and left its CEO, Liegl, in charge of the unit. Mart, who helped arrange the $800 million sale to Berkshire, was fired last year after he went to Buffett and accused Liegl of fraud, according to the April complaint.

Liegl required Forest River to buy parts at inflated prices from a company he owned and appropriated cash from factory vending machines, Mart said. Liegl also reneged on a promise to make Mart CEO, according to the complaint. Mart alleged in the suit that Liegl threatened his life.

“There is no legitimate basis to the allegations of the threats or the fraud,” said Jeanine Gozdecki, lead attorney for Liegl and Forest River. “We will vigorously defend these claims on behalf of the company and on behalf of Pete Liegl.” Gozdecki, of Barnes & Thornburg LLP, is seeking a dismissal.

Liegl said in a sworn statement that he runs Forest River independently of Berkshire and the parent company didn’t play a role in his decision to fire Mart. Liegl, who is also a defendant in the case, didn’t mention the allegations of fraud in a statement in support of his motion for a dismissal.

Mart has also asked to depose Berkshire CFO Mark Hamburg and Secretary Forrest Krutter. The company offered Hamburg in exchange for Mart’s renouncing his request for depositions of other executives including Buffett, according to court filings. Mart rejected that offer. Berkshire’s Krutter declined to comment.

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Ex-Forest River Inc. Executive Suing Buffett’s Co.

April 9, 2010 by · Leave a Comment 

Warren Buffett

Warren Buffett

Berkshire Hathaway Inc. was sued by an ex-manager of its recreational vehicle business who said he was fired after bringing allegations of “millions of dollars” of fraud to executives, including Chairman Warren Buffett, according to Business Week.

Pete Liegl

Pete Liegl

Brad Mart said in an April 5 complaint that Buffett “took no action to correct the deficiencies” at the RV maker, including the removal of cash from factory vending machines for deposit in a personal account of Forest River CEO Peter Liegl. A representative for Berkshire said Mart never told Buffett, in three conversations, about unethical behavior, and that a company probe found no illegal activity.

Mart is seeking the Forest River CEO post, which he said he was promised, according to the complaint in federal court in South Bend, Ind. He also asked for damages including reimbursement for his loss on the sale of his home in Illinois when he purchased a new property in anticipation of getting the promotion. He accused Elkhart, Ind.-based Forest River Inc. of breach of contract and said Liegl threatened his life.

“Because Mart followed the Berkshire Hathaway Code of Business Conduct and Ethics and reported known or suspected violations of the code by Liegl and Forest River to Warren Buffett, Mart lost his job,” according to the complaint. Liegl “fared much better, retaining his position as CEO of Forest River and keeping the millions of dollars he bilked.”

2005 Deal

Mart was fired early last year after helping to arrange Berkshire’s 2005 deal to buy Forest River for about $800 million according to the complaint. Mart said that he was named general manager of the company’s financing business after it was bought by Berkshire and then told in 2007 he would succeed Liegl as CEO. Mart said he reported violations to Buffett in six separate phone conversations.

“Mr. Mart did not alert Mr. Buffett to any unethical, fraudulent or illegal activities” at Forest River, said Berkshire Secretary Forrest Krutter in an interview. Krutter said Buffett asked him to conduct a review of RV maker related to “business items.” “In the course of the investigation, these allegations came to light,” Krutter said of the fraud claims. “My investigation did not identify any fraudulent, unethical or illegal activities.” Krutter said he’s seen “no evidence or indication” that the allegations of death threats are valid, and that the reasons for Mart’s dismissal aren’t related to his claims.

Business Ethics

Berkshire’s code says the company will “uphold the highest level of business ethics” and that retaliation is prohibited against employees who report violations in good faith. Buffett told Congress in 1991 that he had given employees of Salomon Inc. a message after a bond scandal: “Lose money for the firm and I will be understanding; lose a shred of reputation for the firm, and I will be ruthless.”

Mart said that Liegl required Forest River to buy parts, at inflated prices, from a company he owned and demanded that the RV maker’s staff use his airline-charter service for business travel. Liegl’s conduct also included “appropriating hundreds of thousands of dollars in cash from factory vending machines,” according to the complaint.

Liegl also used “ghost payrolling” so that former employees could receive salary or benefits from Forest River in a “fraud upon Berkshire Hathaway’s shareholders,” according to the complaint. Buffett oversees a collection of more than a 70 companies from Berkshire’s Omaha, Nebraska, headquarters with a staff of about 20 people. Berkshire’s subsidiaries include insurers, shoe manufacturers and power producers. He seeks companies with strong management and entices business-owners to sell their firms by promising not to interfere in day-to-day operations.

‘A Remarkable Entrepreneur’

Mart said he introduced Buffett and Liegl. According to Buffett’s annual letter to Berkshire shareholders published in 2006, Liegl previously sold Forest River to a leveraged- buyout firm and subsequently quit the firm because of a disagreement on strategy. Forest River then went bankrupt and Liegl repurchased it, Buffett said. “Pete is a remarkable entrepreneur,” Buffett said in the letter. “You can be sure I won’t be telling Pete how to manage his operation.”

Forest River has about 5,355 employees, according to Berkshire’s 2009 annual report. The unit sells restroom trailers and pontoon boats in addition to RVs, according to the company’s website.

Angelica Schultis, a lawyer for Mart, declined to comment.

RVBUSINESS.com reported in October 2008 that Mart had been named president of Forest River. “Brad is a very competent manager,” Liegl said. “Making this move, we can maintain doing what we are doing.”

Liegl told RVBusiness that he will, in turn, focus on acquisitions. “The times are right to be aggressive in this area,” Liegl said. “There are some people struggling out there. It hasn’t been the greatest of times for everybody in the RV business, but, by the same token, it hasn’t been the worst for everybody, either.”

The announcement of Mart’s promoton came in a company memo dated Oct. 1, 2008.

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