Lush sues head of North American operations over financial mismanagement

Lush sues head of North American operations over financial mismanagement

THE WHAT? UK-based naturals company Lush has filed a lawsuit against Vancouver-based Mark Wolverton, head of the North American operations, over the apparent breach of the terms of its 2003 joint-tenure agreement, according to a report by biv.com.

THE DETAILS Filing the lawsuit earlier last month, Lush claims that Wolverton and his companies are breaching the terms of the deal, which saw the company enter the U.S., in relation to financial mismanagement and are said to be moving money from the North American operations into Canadian operations, as managed by Wolverton. 

The lawsuit cites, “Wolverton has outright refused to issue shareholder dividends despite that Lush would have been otherwise entitled to at least US$18 million.
“He has reduced excess cash by creating an unnecessary and bloated budget for capital expenditures; redefining payment terms to require the Lush U.S. corporations to make payments to other entities upfront; and funnelling funds to his own pockets, and to those of his personal company, under the guise of management fees.”

Another grievance cited in the suit is that Lush has the right to appoint a Corporate Director to view all financial documents. According to the suit, “Wolverton has been so adamant against allowing any corporate input from Lush that he has even denied the majority shareholder’s request to access and audit the corporate book.”

Wolverton is also alleged to have stopped Lush directors from viewing corporate information due to the link with its Canadian operations finances. 

This in turn is said to cause problems, with the lawsuit stating, “There is no wall between team members to separate their work for the U.S. entities from that for the Canadian entity. And because the financial information and funds for the U.S. and Canadian entities are wholly enmeshed, it is unclear which corporation is paying for which expenses.”

THE WHY? The lawsuit indicates a somewhat sour turn in what has been a successful partnership up until now, with Lush having opened up 20 stores in North America since 2019, with seven more set to launch. 

However, this is not the first time Wolverton has been accused of acting in detrimental ways to shareholders, with Casa Margarita Enterprises also filing a lawsuit against the entrepreneur last year. 

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