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Sunday, November 22, 2009
Garduño's Saga Reads Like a 'Whodunit'
By Rivkela Brodsky
Copyright © 2009 Albuquerque Journal Journal Staff Writer
Dave Garduño was still running his first restaurant on Fourth Street in the North Valley in 1985 when John Johnstone went to work for him as a sous-chef.
Johnstone played a major role as the business grew into one of New Mexico's signature restaurant chains over the years, moving from the kitchen to the front office and eventually to vice president of operations.
But the company has fallen on tough times, and Garduño is pointing the finger at Johnstone, alleging he ransacked the company of $2 million and is responsible for the tax delinquency problem that almost shut the doors and threw 450 people out of work.
As for Johnstone, he seems to have disappeared.
His Los Ranchos house is locked up, with a "For Sale" sign; phone numbers listed for him have been disconnected; and his attorney wants out because he can't contact him.
Dueling lawsuits abound.
Tortilla Inc., the parent company of Garduños, has accused Johnstone of embezzlement and other allegations, including fraud and buying food and equipment with Tortilla funds, according to a lawsuit filed in January 2008 in state District Court in Albuquerque.
Those allegations were made in a counterclaim after Johnstone sued Garduño's for $727,000 for wrongful termination and lost compensation.
Settlement negotiations had been taking place since late last year, but those hit a snag in recent months when Johnstone fell out of communication with his attorney, David Frizzell, and stopped showing up at the restaurant locations he now owns in Arizona.
Frizzell sought to withdraw as Johnstone's attorney in October, according to court documents.
It was also in October that a judge in Santa Fe issued an injunction to shut down Garduño's if it did not work out a payment plan with the state over its almost $941,000 tax bill. Shortly after that, Garduño's officials publicly blamed a former employee for its financial problems but would offer no names.
CEO Mike Calcaterra would say after the injunction hearing only that it was "a man and several colleagues" behind the embezzlement.
In an e-mail to the Journal on Oct. 21, Garduño's owner and founder said a "former executive" was at fault. The e-mail did not state a name but indicated a lawsuit had been filed by that employee against the company.
"Garduño's has been paying all our taxes in full and on time every year up until — two years ago," Garduño said in the e-mail. "At that time, upon an internal review, we discovered that a former executive had been misappropriating funds and ransacking the company for an estimated amount of $2M."
The lawsuit filed by Tortilla Inc. accuses Johnstone of buying food and equipment with Tortilla funds for his own Arizona restaurants while falsifying records.
The lawsuit specifically cites discrepancies in the books for the Garduño's of Las Cruces that were found in 2007. That location has since closed. It also claims Johnstone admitted to taking money from the company. Johnstone denies those allegations in court filings.
Long-term employee
Johnstone started with Garduño's in 1985 as a sous-chef. Twelve years later, he was vice president of operations — a position he held for 10 years.
He had a salary of $140,000 a year, plus bonuses and other benefits.
In 1995, he signed a contract with the company giving him the right to use the Garduño's name to open restaurants in Arizona.
According to court documents, he was terminated Oct. 17, 2007 — the same date a Journal article quotes Johnstone as saying he was leaving his role with the New Mexico company to run restaurant locations in Arizona.
At the time, he and a partner, Cameron Eghlimi, had opened two locations in Scottsdale and Chandler, and another in Glendale was being planned. The restaurants served the Garduño's menu, as well as some seafood dishes.
There are two restaurants now called Camerones in Scottsdale and Glendale. Media reports in Arizona indicate a name change in February, saying the restaurants were renamed after the partner Cameron Eghlimi.
The lawsuit continues
Johnstone and Garduno's parent company fired at each other in court filings throughout 2008, with Johnstone denying the fraud and theft charges. He pointed the finger at Tortilla Inc., and in July 2008 claimed the company had defamed him. Specifically, he said Dave Garduño "filed police and law enforcement reports that contain false, inaccurate and misleading statements of fact."
Garduño's denied the claims in September 2008 and added to its claim against Johnstone, alleging he made "false and defamatory statements to Tortilla's customers and vendors," inflicting damage on the company.
The claim asks the court to order a financial accounting of the Arizona restaurants and to order Johnstone and his wife, Holly, to return funds, equipment and supplies.
Johnstone denied the allegations and again said Tortilla Inc. was to blame.
Another lawsuit
According to filings in state District Court in Albuquerque, there is another lawsuit in federal court in Arizona involving claims and counterclaims between Garduño's of Arizona and Tortilla Inc.
At least one mediation occurred Dec. 5, 2008, involving the lawsuits in both states.
A settlement was drafted, although there appears to be some discrepancy as to whether that agreement was official. No signatures appear on any copy submitted with the filing.
Under the settlement, Johnstone would give Tortilla Inc. all supplies and materials — including recipes — belonging to Garduño's and remove all Garduño's signs from the Arizona restaurants.
Both parties would pay for a CPA to conduct an accounting of Johnstone's restaurants and determine what money was owed to Tortilla.
Johnstone filed a motion to enforce that agreement in April; Tortilla Inc. responded that the agreement was not a binding settlement.
The latest development is an Oct. 16 motion by Johnstone's attorney, Frizzell, asking to withdraw as counsel because he had been unable to contact Johnstone by phone or e-mail.
The Journal was told by several Camerones employees that Johnstone had not been seen at either location for some time. Journal messages to Johnstone's partner, Cameron Eghlimi, seeking information on Johnstone's whereabouts were not returned.
Journal calls to numbers listed for Johnstone indict they are now disconnected. A reporter drove by an address listed in court documents for Johnstone, but no one was at the Los Ranchos home, the gate was padlocked, weeds were growing in the yard and a "For Sale" sign was up.
Frizzell told the Journal via a receptionist on Nov. 4 that he was not interested in speaking with the newspaper.
On taxes
Rick Homans, secretary of the state Taxation and Revenue Department, told the Journal in October that the department was aware of the embezzlement claim, but that the company's tax problems developed after the employee in question had left.
Tortilla Inc. — the parent company of Garduño's — has since reached an agreement on a payment plan with the state over its $953,000 tax debt.
Garduño's has five restaurants in Albuquerque and employs 450 people. Garduño said the company has been in business 40 years.
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