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Former Smashburger CEO Sues Chain, Schaden Owners for Millions in Stock

_PWS3833Ex-Smashburger CEO David Prokupek has filed a lawsuit against the chain and owners Consumer Capital Partners, claiming he was deceptively cheated out of millions of dollars in stock after they fired him last year.

The Denver Post reported this morning that Prokupek claims Richard “Rick” Schaden, owner of Consumer Capital, asked him to groom the burger chain for an equity sale in early 2013. In the lawsuit, filed in Delaware last July, the former Smashburger CEO alleges Schaden asked him to give up certain rights under his employment contract in exchange for arranging a potential sale or public offering. Prokupek said he was told it would add value to the company and grow his stake in Smashburger.

While the auction process began in August 2013, yielding several bids, the report states,

But instead of selling, the ownership team in November fired Prokupek. The severance package offered him fewer shares than his employment contract stipulated and the stock price was below what was offered by bidders, according to the lawsuit.

Prokupek filed a second lawsuit asking for access to Smashburger’s financials “so he can see if the company met certain performance benchmarks that would entitle him to more shares in the company.” He argues that Smashburger’s owners understated the chain’s financial performance to minimize its contractual obligations to him.

The lawsuit contends the company loaded its fourth quarter financials with one-time charges and expenses that dragged down overall performance "in order to minimize any payout to Prokupek." Without those charges the company would have met performance hurdles entitling him to more shares, according to the lawsuit. Prokupek also argues the company has valued the shares too low.

Article:  Fired Ex-Smashburger CEO Sues Chain

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About Janet Sparks

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Janet Sparks is the former publisher of the Continental Franchise Review, an industry newsletter that covered the franchise community for over 30 years. She has also been a columnist for a leading franchise magazine for the past 13 years. Today she is an independent journalist who engages in investigative reporting, tackling complex issues that impact the franchise industry.

Janet can be reached at jsparks@bluemaumau.org or at 303-799-7398.