Paramount Fine Foods founder locked in legal battle with investors

Paramount Fine Foods founder locked in heated court battle with investors

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A soured business partnership has turned into a heated court battle that could see prominent businessman and Order of Canada recipient Mohamad Fakih stripped of his duties as an officer and director of the food and beverage chain. Lebanese restaurant he founded in 2007 shortly after emigrating to Canada.

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The chain, Paramount Fine Foods, had expanded to 76 locations in 2020, according to a Toronto Life profile, which chronicled Fakih’s hard-working days as a businessman, philanthropist and family man that sometimes began from 4 o’clock in the morning.

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But documents filed in the Ontario Superior Court of Justice in a long legal battle that began last year tell a different story. Legal documents filed on behalf of investors AHM Investments Corp. Ali Noureddine and Mirza Naeem Javed accuse Fakih of running the company without consulting them, despite their majority ownership, and of using it for personal gain “at the expense of the company”.

Their claims, which relate to the company’s financial situation and the status of the roughly $25 million that Kuwait-based investors have invested in the company since 2015, have not been tested in court.

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A motion to have Fakih removed is due to be heard on December 9. Paramount investors say the deletion is necessary because “critical business decisions must be made that cannot be made” due to an impasse over a voting rights agreement among shareholders. They say they own 75% of the company, with Fakih and his family owning the rest.

“Until around 2020, Mr. Fakih had at least some contact and consultation with me and Mr. Javed when making business decisions, Noureddine said in an affidavit filed Sept. 13. “Our relationship deteriorated in the period that followed, and it is evident that Mr. Fakih completely stopped contacting or consulting with us and ran the business as he saw fit, including taking some number of measures for his personal benefit at the expense of the company.

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After failing to get the answers they expected from Fakih, the Kuwait-based investors engaged A. Farber & Partners Inc. to assess the state of the business and potential restructuring options. They say the report revealed that Fakih and his company, Fakih Group Inc., owe the company nearly $12 million.

“It appears that some or all of (Paramount’s) subsidiaries are insolvent and there are millions of dollars owed to the CRA for unremitted HST and a critical supplier,” the shareholders say in their motion to have be removed from his position as manager and director of the company.

Noureddine and Fakih are the two directors of Paramount. If Noureddine and Javed fail to have Fakih removed, the two majority shareholders want the court to appoint a third director instead.

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Mohamad Fakih, left, works with a Syrian refugee at one of his <a class=restaurants in Mississauga, Ontario, in 2016.” class=”embedded-image__image lazyload” data-src=”https://smartcdn.gprod.postmedia.digital/financialpost/wp-content/uploads/2022/09/paramount-2-0927.jpg?quality=90&strip=all&w=288″ data-srcset=”https://smartcdn.gprod.postmedia.digital/financialpost/wp-content/uploads/2022/09/paramount-2-0927.jpg?quality=90&strip=all&w=288, https://smartcdn.gprod.postmedia.digital/financialpost/wp-content/uploads/2022/09/paramount-2-0927.jpg?quality=90&strip=all&w=576 2x” height=”771″ loading=”lazy” width=”1000″/>
Mohamad Fakih, left, works with a Syrian refugee at one of his restaurants in Mississauga, Ontario, in 2016. Photo by Tyler Anderson/National Post

Paramount Fine Foods is headquartered in the western suburbs of Toronto, where the company’s name adorns a major sports and entertainment center in Mississauga that has hosted national and world hockey and figure skating championships, as well as entertainers musicals such as Green Day, Chris Brown and the White Stripes.

Last year, Fakih was among 135 nominations to the Order of Canada, the country’s highest civilian honour, bestowed on him for “his leadership in business and in the community, and for his philanthropic involvement in his community and abroad.

Fakih disputes the allegations and took action against his business partners last year, accusing them of failing to meet their obligations to the company.

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“Mr. Noureddine, AHM and Mr. Javed…failed to provide the required capital contributions and/or shareholder loans to acquire and/or maintain their stake” in the companies, Fakih said in a court filing dated of March 25, 2021.

He said that in 2015 he and Noureddine “became business partners based on a fundamental understanding…of how the Paramount business would be operated.”

As was “consistent with past practice, Mr. Fakih would be responsible for the day-to-day operations, management and strategic advancement of Paramount” while Noureddine would act “in a supportive, respectful and constructive manner to assist Mr. Fakih” . in performing this role. »

Part of this fundamental understanding was that “Mr. Fakih and the Noureddine parties would promptly fund any operating deficits or capitalization required for ongoing operations in proportion to their respective equity interests,” the documents state, and “to the extent that the Mr. Fakih’s role in the management of Paramount has led to any potential personal liability, the Noureddine Parties would indemnify and hold Mr. Fakih harmless in proportion to their interests.

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In addition, Fakih and Noureddine would “fund any tax liability incurred by Paramount as a result of the Noureddine parties’ acquisition of shares in proportion to their respective shareholdings.”

In court documents, Fakih says Noureddine first took a 25% stake, then put him and Paramount “under financial duress” and created an environment where Paramount would need more money.

This included “delaying and withholding funds” while “promoting an aggressive expansion plan that required additional funds”.

Additionally, Fakih accuses his business partner of “directly lobbying Paramount employees and instructing to lobby business counterparties, make statements and commitments on Paramount’s behalf to counterparties.” trading without permission, and ultimately withdrawing these commitments without considering the resources wasted in the negotiations, all of which have resulted in strained relations and, in some cases, disputes and litigation.

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He said the moves allowed Noureddine to increase his total stake in the company to 40% and then 50%.

“At the end of 2018, rather than providing these funds by meeting the deficit payment obligation, as required by the fundamental agreement and the reasonable expectations of Mr. Fakih and the Trust, Mr. Noureddine presented his friend Mr. Javed to Mr. Fakih as a new potential. investor in Paramount,” Fakih claims in the court documents.

“Since Paramount needed additional funds, Mr. Fakih and Paramount had no choice but to accept Mr. Noureddine’s terms and accept Mr. Javed’s investment.”

Reached by phone, Fakih said his investors were trying to use a counterclaim to a lawsuit he filed demanding they fulfill their financial obligations to him to damage his reputation “because I’m suing them hard to get my silver”.

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He said claims that his company is insolvent are false – only a tactic intended to pressure him into stoking concerns among his owners and franchisees.

“I imagine they’re laughing,” he said. “It’s sad that (the media) is reporting this because (it) helps them in the end, because they live in Kuwait and they have nothing to lose,” he added. “They don’t care about the investments of Canadian families who believed in Paramount. They never did.

After arriving in Canada in 1999, Fakih became a famous Toronto-area restaurateur and philanthropist, who gained a lot of attention for his pledge to hire 100 Syrian refugees following a trip to a refugee camp. in his native Lebanon in 2015.

“They’re just throwing dirt because they know my reputation is very important to me,” he said. “The business is viable and worth saving.

John J. Pirie, a Toronto-based partner in the litigation group of Baker & McKenzie LLP, attorneys for Noureddine, Javed and AHM Investments, declined to comment on the dispute.

“I will not comment on the case while it is in court,” he said.

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