Stew Leonard's Target of Two Civil Lawsuits

Abstract

NORWALK--Two lawsuits have been filed against Stew Leonard's, the grocery store whose "customer is always right" philosophy has made it famous around the world. One of the suits, which contains allegations that Stew Leonard's store in Danbury overcharged customers on sales tax, echoes a federal criminal investigation into suspected tax evasion at the Norwalk store that began more than a year ago. The second lawsuit claims company president Stew Leonard Jr. stole the idea of establishing a "Stew Leonard's University," which teaches business techniques, from a man who says he met with Leonard about the idea before the venture began. (excerpt)

NORWALK--Two lawsuits have been filed against Stew Leonard's, the grocery store whose "customer is always right" philosophy has made it famous around the world.

One of the suits, which contains allegations that Stew Leonard's store in Danbury overcharged customers on sales tax, echoes a federal criminal investigation into suspected tax evasion at the Norwalk store that began more than a year ago.

The second lawsuit claims company president Stew Leonard Jr. stole the idea of establishing a "Stew Leonard's University," which teaches business techniques, from a man who says he met with Leonard about the idea before the venture began.

The lawsuit that contains the overcharging claim was filed Oct. 1 in Danbury Superior Court by Terrence D. Rickert, a former security guard at the Danbury store, who claims he was wrongfully dismissed by the company.

Rickert said he was fired Dec. 1, 1991, not for the reasons the store gave him, but because he blew the whistle about cash registers at the store that he claims overcharged customers sales tax.

On Oct. 1, 1991, two months before Rickert was dismissed, Connecticut reduced its sales tax from 8 percent to 6 percent

Rickert, who began work in mid-August, contends some machines at the Danbury store charged more than the correct rate.

Stew Leonard's "had in fact been improperly setting cash machines in its Christmas tree and decoration department to charge an excessive rate of sales tax," Rickert's suit alleges. The extra money "upon information and belief was not forwarded to the Department of Revenue Services, but was retained by the store."

A secretary for Stew Leonard Jr., president of Stew Leonard Inc., said, "I guess you're going to have to do without us" when asked for a comment from Leonard. The secretary said Leonard was checking out some facts about Rickert's action and the other lawsuit, and would not be available immediately.

A.J. Janschewitz, a spokesman for the state Department of Revenue Services, said "I can't comment on it" when asked about Rickert's suit.

Rickert could not be reached, and his attorney, William Laviano, declined to discuss the case.

Business at the Norwalk store is impressive, with more than $100 million in estimated sales a year, or $3,470 per square foot of store space, a figure that has earned Stew Leonard's a place in the Guinness Book of World Records.

But in August 1991, just before the opening of the Danbury store, Stew Leonard's Norwalk store was raided by agents of the Criminal Investigation Division of the Internal Revenue Service who seized financial records.

The division typically begins an investigation only when large sums of money are involved, according to government officials.

Sources familiar with the case said the IRS was particularly interested in an alleged "skimming" operation. Skimming is a systematic, continual diversion of cash from normal accounting for the purpose of evading taxes.

In light of the investigation, the store last year withdrew as a finalist for the prestigious Malcolm S. Baldridge Award, given by the U.S. Commerce Department for excellence in business.

The IRS has declined to comment on the status of its investigation, as has Stew Leonard Jr.

The second new lawsuit was filed against the younger Leonard and his sister, Jill Leonard Tavello, on Oct. 20 in Stamford Superior Court by Edward S. Van Winkle.

Van Winkle claims the store stole his idea for a Stew Leonard's University, in violation of the state Uniform Trade Secrets Act and the Unfair Trade Practices Act. Tavello is named because the university is a tradename of hers.

Leonard's attorney in the case, Frank Zullo of Norwalk, said he couldn't comment on pending litigation.

Van Winkle, who previously had a career in advertising and marketing, contends that he pitched the idea of a Stew Leonard's University to Stew Leonard Jr. during an August 1989 meeting.

Unemployed and living in Darien at the time, Van Winkle thought if Leonard liked his idea and wanted to adopt it, then Van Winkle, a self-described "ardent fan" of the store, could work as an administrator for the school.

In a telephone interview, Van Winkle said his idea was to exploit the popularity of the Stew Leonard name by enrolling business people who often visited the store, talking to employees to learn customer satisfaction techniques. The school also could be used for training Stew Leonard's workers.

Van Winkle said he told Leonard that the university, while further promoting the store's name, would provide an extra revenue source.

Van Winkle quoted Leonard as saying, "Gee, what a good idea."

A week later, Van Winkle claims he received a letter from Leonard thanking him for his idea, and saying that he would keep it close at hand once the Danbury store opened.

Less than two years later, in April 1991, Van Winkle said he noticed an announcement that "someone had been appointed to assistant dean of Stew Leonard's University."

Van Winkle said he found out that a school, which he says was just like the one he described to Leonard, was up and running.

According to an article in the trade magazine, Training and Development, which Van Winkle cited, Stew Leonard's U. had more than 700 graduates in its first year of operation, training employees of companies like Prudential Insurance, Toyota, NYNEX, AT&T, and Burger King. The four-hour seminars cost $195 per student, according to brochures Van Winkle has seen.

Thinking it wasn't "too fair" that his idea was being used without being told or paid, Van Winkle said he tried to contact Stew Leonard Jr. without success.

Van Winkle then wrote to Stew Leonard Sr., saying, "I can't believe you would tolerate this kind of thing." Again, there was no response, he said.

"I didn't really want to make a big deal about this, but I couldn't believe they were being so fast and loose," Van Winkle said.

He then went to a lawyer who decided to sue.

"I don't like to sue people," said Van Winkle, who is currently working in the real estate business. But, "it seems to me that they owe me something."

While the store and the Leonard family "project this image of the customer first," Van Winkle said, behind that image is "not a great deal of integrity."

"Their behavior in this matter has just been unconscionable," he said.