A chapter Trustee has claimed JRJR33 President, CEO and Chairman of the Board, John P. Rochon, with the help of his youngsters, ‘pillaged and decimated greater than a dozen firms below his management’.
Rochon Sr. is a named defendant within the criticism, alongside along with his youngsters John Rochon Jr. (proper, JRJR33’s Vice Chairman, CFO and Treasurer) and Heidi Rochon Hafer (JRJR33’s Common Counsel).
Different company and particular person defendants embrace former Board Administrators Michael Bishop and William H. Randall, and R-9 9 9 Inc (a holding firm owned by Rochon).
The allegations stem from JRJR33 chapter proceedings, which noticed a variety of MLM firms collapse (notably Agel and Longaberger).
In an adversary criticism filed on June twenty sixth, the Trustee claims
exorbitant insider administration charges and bills destroyed any vital asset worth of the debtors and their associates.
Aided by a hand-picked and ineffectual board, the Rochon defendants failed to guard the worth of the Debtors’ sizable belongings, inflicting vital monetary damage to the Firm and its collectors and stakeholders.
No matter John R. Rochon ordered was adopted largely and with out query of significant resistance.
Such negligence, waste, inaction, and breach of fiduciary obligation and loyalty type the premise for this lawsuit.
The Trustee alleges Rochon Sr. (proper) was ready “manipulate” JRJR33, by a “advanced and convoluted internet of associated entities”.
A breakdown of JRJR33’s enterprise mannequin by the Trustee states the corporate focused companies “for acquisition” that had been “troubled or underperforming.
This was on the premise JRJR33 and its govt crew had been “skilled professionals in enterprise integration”.
It shortly grew to become clear, nevertheless, that the person defendants weren’t expert turnaround professionals.
The person defendants had been certainly proficient at spending cash, simply not on the sorts of issues that added shareholder worth.
The references to the person defendants and their contributions to the corporate as discovered within the firm’s SEC filings and investor supplies are largely generic enterprise buzzwords, like “discovering efficiencies”, “recognizing alternative for high line progress”, and “efficiencies by eliminating duplication of efforts and prices”.
Sadly, there is no such thing as a substance to those hole descriptions, and the corporate’s operational “infrastructure,” as touted by the person defendants, was just about nonexistent.
In line with the Trustee, Rochon Sr. and the defendants paid Richmont Holdings, one other holding firm managed by Rochon, “hundreds of thousands of {dollars} yearly” for “recommendation and help”.
However even after years of this so-called “recommendation and help” … JRJR33 was tormented by materials weaknesses in its monetary and compliance controls.
In actuality, Richmont Holdings was not offering worth to JRJR33, it was sucking it dry.
The one motive Richmont Holdings was paid was as a result of it was owned and operated by Rochon and Rochon Jr., and so they had been those immediately benefiting from these funds.
Examples of private enrichment in 2014 alone embrace:
- $122,578 spent on repairs for the “household fleet of Maseratis” in 2014
- $841,489 in authorized charges in opposition to Richmont Holdings and “one other affiliate” (remembering Richmont Holdings is owned by John Rochon)
- $115,289 in journey bills (first-class flights and inns)
In 2015 one other $119,000 of JRJR33 funds was diverted to the Rochon household’s Maserati repairs bills.
Michael Bishop and William Randall, together with the remainder of JRJR33’s board, are alleged to have been “puppets of the Rochon defendants”.
Funds by Richmont Holding to the Rochon defendants had been expensed in several methods on JRJR33’s financials, and labeled both “M&A Bills”, “M&A Infrastructure Bills,” or “Common and administrative expense”.
These funds totaled hundreds of thousands yearly.
For M&A associated actions, JRJR33 paid $3,236,000 in 2014, $2,681,000 in 2015, and in 2016, a 12 months (the place) no acquisitions had been consummated, there have been bills totaling $2,365,000.
Underneath the “Common and administrative expense” class, extra funds to Richmont Holdings had been at the least $1.9 million in 2014, $2.2 million in 2015, and $1.9 million in 2016.
All of this was on high of salaries paid because of JRJR33 govt positions held by the Rochon defendants.
