Tile Shop Fires Employee In Wake Of Ethics Violations
Tile Shop Holdings, Inc., a publicly traded retailer of stone tiles and related products, said this week that the brother-in-law of its CEO has been fired for “multiple violations’’ of the Plymouth-based company's ethics policy.
Plymouth-based Tile Shop's stock was roiled by a November report from Gotham City Research, which charged that the company’s earnings were overstated and argued that the company’s largest supplier was owned by the brother-in-law of Tile Shop CEO Robert Rucker. Numerous law firms from around the country subsequently lined up to file shareholder lawsuits against the company in the wake of the allegations.
The company announced late Monday in a press release the findings of an audit committee investigation, which was conducted by local law firm Dorsey & Whitney LLP. It said that the report found no evidence that the company’s financial statements were inaccurate—but it did confirm problems stemming from inappropriate vendor relationships with Fumitake Nishi, Rucker’s brother-in-law and a former Tile Shop employee.
Tile Shop said that Nishi acquired Beijing Pingxiu, a Chinese export trading company, in 2011. The report found that Nishi failed to disclose to Tile Shop the nature of his operations, and between 2011 and 2013, millions of dollars in payments were processed by Beijing Pingxiu, the report found. Nishi also acquired a majority ownership interest in a Tile Shop vendor called Nanyang Helin Stone Company in 2010.
Tile Shop said Monday that Nishi was fired January 1 “for multiple violations of the company’s business ethics policy,” and the company “will actively pursue recovery from Mr. Nishi of all monies he received from sources other than the company while he was an employee of the company.”
“I am naturally extremely disappointed to learn of the nature and extent of the previously undisclosed relationships that Mr. Nishi maintained with our vendors,” Rucker said in a statement. “Our senior management team has had direct and pointed conversations with our vendors about this situation. We believe that by working together we will implement better practices to safeguard against any of these situations recurring in the future.”
The company said the investigation did not uncover problems with its previously announced financial data (although the investigation itself is expected to cost upwards of $1.5 million).
“The findings of the investigation concluded that while certain previously undisclosed related party relationships existed, there is no evidence that the company’s historical financial results have been misstated or that the company applied any improper accounting treatment with respect to its historical financial statements,” Tile Shop said in its announcement.