Power Hungry

D Magazine, Mar 01, 2005 by McGill, Adam

Schwarz was finally on the board of directors. He needed to get rid of the old guard, but firing them without just cause would trigger the very expensive compensation packages. Maybe, even though the board at the time approved them, Schwarz could poke holes in the legality of the poison pills.

On October 5, 2004, Pizza Inn filed a breach of fiduciary duty suit against Akin Gump Strauss Hauer & Feld, Pizza Inn's law firm from June 1997 through May 2004. Pizza Inn, now represented by Bickel & Brewer, says Akin Gump and codefendant Ken Menges, a partner there, schemed with Ronnie Parker and others "to enrich themselves at the expense of Pizza Inn and its shareholders." As the petition points out, the $7.4 million in compensation payouts is more than 200 percent of Pizza Inn's total net earnings in 2003.

Shortly after the breach of fiduciary duty was filed, in a special Saturday meeting on December 11, the board fired Ronnie Parker, citing "violations of his employment agreement." Parker would not comment for this article, but his lawyer, Rogge Dunn, says Parker has done nothing wrong. His client deserves the compensation package that the board unanimously approved for him, and he'll fight to get it. As of press time, the matter is in arbitration.

In a statement, Akin Gump says the law firm did not scheme with anyone. "The company ... decided to revise existing employment agreements for several key executives, including the new CEO, to ensure stability in the management team following the departure of the outgoing CEO," the statement reads. "After deliberation, Pizza Inn's duly elected board of directors determined the revised agreements were in the best interest of the company and unanimously voted to approve them. Pizza Inn now seeks the benefits of the changes for purposes of its termination of Mr. Parker but wants Akin Gump to bear the potential burdens of these agreements, signed by the company and unanimously approved by the board of directors."

Even after the legal mess is untangledbe it in the courts or in arbitrationSchwarz still has the problem of what to do with Pizza Inn. How is he going to turn all of that potential into profit?

"The first thing you do is come up with a plan, and I've been a huge proponent of it," Schwarz says. The company has hired a recruiting firm to find a permanent CEO, presumably one who can come up with a plan and implement it.

And then what? If and when the stock price goes up, will Schwarz take his profits and move on to the next project?

"I care about this company," he says. "I care a lot about this company. I'm not a short-term flip artist here. I'm not here to spruce it up and pawn it off on somebody at some higher price."

It's late in the day as the tour of the headquarters comes to an end. Schwarz walks by the front desk, where he sees an envelope sitting on a pile of outgoing mail. It's addressed to him.

"We can save the postage on this, can't we?" he says as he tucks it under his arm.

He just added 37 cents to the bottom line. Now if he can just come up with that plan.