19 May 7-Eleven Whistleblower Alleges Predatory Practices, Franchise Churning & Personal Vendettas
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Posted Wed, 2014-05-07 19:10 by Sean Kelly
Former 7-Eleven Corporate Investigations Supervisor Kurt McCord has dropped a bombshell in the lawsuit of 7-Eleven, Inc. v. Karamjeet Sodhi, et. al. McCord, an experienced loss prevention specialist who worked for 7-Eleven, Inc. for 7 months in 2013, has stated that he resigned because of “unethical and even unlawful missions” being carried out by SEI against its franchisees. He claims that 7-Eleven’s asset protection department is a “predatory program [designed] to increase corporate profits by unethically stealing the equity and goodwill of its franchisees.” He claims it’s a “weapon of vengeance” wielded by 7-Eleven executives for personal vendettas and to terminate franchisee leaders they deem “pains in the asses.” And he claims that the massive build-up of the 7-Eleven asset protection program in 2013 and the extreme pressure for it to meet profit goals has resulted in unfair seizures of stores from franchisees who have done nothing wrong. I feel that it is my duty to expose the injustices I witnessed. – Kurt McCord
Kurt McCord’s damning allegations regarding 7-Eleven are contained in a 25-page certified statement (Certification of Kurt McCord) filed by attorney Jerry Marks of the law firm Marks & Klein on behalf of his client, 7-Eleven franchisee Karamjeet Sodhi. In June, 2013 7-Eleven, Inc. attempted to terminate Karamjeet Sodhi’s franchise agreements and seize control of his 6 profitable 7-Eleven convenience stores with no prior warning or opportunity to “cure” the alleged defaults. 7-Eleven, Inc. sued the 26-year franchisee (See 7-ELEVEN Sodhi Lawsuit to Proceed to Trial), alleging that Sodhi had fraudulently failed to report hundreds of thousands of dollars in merchandise sales, thereby cheating the corporation of its share of the stores’ revenue. However, Kurt McCord alleges that Sodhi was the victim of an internal 7-Eleven hit squad (my words) that maliciously targets the profitable stores of respected franchisee leaders, and seizes them for later resale.
The 7-Eleven asset protection team allegedly kills two birds with one stone: generating tens of millions of dollars through the resale of seized stores from uncompensated owners, and eliminating long-term franchisee leaders (like Sodhi) who don’t toe the company line.
7-Eleven’s Launches “Biggest Asset Protection Rollout of 2013”
Kurt McCord, who previously worked for Target and Burlington Coat Factory, claims that 7-Eleven initiated a massive build-up of its asset protection department in 2013. (Another exhibit in the case is a news release titled “7-Eleven adds 35 Asset Protection positions – the biggest Asset Protection roll-out of 2013”) According to Kurt McCord’s Certification, 7-Eleven built the department to generate massive profits through “unfair, illegal and predatory practices” against its own franchisees.
According to McCord: 7-Eleven, Inc. has designed and implemented a predatory program to increase corporate profits by unethically stealing the equity and goodwill of its franchisees. In some cases, these franchisees spent decades of hard work and financial investment building their businesses. 7-Eleven’s scheme was to use its superior financial, legal, and corporate strength to seize the stores of profitable franchisees without providing them fair compensation for the years of goodwill they accumulated. The 7-Eleven Corporation would then resell those stores at an enormous profit. Using an internal team masquerading as an Asset Protection (Loss Prevention) Department, 7-Eleven set a yearly number of stores to take back, prioritizing locations in areas with the highest resale values or, in some cases, operated by respected franchisees who had spoken out about the corporate giant’s corrupt practices.
7-Eleven Alleged to Have a Franchise “Churning” Strategy
According to Kurt McCord, legitimate asset protection departments are intended to prevent losses for store operators and the parent corporations, but are NOT regarded as profit centers or generators of new revenue. However, McCord contends that 7-Eleven’s asset protection department was used as a cover for its franchise “churning” (seizure and resale of franchise stores) activities. McCord states: [The] relentless quest for higher profitability and greater control led 7-Eleven, Inc. to adopt a strategy of “churning” franchise locations. This acted as a way to generate tens of millions of dollars in additional profits, and as also became an effective way to rid the system of “pain in their ass” franchisees who dared question 7-Eleven’s predatory practices. In order to deploy an aggressive churning initiative, 7-Eleven, Inc. needed to disguise it as something more professional and benign. 7-Eleven decided to conduct their churning initiative under the guise of an Asset Protection (Loss Prevention) department. They named the two teams that acted as the warhead of the scheme the “Centralized Investigations Team” (CIT), and a covert mobile surveillance team that they dubbed the “Profit Assurance Team” (PAT Team)…Their goal was not to prevent retail theft, but to create a new profit center to acquire franchisee stores at no cost through tactics that sometimes consisted of false charges of franchisee wrongdoing and intimidation of franchisees.
