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Hofmann Hot Dogs CEO Frank Zaccanelli and competitive eating champion Takeru Kobayashi clown around for the cameras following a press conference at the Turning Stone Resort and Casino announcing a partnership with Kobayashi and a new product line of hot dogs under his name.
(Photo by John Berry / The Post-Standard)
Jim Boeheim, the Oneida Nation and other partners in an all-star team trying to take Hofmann hot dogs nationwide are accusing their top executive of using company money to finance his lavish lifestyle.
Nine months after Syracuse native and former Dallas Mavericks president Frank Zaccanelli assembled investors to spend more than $7.5 million to buy Hofmann Sausage Co., he is being sued by a majority of the investors. A lawsuit they filed last month alleges Zaccanelli:
- Used company money as his "personal slush fund." A company official said Zaccanelli used his corporate credit card for $34,000 in non-business expenses such as a $1,000 night out at a Dallas nightclub; $1,800 in airfare for his wife and $500 at a women’s clothing store.
- Instructed employees to backdate employment records for a woman, described in court papers as his "apparent girlfriend," so that she could receive company health insurance. The same woman was hired at an executive salary after "failing" as a contracted photographer and social media coordinator.
- Had company officials pay $3,000 a month to lease a house in Dallas for the woman and disguise the expense as a "facility payment."
- Frequently patronized a Dallas restaurant where the woman worked and billed his meals to the company.
- Verbally abused employees and threatened to fire those who questioned his conduct. Court papers accused him of being "belligerent" and running a "dictatorship."
The lawsuit lists more than 20 plaintiffs who are being represented by attorney Daniel French. He declined comment on behalf of his clients who include the Oneida Nation Economic Development LLC; Jim Boeheim, Syracuse University basketball coach; Phillip Romano, founder of national restaurant chains, Fuddrucker's and Romano's Macaroni Grill; Marc Overdyk, husband of County Executive Joanie Mahoney; local funeral directors Thomas Pirro Jr. and Sr. and a trust for Joseph and Richard Riccelli, owners of a trucking company. They are part of the team recruited by Zaccanelli to buy the 133-year-old, family-owned Syracuse business.
Frank Zaccanelli, Hofmann's CEO, stands outside a company booth at the 2012 New York State Fair.
Zaccanelli grew up on the west side of Syracuse and went on to play basketball at State University College at Potsdam. In addition to Boeheim, he recruited well-known sports figures as investors in Hofmann, including championship eater Takeru Kobayashi and former Dallas quarterback Roger Staubach. They are not part of the lawsuit.
Staubach’s history with Zaccanelli dates back to the 1990s, when Staubach introduced him to tycoon H. Ross Perot Sr. Perot hired Zaccanelli to help run his development and investment company. When Perot’s son, H. Ross Perot Jr., owned the Dallas Mavericks, Zaccanelli became president and a minority owner of the team.
In 1998, Zaccanelli left the Perot organization and joined Telergy, a Syracuse-based telecommunications startup, as a senior adviser and director. He helped raise more than $250 million for Telergy and became known for his ability to lure high-profile investors to the company. He recruited Staubach, Olympic sprinter Michael Johnson, pro golfer Fred Couples and former college basketball announcer Billy Packer to Telergy.
Boeheim was listed among the shareholders when Telergy went bankrupt in 2001.
Zaccanelli told The Post-Standard last year that he viewed the Hofmann deal as a chance to promote his hometown.
"I was born in Syracuse, I was raised there, my parents are buried there, and I take great pride in where I’m from, " he said. "So it’s more important than just a business deal because it’s part of the legacy of my family."
Messages left for Zaccanelli by phone and e-mail were not returned.
The lawsuit filed Jan. 2 in state Supreme Court seeks judicial permission to fire Zaccanelli with less than the 90-day notice called for in an agreement with the company. Court documents show that the investors hope to appoint Rusty Flook, the great-grandson of A.C. Hofmann Sr., as interim co-chief executive officer. The day before the lawsuit was filed, 75 percent of the investors voted to remove Zaccanelli as chief executive officer. A letter was personally delivered to Zaccanelli asking for his resignation, a request he refused, according to court papers.
