By Dave Yochum. A memo sent to investors in an LLC related to Mooresville-based Carolina Beer & Beverage and its founders says claims in a lawsuit brought by 18 former investors “are absolutely 100 percent false.”

In the memo, the entrepreneur behind CB&B said the disgruntled shareholders’ complaints only came to light in November, more than 10 years after the same shareholders actually made a profit on their investments.

MIKE AND JENNIFER SMITH

“I am mad, hurt and extremely disappointed these individuals (all of whom made a profit selling their interest in Carolina Beer & Beverage) have chosen to make these false allegations,” J. Michael Smith said in the memo dated Dec. 9.

The lawsuits were filed in Mecklenburg County Superior Court in November. They allege Cornelius entrepreneur Smith and his wife Jennifer Smith worked with deceased Charlotte fraudster Rick Siskey to cheat early investors in Carolina Beer & Beverage out of tens of millions of dollars.

RICK SISKEY

One suit alleges that “Mike Smith, Jennifer Smith and Carolina Beer & Beverage breached their fiduciary duty to the Plaintiff, aided Rick Siskey in committing securities fraud, committed constructive fraud and engaged in a civil conspiracy to commit securities fraud and as a result, they each are each jointly and severally.”

Siskey bought out investors

The Smiths own a home at 17638 Spinnakers Reach in The Peninsula. They could not be reached for comment. Their attorney Ward Davis said the Smiths  will be seeking a court order for the plaintiffs to pay the Smiths’ legal fees based on the “frivolous claims and false statements throughout the complaints.”

Siskey, the founder of Wall Street Capitol and the benefactor of the since-renamed Siskey YMCA in Charlotte, committed suicide three days after Christmas in 2016. He left behind a tangled web of Ponzi investments, ruined retirement plans-—and a heady success in Mooresville-based Carolina Beer & Beverage (CB&B).

The suits say Siskey used insider knowledge to buy out early investors in CB&B at a lower premium than a “pending” sale which netted considerably more money. Smith, as CEO of Carolina Beer, approved each allegedly fraudulent transaction, the suits say.

The lawsuits contain affidavits from the FBI, including copies of emails and cancelled checks. One email from Mike Smith to Rick Siskey said “I love you man… You bring out the good vibes in me! FYI—best month in history of the business…good one to go out on.”

Other emails between the Smiths and Siskey outline Super Bowl trips and a chartered flight on a private jet.

Both Smiths were employed at Carolina Beer and Beverage in Mooresville where Mike Smith was the long-time CEO. The suits say Jennifer Smith, his wife, “was at all times relevant to this complaint, an employee and Special Projects leader of Defendants, Caroline Beer & Beverage LLC and Defendant Home Run Holdings.”

Home Run Holdings is a corporation located at 17638 Spinnakers Reach in Cornelius.

There have been two sales of Carolina Beer, which was launched with the investment advice of Siskey, according to the lawsuit. The second sale took place at an “enormous” profit.

The suits contain an email from Mike Smith to Rick Siskey Dec. 11, 2006 with a postscript that said: “I am being approached by an investment group seeking to purchase CBCO. I’ll keep you posted… I’m certainly not in a rush as the best is yet to come… This franchise is worth about 6-7 million net profit annually.”

Investors made money

The Smiths were wined and dined by Siskey and participated in the profits, according to the lawsuits.

But Mike Smith, in the memo to current Home Run Holdings investors, said the disgruntled investors made money on their investments.

Litigant Carl E. Merrell, according to Smith, invested $75,000 in 2003 and sold out in 2007 for $125,000, a 66 percent profit.

Litigants Jeffrey A. and Penny N. Strack invested $50,000 in 2001 and sold out in 2007 for $135,000, an $85,000 profit.

The memo says the plaintiffs “conveniently ignore the fact that the company was not sold until Aug. 2010,” more than two-and-a-half years after they sold their units.

The lawsuits will hold up final distributions from Home Run Holdings Escrow Holdabck, which were to be made prior to the end of 2019.

Carolina Beer & Beverage is an early success story in the world of upstart breweries.

In 2018, Brynwood Partners VII announced that its wholly-owned portfolio company, Cold Spring Brewing, acquired 100 percent of the stock of Carolina Beverage Group, LLC from SunTx Capital Partners and other selling shareholders. Terms and conditions of the transaction were not disclosed.

Brynwood created one of the largest independently owned contract manufacturers in the beverage sector for numerous well-known national and international brands. Customers include well-known energy drinks, sparkling waters, teas, cocktails, flavored malt beverages and craft beers.

The suits allege Siskey ultimately collected $27 million in shareholder distributions. Despite the years that have passed, “plaintiffs would not have sold their shares of Carolina Beer & Beverage if they had been informed of the true facts concerning the pending sale of the company to a private equity firm.”

The suit asks that the sale of Carolina Beverage to Siskey be voided, and that the Smiths and CB&B “pay the plaintiffs an amount they would have received from their rightful shareholder distributions from 2009 to present.”

Also named in the suit is Metropolitan Life, Siskey’s previous employer.