The Rochon defendants carried out themselves in a fashion that exposed their full and utter contempt for the moral boundaries that ruled the remainder of the Firm.
Finally, the Rochon defendants’ willful ignorance of the obligations they took on as officers and fiduciaries of JRJR33, their failure to institute inner controls and oversight procedures, and their self-dealing by way of Richmont Holdings brought about JRJR33 to fail.
By late 2017 JRJR33 was in shambles.
It has missed SEC submitting deadlines, was below the specter of delisting, was unable to lift extra capital, had defaulted on the mortgage from a senior secured lender, and there was inadequate cashflow to proceed operations.
Regardless of this, Rochon Sr. and the opposite particular person defendants
assured JRJR33’s shareholders and collectors that operations would have the ability to proceed resulting from Funding Request Settlement that JRJR33 entered into on October 18, 2017 with Rochon Capital Companions.
That settlement finally result in a “demise spiral financing” settlement with JGB Collateral.
Inside a month after getting into into the Funding Request Settlement, it grew to become clear from inner JRJR33 communications from Rochon that it was by no means his intention for Rochon Capital Companions to fund money shortages, and the Rochon defendants started planning for JRJR33 to be delisted and “go darkish”.
By April 2018 JRJR33 defaulted on its JGB mortgage, inflicting the reimbursement charge to be accelerated.
Rochon, who stood on each side of the transaction between JRJR33 and Rochon Capital Companions, didn’t implement the Funding Request Settlement and canopy the money shortfall.
JRJR33 and The Longaberger Firm filed their chapter instances a few months later.
Along with being a puppet for Rochon, Michael Bishop (proper) managed to extract $1.9 million out of Agel by his firm ActiTech.
Agel utilized the manufacturing capabilities of ActiTech’s 600,000 sq. foot manufacturing facility in Sherman, Texas, to supply merchandise to promote globally.
Bishop leveraged his place on JRJR33’s Board, alongside along with his insider information that JRJR33 and Agel had no different supply instantly out there to fabricate Agel’s product line.
Funds between Agel and ActiTech totaled $3.3 million in 2016.
Of this quantity, roughly $1.9 million was usurious charges for penalties and curiosity because of premature funds all year long.
Bishop, who served on JRJR33’s Board and was concerned in Agel’s enterprise, knew or ought to have identified that the finance expenses had been neither truthful to JRJR33 nor financially sustainable in mild of JRJR33’s monetary situation, contemplating it had reported internet losses of just about $35 million … for year-end 2016.
In early 2017, there have been settlement efforts to resolve the battle between Bishop and JRJR33, however between the Rochon defendants’ dysfunctional administration and Bishop’s self-interested motivations, these efforts had been, unsurprisingly, unsuccessful.
On October 31, 2017, Bishop resigned from JRJR33’s Board and threatened litigation in opposition to JRJR33 for non-payment.
His resignation letter additionally states that the draft submission to the SEC will not be correct.
The Trustee’s lawsuit alleges
- breach of fiduciary duties;
- company waste;
- unjust enrichment;
- abuse of management;
- gross mismanagement and
- avoidance of restoration
The Trustee’s adversarial proceedings seeks
- judgement in opposition to the defendants;
- financial and exemplary damages;
- disallowance of any defendant claims in opposition to JRJR33, The Longaberger Firm and the Trustee till detailed Insider Choice Transfers and Fraudulent Transfers are repaid;
- “curiosity on the most authorized charge”; and
- authorized prices
Along with the criticism filed above, the Trustee has additionally filed a associated criticism naming JGB Collateral, JGB Capital, JGB (Cayman) Port Ellen Ltd., JGB Companions, LP, Rochon Capital Companions, John P. Rochon and Donna Rochon as defendants.
The acknowledged purpose of the criticism is “restoration of cash/property” obtained by way of “fraudulent switch”.
I’ve added JRJR33 chapter proceedings to our case docket calendar. Keep tuned for updates as we proceed to trace the case.
Replace 2nd November 2021 – JRJR33 executives have settled with the Trustee for $3.2 million.