7-Eleven Allegedly Targets Most Valuable Stores for Seizure
McCord contends that 7-Eleven, Inc. prioritizes franchisee stores in California, New Jersey and New York for take-back, since those markets generate the highest resale value. He states: So, for example, even if evidence existed that a franchisee in the Midwest was committing more fraud against 7-Eleven than a store in California, New Jersey, or New York, the priority for take-back would go toward the stores in California, New Jersey, and New York. These stores are more profitable to refranchise and will be prioritized, even if crimes are less severe than the franchisee in the Midwest.
7-Eleven Allegedly Targets “Pain in the Ass” Franchisees for Termination
According to Kurt McCord, another major criteria in the selection of stores for take-back was whether the franchise owner was deemed (in the words of asset protection head Mark Stinde) a “pain in the ass” by top management. McCord states: Several long-time franchise owners were designated as high-priority targets for fraud investigations by top executives because of their roles as heads of regional Franchise Owners Associations (FOAs), and their advocacy on behalf of fellow franchisees. Stinde and top executives continued to pressure the CIT staff to “dig up dirt” on prominent financially successful franchisees such as Jerry Sahnan, head of the Arizona FOA, and Karamjeet Sodhi, head of the New Jersey FOA. Even after investigators reported not being able to find evidence of fraud or other improprieties, top executives insisted they remain “Top Priority” targets.
7-Eleven’s Case Against Sodhi Deemed “Unwinnable”
Kurt McCord claims that 7-Eleven’s lawsuit against franchisee was driven by personal and professional animus, not legitimate charges of fraud. He claims that 7-Eleven, Inc. upper management had targeted Karamjeet Sodhi, who was head of the New Jersey Franchisee Owners Association, for political reasons, and instructed the Asset Protection team to find evidence of fraud the could use against him. They never did. According to McCord: “Sodhi” was a name we heard almost daily after Tariq Khan (TK)… I was told by Art Lazo, the current Director of Investigations and SSC Operations at 7-Eleven, that Sodhi was “Public Enemy #2” after Tariq Khan. Sodhi was the case that was on deck after the successful removal of Tariq Khan…after Mike Aldridge took over the case from Lazo, he was told to investigate Sodhi for fraud and payroll. No fraud was ever found. So, Mike came to me on many occasions comparing Sodhi to Sahnan [another innocent franchisee targeted for termination]. So, he and I had many talks about the Sodhi case being unwinnable… So, despite no fraud being found and the investigators deeming a case against Sodhi “unwinnable,” 7-Eleven proceeded to seize Sodhi’s 6 successful stores anyway.
Unwarranted Store Seizures Result in “Cruel and Coercive Tactics”
On my UnhappyFranchisee.Com website, I have written extensively about the seizure of Dilip & Saroj Patel’s Riverside, CA 7-Eleven, a business it took the family 19 years to build (7-ELEVEN Stole Our Store – Dev Patel’s Story) I have interviewed Dilip Patel and his son Dev, and corresponded with his outraged customers who publicly protest 7-Eleven’s treatment of the Patel family. These are really nice and sincere people. I find it highly unlikely they are capable of the fraudulent scheming 7-Eleven accused them of (Slurpee coupon fraud). It was really difficult for me to read Kurt McCord’s account of the “cruel and coercive tactics” used against these soft-spoken 60-something grandparents, which involved threats of prison time, and a brutal “8-hour interrogation session using tactics more befitting murder suspects than franchisees accused of improperly redeeming Slurpee coupons.”
Why was it necessary for 7-Eleven asset protection to detain the Patels until Saroj, a diabetic, “began to get even more upset, crying uncontrollably and… inconsolable”?
According to Kurt McCord, “There was only one reason an interrogation like the 7-Eleven interviewers was necessary: 7-Eleven didn’t have enough evidence on the Patels to proceed with the lawsuit without them signing over the store. Their true motive was to gain full control of the Patel’s valuable store, so they resorted to extremely cruel and coercive tactics.” Finally, in fear for his hysterical wife’s well-being, Dilip Patel agreed to sign away the family business his only son was to take over.
7-Eleven Asset Protection: “A Weapon for Vengeance”?
Kurt McCord concludes his Certification by stating that he left 7-Eleven because he could no longer be used as a “weapon of vengeance.” McCord states: Cases like Sodhi and Jerry Sahnan, are THE reason I left 7-Eleven. I could not be a weapon of vengeance for 7-Eleven executives. I did not sleep well at night after managing a case load that only had an agenda for silencing well respected franchisees who were rebelling against injustices they were enduring…. Working for 7-Eleven, I felt that I, and most importantly, I felt like the honest and hardworking individuals I recruited to the CIT (like Mike Aldridge) were using our expertise for unethical and even unlawful missions. What I witnessed at 7-Eleven were not the actions of a legitimate Asset Protection/Loss Prevention program, and I feel it is my duty to expose the injustices that I witnessed.