Franchise operators allegedly steal hundreds of thousands in unreported transactions.
7-Eleven and TSC Lending Group have sued 7-Eleven franchisee Balraj Chopra, his wife Neelam Chopra and Chopra Holdings Inc., for allegedly committing RICO fraud, breach of contract, unfair competition and trademark infringement, noted CourtHouse News Service.
7-Eleven sought $500,000 in damages through the lawsuit, as well as an order that the defendants vacate their stores and deliver possession of their stores to 7-Eleven.
The Chopras, of Granada Hills, ran three 7-Eleven stores, in Southern California, including in Sepulveda, Van Nuys and San Fernando.
The suit claimed the Chopras ran a “cash business,” stealing hundreds of thousands of dollars by making false entries in the cash register when customers bought merchandise with cash. The false entries, which included using non-sale cash register keys, masked the actual sales transactions, allowing defendants to keep the cash for themselves, the complaint states, CourtHouse News Service reported. The fraud was discovered thanks to the excessive use of these register keys in the stores’ electronic journals.
“The essence of the schemes was to utilize various devices to effect unreported merchandise sales, the proceeds of which were used to pay for merchandise in cash, for purchases which were not reported to 7-Eleven, with the significant balance going into the pockets of defendants and their co-conspirators,” 7-Eleven stated in the complaint.
The Chopras allegedly then used the unreported cash they got from customers to buy more inventory, which they failed to report to 7-Eleven.
“By way of example only, a review of the stores’ transactions during the 10-month period May 1, 2011 through Feb. 28, 2012, show that reported purchases exceeded reported sales in multiple categories, such as non-carbonated beverages, candy, health and beauty care (HABC), and tobacco, by more than $28,000. Inasmuch as merchandise does not multiply by itself on the shelves, the explanation for this significant discrepancy cannot be benign,” the complaint stated
“During the same time period, defendants’ reported sales in certain categories of merchandise at the stores have been significantly less (by more than $100,000) than reported purchases, and the magnitude of these shortages cannot be explained by employee or customer theft,” said 7-Eleven as quoted by CourtHouse News Service.
7-Eleven terminated the Chopras’ franchise agreements and demanded that they return the stores and all property in them, but the Chopras refused to vacate and surrender the formerly franchised 7-Eleven stores. Defendants also continue to use 7-Eleven’s trade names, trademarks, service marks and trade dress, the complaint stated.
Update: A settlement was reached on June 6, and and the lawsuit was dismissed. Details of the settlement were not disclosed.
