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All American Pet Sues Ex-Controller Who Leveled Allegations

Posted: Feb. 5, 2013, 1:15 p.m. EST


By Ken Niedziela

A war of words and a lawsuit have erupted between All American Pet Co. Inc. and its former controller, who accused company executives of overstating production and sales figures and misusing investor funds.

The Los Angeles manufacturer of all-natural food and wellness products for dogs blasted Eric Grushkin for what it called his “libelous statements and meritless accusations regarding its chief executive and president.”

The dispute became a legal matter Jan. 18, when All American Pet sued Grushkin in Los Angeles County Superior Court, accusing him of breach of contract, misappropriation of trade secrets, breach of fiduciary duty and computer fraud.

Grushkin could not be immediately reached to comment, but in a statement posted Jan. 16 on InvestorHub.com he spelled out why he leveled the accusations.

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“Many people have questioned my motives for taking these actions, and I want those motivations to be known by everyone,” he wrote. “I believe that AAPT has developed quality products, and I believe that the company might be successful in the future, and I do not believe that that success would be possible with the current set of officers/directors.

“I also could no longer tolerate seeing investors, vendors and my fellow employees continue to be hurt financially by the repeated actions of these two individuals,” he added.

Grushkin’s accusations involve CEO Barry Schwartz, president Lisa Bershan and company news releases that announced production, distribution and sales milestones. The company makes high-protein NutraBar power bars for dogs, Pawtizer antibacterial wipes and sprays and Chompions dog food.

Among Grushkin’s allegations:

• In a statement released Sept. 27, 2012, and titled “No, Not a Million Bars a Month, A Million Bars a Week!” the company raised its estimate of the number of stores that would stock its power bars by year’s end from 40,000 to 60,000. “Promising 40,000 retailers by year end was misleading,” Grushkin wrote. “A retraction of this statement should have been made when it became known that 40,000 stores was grossly overstated and totally unachievable.”

The company website in late January linked to sites operated by five retailers: Walmart, Amazon, Marshalls, TJ Maxx and Giant Eagle supermarkets, none of which showed NutraBar for sale. Amazon.com offered Pawtizer products.

A spokesperson for Marshalls and TJ Maxx declined to comment. A Giant Eagle spokesperson said NutraBars were not sold in any  corporate-owned stores, or about half of the chain’s 230 locations.

Lending credence to All American Pet’s assertion, a spokesperson for Bentonville, Ark.-based Wal-Mart Stores Inc. confirmed that NutraBars would be sold starting in February in about 1,000 of Walmart’s nearly 4,000 U.S. locations.

In a statement released Jan. 31, All American Pet reported it was “fulfilling its first purchase order with the world’s largest retailer,” and Schwartz added, “It took us a little longer than promised, but we did what we said we would do.”

• Schwartz stated in a news release Jan. 11 that “I am overseeing the production of millions of food bars and tons of treats to meet retailer demand.” According to Grushkin, the Manhattan, Kan., plant “does not have the most critical production items necessary to manufacture the dog bars as well as other important pieces of equipment.” Production runs in Manhattan on Jan. 9 to 11 “consumed less than 2.7 tons of raw materials and thus produced less than 22,000 dog bar units,” Grushkin stated, adding, “No treats were produced [the previous week].”

• More than $1 million was “improperly converted to a Wells Fargo Bank account” belonging to a Nevada corporation “controlled by director Barry Schwartz.” “Transfers to this…account occurred during every month of my employment,” Grushkin added.

Schwartz declined to address specific allegations.

“Let me answer all those questions with a simple answer,” he said. “All the filings sent to the [U.S. Securities and Exchange Commission] were factual. And Eric Grushkin, before he became a disgruntled employee, was responsible for those filings.”

Asked whether he runs an honest, reputable company, Schwartz responded, “That’s exactly right.”

Grushkin reported that he was fired Jan. 10 and that “prior to my termination I requested the immediate resignations” of Schwartz and Bershan. He added that before his departure he “composed and delivered a letter…to all shareholders of record and as many private placement investors as I could contact by email.”

The company responded Jan. 11, calling Grushkin’s charges “reckless and unscrupulous.”

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