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Charged with Cheating Government Out of $600,000, Soupman CFO Arrested

An indictment was unsealed on Tuesday at the Brooklyn federal courthouse charging Robert N. Bertrand, chief financial officer of Soupman Inc., with 20 counts of failure to pay Medicare, Social Security, and federal income taxes for the period 2010 to 2014. The total approximate unreported cash and stock compensation was allegedly $2,850,967.59. The tax loss to the government is believed to be approximately $593,971.52.

The CFO was immediately arrested by authorities and Soupman Inc. announced that Bertrand was suspended from his executive position.

CEO and chairman Jamieson Karson, who joined the company in August 2015 and is the former CEO of Steven Madden Ltd., responded to the criminal indictment by saying that Soupman was deeply shocked and saddened by the indictment. "The company will be immediately launching an internal investigation to determine whether its public filings need to be amended for the period in question or any subsequent period based upon the allegations." Karson added, "Moreover, we expect that this news will not make it easier for us to raise the capital we need to remain in business."

Publicly traded Soupman Inc. (OTCQQB:SOUP), based in Staten Island, New York, was founded in 1984 when The Original Soupman restaurant opened in Manhattan. The company touts it quickly became a worldwide destination, setting the standard for innovation and excellence long before the famous "Seinfeld" episode made it a cultural icon. Soupman licenses the names and recipes of Al Yeganeh, the real-life "Soup Nazi" character from the Seinfeld series.

The charges were announced by Bridget M. Rohde, Acting U.S. Attorney for the Eastern District of New York, and James D. Robnett, special agent in charge, Internal Revenue Service, Criminal Division, New York Field Office. As alleged in the indictment, Bertrand had a corporate responsibility to collect, truthfully account for, and pay Medicare, Social Security, and federal income taxes for Soupman's employees. However, between 2010 and 2014, Bertrand paid Soupman employees on the side in unreported cash amounts, and compensated certain employees in large unreported stock awards. Bertrand never reported this employee compensation to the IRS, and never paid trust fund taxes on the cash payments or the stock awards, despite a 2012 warning from an external auditor that these payments should be reported to the IRS.

Acting U.S. Attorney Rohde said, "As alleged, the United States was fleeced out of more than half a million dollars through the defendant's corporate misdeeds. Tax crimes like those alleged in the indictment hurt every American citizen. My Office and our law enforcement partners will prosecute such crimes to the full extent of the law."

Special Agent-in-Charge Robnett announced at the indictment hearing, "IRS Criminal Investigation, along with the Justice Department, realizes the negative consequences employment tax evasion has on the solvency of the United States government. However, this type of evasion also results in the loss of future Social Security and Medicare benefits for the employees of Soupman Inc. as well."

The charges in the indictment are allegations, and the defendant is presumed innocent unless and until proven guilty. If convicted of the offense, Bertrand faces a maximum sentence of five years imprisonment.

The government's case is being handled by the Office's General Crimes Division. Assistant United States Attorney Kaitlin T. Farrell is in charge of the prosecution.

Soupman's history of disarray

Soupman Inc., parent company of The Original Soupman, has had several changes in its top management position, and the company has faced litigation. In 2007 Soupman dismissed John Bello from his post as chairman and chief executive officer "amid reports of problems with disgruntled franchisees," according to a Nation's Restaurant News report. At that time the CEO's termination was announced by company officials of Soup Kitchen International, operator of the Original Soupman chain.

The company then publicized in April 2013 that Lloyd Sugarman, co-founder of Johnny Rockets, would replace Arnold Casale as chief executive officer and that Sugarman intended to expand the company's franchise model. Casale was to remain on the board of directors and continue to be involved in the retail side of the business. Tim Gannon, co-founder of Outback Steakhouse Inc., was also named to the board.

Soupman had just announced multi-unit franchise deals. At that time Robert Bertrand, then president, stated that Soupman was at a pivotal point in its growth with product presence in grocery stores and growing its deli franchise, Al's Famous New York Delicatessen & Restaurant. Sugarman was operating 17 Johnny Rockets locations in seven states at that time. The company also disclosed that in 2010 Sugarman became an area developer for the Original Soupman and said he "currently owns three Original Soupman franchises across seven states."

A more recent report from TheStreet explains that Soupman Inc. announced on February 28, 2014 that a U.S. federal court approved the settlement of a three-year litigation involving the purchase of the assets of Soup Kitchen International Inc. "Under the terms of the settlement, Soupman, Inc. will continue to retain all rights to the brand, trade dress, intellectual property and assets including the famed Original Soupman® soups. The court case challenged the purchase price paid in December 2009 to acquire The Original Soupman assets from Soup Kitchen International, Inc."

CEO Sugarman said at that time, "We are extremely gratified that this protracted case, which we have always considered to be without merit, is now behind us. We have been vindicated on the facts related to the purchase of the brand rights and assets of Original Soupman, and have agreed to contribute only $350,000 towards the settlement, which is less than the cost of the litigation itself."

On August 12, 2015 Jamieson Karson became Soupman's latest chief executive officer. On January 20, 2017, Karson wrote a letter to the shareholders of the company regarding first quarter results ending November 30, 2016, reporting that total revenue was $1.050 million.

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