A lawsuit brought by investors who bought Hoffman Sausage Co. last year questioned corporate payments to Megan Lucas.
Much of the allegations against Zaccanelli involve Megan Lucas, who was a hostess at Nick & Sam's Grill in Dallas where she met Zaccanelli, according to affidavits from three Hofmann employees. Shannon Bane, the company chief financial officer, said Zaccanelli told him in June that Lucas was a professional photographer who would be taking photographs of Hofmann products, according to an affidavit. Lucas would be paid $2,500 every two weeks, according to Bane's affidavit. But the photos were of such "poor" quality that Hofmann had to retain another photography company, Bane said.
Zaccanelli then had Lucas hired as a marketing consultant to promote Hofmann products through social media such as Facebook. "Lucas ultimately failed in the role of social media marketer as well," the affidavit said.
Lucas, who did not have a contract, was paid $5,000 a month, Bane said.
Bane also said Zaccanelli called him to "demand" that he fill out a lease application for a Dallas house in Hofmann's name. After a company attorney rejected that request, Bane said Zaccanelli directed the company to pay $3,000 a month to Lucas as a "facilities" payment. No other Hofmann employee was given a housing allowance, Bane said. The payments were paid without Lucas submitting lease or rent invoices, Bane said.
Dennis DuVal, a former Syracuse police chief and then-president of Hofmann's northeast region, said in an affidavit that Zaccanelli told him in late July that he and Lucas were "romantically involved." DuVal resigned a week or so later to "avoid carrying out directives that I found to be morally repugnant," he said in an affidavit. "I also resigned because because I was unable to put an end to Zaccanelli’s increasingly concerning misfeasance."
DuVal, a former All-America basketball player at Syracuse University, returned in October in more a limited role as Hofmann's chief relationship officer. He currently works with Hofmann’s major accounts including Wegmans, Wal-Mart, Sam’s Club and Tops Markets, according to an affidavit.
Bane said he understood that Zaccanelli eventually created a position for Lucas. Lucas used "Chief Marketing Officer" as her title in a Dec. 17 email, Bane said. To skirt the 90-day period employees must wait to qualify for health insurance, Zaccanelli told employees to backdate Lucas' records, Bane said. "Zaccanelli further directed that a fraudulent insurance application be submitted to Hoffmann's health insurance provider," Bane said.
Chief Operations Officer Reginald Bailey said in an affidavit he was "highly uncomfortable" when Zaccanelli asked him to change Lucas' employment records, and that an administrative employee carried out the task and sent it to the insurance company. Bailey said Lucas was paid close to $100,000 a year.
The investors first learned of Zaccanelli's conduct from Bane in late December. Less than a month after taking the reins at Hofmann, Zaccanelli asked DuVal to obtain corporate credit cards for high-level employees. Bane had recommended employees spend their own money on business-related expenses and then apply for reimbursement.
In June, as he was looking over the first round of credit card statements, Bane said he noticed unusual charges on Zaccanelli's corporate card, such as $1,800 in airfare in his wife's name and $500 spent at Lululemon, a women's clothing store, in New York. Bane said Zaccanelli did not turn in receipts or the expense forms he created to ensure employees used corporate cards appropriately.
Bane also cited such expenses as more than $1,000 spent in one night at "The Dram," a popular Dallas nightclub, jewelry store purchases and purchases of non-office related technology. Bane calculated Zaccanelli's "clearly personal" charges at around $24,000, but said there were also $10,000 in additional charges that at "first blush" might seem business-related. Upon closer examination, he said they were more than likely personal.
These included flight and hotel charges that included deluxe rooms or suites, movie and mini-bar charges. Bane also contends that Zaccanelli used his corporate card for meals in Dallas nearly every day.
"There simply is no business reason that would explain daily meal expenses in Dallas, Texas," he states in the affidavit.
In a statement released Wednesday night, the Oneida Nation said it remains committed to the venture.
"The company obviously is going through some growing pains which involve internal personnel issues that need to be resolved," the statement read. "Hofmann’s is a great company that is a source of tremendous local pride, and it has tremendous growth potential. We remain fully committed to its success."