Silpada lawsuit describes theft involving ‘insider knowledge’ and a forklift

Silpada Designs Inc., which shocked customers and sales representatives by closing suddenly last year, has sued three former employees and a Kansas City jewelry store over $300,000 in merchandise it said they conspired to steal and sell.

The petition, filed last week, comes after more than two months of courtroom battles. Their dispute centers on Silpada-labeled boxes, jewelry and materials as well as purses, scarves and other accessories that the Lenexa-based company said had been earmarked for destruction.

Instead, the company’s recent filing claims, the employees used “insider knowledge,” “the cover of darkness” and a forklift to take nearly 23,000 items with them. Silpada said it has video of the thefts taking place over several days in mid-October.

Not so fast, say the employees and jewelry store operator. They argue this has to do with the confusion surrounding Silpada’s shutdown, not some criminal conspiracy.

These goods were leftovers, stuff that had been rejected when the Silpada name and merchandise were sold off, also in mid-October, to the Richline Group. The Richline Group is owned by Berkshire Hathaway Inc., run by Warren Buffett.

Silpada had been a highly successful local startup, and its owners sold the business for $650 million to Avon and then repurchased it a few years later for only $85 million.

“My clients did not steal anything and they were, in fact, given permission by warehouse staff to take product that was not subject to the sale to Richline,” said Sean Pickett, who represents the former employees, each of whom had worked at Silpada for more than a decade.

William Reneau, owner of the Gold Rush Exchange that bought much of the merchandise, said in a Twitter post that the situation stems from “the incompetence of the higher ups” at Silpada and “the confusion and dysfunctional closing of this company.”

Reneau disputed the theft claims in one court filing by saying the company had produced “no evidence that a police report was filed or any arrests were made.”

Lenexa police confirmed to The Star that they did hear from the company. A Silpada representative walked in the theft report at 3:45 p.m. Nov. 3.

Ten minutes later, a Missouri judge issued a restraining order against the former employees, Reneau and his Kansas City-area business to keep them from advertising, selling or destroying the merchandise.

Silpada had been much quicker to the Jackson County courthouse than to the Lenexa Police Department. A day earlier, on Nov. 2, Silpada’s attorney had filed a motion seeking the restraining order. The motion repeatedly said the former employees had stolen the merchandise and called the merchandise stolen.

The court held a hearing on the motion at 10:30 a.m. Nov. 3, or roughly five hours before the theft report reached Lenexa police.

With the restraining order in place, the company has focused on getting the merchandise back, said Patrick McInerney, an attorney for Silpada.

“What we are asking the court to do is to take the product and give it back to us,” McInerney said.

Silpada’s latest petition also seeks unspecified damages, including actual damages from the loss of merchandise and punitive damages, from Reneau, Gold Rush Exchange and the three former employees.

The former employees are Edward Jones, who was the company’s maintenance team lead in charge of facilities who had worked for the company for 14 years; Shaun Aelmore, the logistics supervisor in charge of shipping and receiving with 13 years at Silpada; and Beau Foos, a stocking supervisor with 12 years at the company.

In court filings, Silpada says the thefts occurred on eight separate occasions between Oct. 13 and 18, and “almost always” at 6 a.m. before the sun came up.

Employees, its court filings said, took returned purchases, odd-lot items and “failure to launch” merchandise. Those failed launches were bags, scarves and makeup cases that the company had deemed short of its own “rigorous standards for Silpada-branded merchandise.” An inventory list from Gold Rush included taupe and gray-plum scarves, pewter clutches, teal totes and yellow-trimmed travel cases.

Silpada had launched its first-ever accessories line in mid-2015 with such items as cotton scarves for $69, animal-print clutches for $149 and leather totes with suede fringe for $299.

But the allegedly stolen items needed to be destroyed to protect the Silpada brand and to meet the terms of the deal with Richline, Silpada’s filings said.

Moreover, the employees knew that, the lawsuit said, and used their “insider knowledge” to take items that weren’t on “certain inventory lists” and “assumed their theft would go undetected.”

Pickett said testimony has shown there was a difference of opinion between Silpada and its warehouse manager, with the warehouse manager allowing employees to take product rather than having it destroyed.

John Campbell, an attorney who represented Reneau in the early stages of the case, said his client inquired — before buying — whether the material had been stolen. It’s routine in Reneau’s business that deals constantly with second-hand goods.

“This is nothing more than an internal squabble between plaintiff (Silpada Designs) and some of its employees, that has little to do with” Reneau or his company, one of Reneau’s filings in court said.

Reneau recently turned the case over to attorney Connie Shidler, who had represented his business before. She said her client is “completely adamant that he bought these things in good faith” and still sees nothing wrong with reselling them.

Silpada acknowledged in court filings that it offered to buy back the merchandise from the Gold Rush Exchange on Oct. 28, and offered what it believed Reneau’s company had paid.

Reneau rejected what he called a low-ball offer of $35,000, saying in a court filing that he’d paid much more than that. Silpada said it countered with $451,000, based on an average value and the number of items he received. A closer count, according to Silpada’s filings, led Reneau to cut the counter to $412,000.

Silpada called the counter offer “a textbook act of extortion” in one court filing.

As the case spilled into the new year, Silpada complained that Reneau had violated the court’s order and had turned to social media posts to “wage war” on the company and undermine the court proceedings.

A hearing on that issue set for Friday has been continued. Shidler said nothing has been sold in violation of the order.

This story was originally published January 13, 2017 at 5:46 PM with the headline "Silpada lawsuit describes theft involving ‘insider knowledge’ and a forklift."