Tami Longaberger Battles CVSL Over Exit
Tami Longaberger’s departure from the basket-making company that her father founded has turned into a heated battle between her and CVSL, parent of the Longaberger Co.
Longaberger said CVSL failed to pay sales and use taxes and drastically cut her pay, while CVSL charged Longaberger with misconduct, according to a filing with the U.S. Securities and Exchange Commission.
The two sides also can’t agree on whether Longaberger, who left the company in early May, was fired or resigned.
Longaberger says in a resignation letter dated April 28 that she was resigning due to three reasons:
- CVSL reduced her salary of $850,000 per year by $600,000 during a four-month “deferral period” that was never made up.
- CVSL reduced her responsibilities and put another executive in charge at the Longaberger Co.
- CVSL caused the Longaberger Co. to fail to pay sales and use taxes to several states, “prompting these state taxing authorities to seek to assess me personally.”
After the April 28 letter, CVSL requested that Longaberger withdraw her resignation to allow both sides to negotiate the terms of her departure, “without CVSL needing to disclose my resignation in an SEC filing,” Longaberger’s letter says.
But CVSL reneged on the agreement “and has not tried to resolve this situation in good faith,” Longaberger wrote in another letter, dated May 29.
“There have been unexplainable delays by your attorneys in responding to my counsel, including your attorneys’ most recent 10-day failure to respond to us without any reasonable explanation for their delay. During the delay caused by your attorneys, the circumstances that led to my April 28 resignation were exacerbated.”
For example, CVSL once again caused the Longaberger Co. to fail to pay its taxes, she said. In one case, Longaberger said she received a letter on May 18 from Kansas demanding that she — personally — pay $32,000 of delinquent Longaberger Co. sales taxes.
“My counsel provided this letter to CVSL’s counsel and asked for assurance that this tax liability would be promptly paid by the company so that I would not have to deal with this taxing authority, but we received no such assurance,” she said.
In addition, while CVSL was obligated to continue to pay Longaberger’s salary during the month-long notice period, the company failed to do so, she said.
“It is obvious that CVSL had no intention to provide a separation consistent with the agreed terms, and the only reason CVSL asked me to withdraw my resignation was to delay its SEC disclosure obligations and advance its own interests,” she said.
CVSL responded to Longaberger’s May 29 letter on June 1, saying that her “attempted resignation” was “improper and ineffective because you were terminated for good cause.
“CVSL was compelled to terminate you after an internal investigation revealed that you engaged in substantial misconduct that has damaged the Longaberger Co. and CVSL,” the response says.
The company does not deny Longaberger’s charge that it cut her pay and never made it up, but says that it was done at the insistence of the Longaberger Co.’s bank.
The parent company also denies that Longaberger had suffered a reduction in authority. “You were chairman until the time of your attempted resignation. No Longaberger executive was ever given authority over you,” the company said.
Regarding failure to pay taxes, CVSL says it made “every good faith effort to pay all state taxes appropriately.”
CVSL also responded to Longaberger’s complaints with charges of its own, saying that Longaberger’s “lengthy absences from the company’s home office became so frequent and egregious that you made yourself an absentee CEO.
“Additionally, by your own admission, you engaged in an inappropriate personal relationship with a subordinate executive who was in a senior position with the Longaberger Co. This represented a clear conflict of interest to us.”
While CVSL has recently portrayed itself as the Longaberger Co.’s savior, the Dallas-based parent of a group of eight direct-sales companies has seen its share of turbulence.
An audit by accounting firm PMB Helin Donovan LLP that can be found in CVSL’s annual report indicates that “there were material weaknesses in the company’s internal control over financial reporting.”
In addition, CVSL stock has plummeted in the past year. In September, the stock peaked at more than $20 per share. On Tuesday, the stock was listed at $1.35 per share.
Longaberger has struggled since the death in 1999 of company founder Dave Longaberger. A combination of bad economic times and changing tastes in home decor sent sales from a peak of $1 billion in 2000 to about $100 million last year. Several rounds of layoffs have occurred during the past decade, leaving the company much smaller.