Bamboo Sushi is currently stuck in the middle of a legal battle between its former CEO, Kristofor Lofgren, and private investment firm Bain Capital.
As first reported by the Portland Business Journal, Lofgren is suing Bain Capital’s Double Impact Fund and fund manager Christopher Cozzone for defamation and breach of fiduciary duty, among other things. The lawsuit claims Bain Capital postured as a socially conscious investment firm before instituting a “hostile takeover” of Sustainable Restaurant Holdings, which owns Bamboo Sushi. Lofgren wants the fund to pay SRH, the holding company he used to run, at least $5 million, plus an additional $4.7 million for himself.
Sustainable Restaurant Holdings is the company behind Bamboo Sushi. One of Portland’s more prolific chains, Bamboo Sushi and its poke-centic, fast-casual sibling, Quickfish, operate locations in Seattle, California, Phoenix, and Denver, as well as Oregon. In the Portland area alone, there are five Bamboo Sushi locations, plus two Quickfish locations. But Bamboo Sushi isn’t just widespread; the company has aimed to be a leader in the environmentally friendly seafood movement and claims to be the world’s first certified sustainable sushi restaurant. On its website, customers can find an interactive graph of the company’s carbon footprint, breaking down the individual carbon footprints of each fish the company serves.
Back in 2018, SRH agreed to accept $15 million from Bain Capital “in exchange for a 23% ownership interest in the company,” the lawsuit reads. Lofgren planned to use the money to expand Bamboo Sushi and Quickfish, hoping to open locations in San Francisco and Seattle.
Bain Capital, the private equity firm co-founded by former presidential hopeful Mitt Romney, hasn’t historically had a good reputation nationally: Once called “the worst of capitalism” by Rolling Stone and “bad for America” by Forbes, Bain was known for buying up profitable companies and stripping them for parts, reorganizing them to make a larger profit.
This didn’t seem to concern the folks at Bamboo Sushi when they started to look for funding. The company was pursued by Double Impact, the socially conscious corner of Bain Capital that seeks out sustainable businesses like By Chloe. Then-creative director Cory Schisler called Double Impact the “the hippie flower children within Bain Capital,” saying that the fund seemed genuinely interested in Bamboo Sushi and Quickfish’s mission of creating scalable, “ocean-to-table” seafood chains. “Bain further claimed that, unlike most private equity funds, its Double Impact Fund invested in long term growth rather than seeking a quick expansion and payoff,” the complaint reads.
However, according to the complaint, it was only a few months before Bain Capital considered withholding $7.4 million of contractually promised funding unless the company quickly increased its profitability. Lofgren also claims Bain went back on its word by withholding funds unless the firm received additional shares in the company, pulling directly from the owners’ interests.
The lawsuit says that, by April 2019, Lofgren felt obligated to agree to give a portion of his ownership shares to Bain to secure the capital to expand. According to the lawsuit, fund manager Cozzone then insisted that the company open “five to six new locations within a short period of time.”
Then, coronavirus started to spread across the country, shutting down restaurants in cities around the world. Anticipating an Oregon shutdown, Lofgren says he started to secure funding and renegotiate leases, helping the company brace for the economic fallout. Instead, the suit claims Cozzone rejected Lofgren’s plans, allegedly accelerating Lofgren’s planned departure as CEO and “(moving) to the Bain Capital playbook.”
The lawsuit claims that Bain, through an emergency board meeting, terminated him and demanded another chunk of shares — giving Bain majority ownership. The suit also claims Cozzone undervalued the company for the share purchasing, claiming it was worth only $15 million as opposed to $40 million. When Lofgren refused to give up more shares, the lawsuit claims Bain Capital threatened to retroactively terminate him “for cause,” “falsely claiming that a 2017 accounting error on SRH’s books somehow constituted fraud on Mr. Lofgren’s part.”
The lawsuit claims that Bain had previously decided the accounting error was simply a mistake, as opposed to conscious fraud: While Lofgren was traveling in 2017, SRH needed about $900,000 in short-term cash, so Lofgren says he asked a banker to take $900,000 out of his account and send it to SRH. He says the banker, unbeknownst to him, took $650,000 out of his personal account and the final $250,000 out of the company’s business line of credit. According to the suit, SRH mistakenly recorded that the full $900,000 came out of Lofgren’s account, and he was thus paid back the full $900,000. He says he was unaware of the change because he was traveling.
The lawsuit also claims Bain is considering filing for bankruptcy or reorganizing the company, even though the lawsuit says “with multiple state and government stimulus packages and protective rules available to ride out the COVID-19 shutdown, SRH is well-positioned for a full recovery when the pandemic subsides.” According to the lawsuit, the new CEO, Matthew Park, has already laid off employees.
“Mr. Lofgren’s amended complaint is yet another attempt to manipulate and pressure Sustainable Restaurant Holdings (SRH) into paying him money he is not owed,” a statement from Sustainable Restaurant Holdings reads. “The fact remains that following a routine audit, the SRH Board determined that actions by Mr. Lofgren constituted cause for his termination as Chief Executive Officer.” Bain Capital and Sustainable Restaurant Holdings chose not to respond to specific claims made within the lawsuit.
• Lawsuit against Bain Capital [Official]
• Ousted as CEO, Bamboo Sushi founder sues Bain Capital fund over alleged ‘hostile takeover’ [PBJ]
• Bamboo Sushi founder raises the stakes in legal fight against investor Bain Capital [PBJ]
• Bain Capital Has Invested in Bamboo Sushi — Here’s What That Really Means [EPDX]