A year after legal squabbles led to the departure of one of 5 Rabbit’s two founders, four of the brewery’s original investors have sued the company, alleging a complex scheme to depress 5 Rabbit’s value and force out those investors with artificially low financial returns.
Among the defendants are Andres Araya, the brewery’s co-founder and chief executive officer, and Randy Mosher, a minority owner who wrote the brewery’s early recipes and is considered a foremost craft beer expert.
5 Rabbit was founded in 2011 by Araya and Isaac Showaki, each of whom recruited friends and family to help finance the brewery. The plaintiffs are the investors who Showaki brought to the company.
Showaki left 5 Rabbit in February 2013 after Araya sued him for allegedly telling multiple people that Araya had stolen money from the company and was having an extra-marital affair with an employee. The employee, Sonia Anacleto, also filed suit against Showaki. Both of those suits were settled in October.
In the new lawsuit, filed Jan. 8 in Cook County circuit court, it is alleged that just before Showaki left the company, Araya sold 11 shares of 5 Rabbit to Diego Foresi — described as “a friend and former colleague of Andres’, who Andres met while working in Costa Rica” — for $250,000. The plaintiffs were not made aware of the sale, it is alleged.
According to the suit, 5 Rabbit “treated Foresi’s stock purchase funds as company debt, not equity,” which “was extremely important to (the) plan to artificially depress 5 Rabbit’s share value.”
When 5 Rabbit hired a company to determine its value, it “instructed the valuators to treat the investment as debt, not equity as it actually was,” according to the suit, which “significantly reduced 5 Rabbit’s fair market value and the implied value of its shares.”
Then, on Sept. 30, the suit says, Araya, Mosher and the other defendants (which are investors Araya brought to the company) set up a Delaware company called Benjamin Thomas Inc. to which they transferred their shares of 5 Rabbit. That made Benjamin Thomas Inc. the controlling shareholder of 5 Rabbit.
Benjamin Thomas Inc. and 5 Rabbit then enacted a short-form merger, a legal maneuver that forced out Showaki’s investors at “an artificially low price,” according to the suit.
Those investors’ shares were converted to cash at $3,019 per share — a loss of nearly $2,000 per share on their initial investments of $5,000 per share.
With Showaki’s investors out, Foresi’s “debt” was converted to equity and “the fair market value of 5 Rabbit increased significantly, providing a substantial windfall for Foresi,” the suit says.
“By any measure, the … scheme was a success,” the lawsuit says.
Mosher declined to comment on the suit, but said he believes it is rooted in the discord that led to Showaki leaving the company last year.
“All I can say is we’re excited to get this stuff behind us,” Mosher said. “We think we’ve acted fairly in these dealings. We don’t think we’ve created any of the problems. They’ve all come from the other side.”
Araya declined to comment. Showaki also declined comment, saying he is uninvolved in the suit.
In yet another 5 Rabbit-related lawsuit, Showaki sued 5 Rabbit’s lawyer, Timo Rehbock — who is Araya’s brother-in-law — last year, claiming that Rehbock helped Araya sell the shares to Foresi, which diluted Showaki’s stake in the company. Rehbock’s firm, Barnes & Thornburg, is also named in the suit.
Tribune reporter Meredith Rodriguez contributed to this report.
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