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Executives? accuse? owners? of Armor; Say husband and wife engaged in fraud

Think Adelphia but much, much smaller.

Just like the high-profile case against the Rigas family, there are allegations of looting the company and using corporate assets for personal benefit.

The difference is these accusations, part of new federal court lawsuit, involve a small but growing company in Buffalo.

At the crux of the suit is the claim that the majority owners of Armor Electric Motor & Industrial Services used company funds to pay for luxury cars, country club memberships and personal dental expenses.

The three company vice presidents who filed the suit claim President Thomas M. Pawlak and his wife, Lisa, Armor's majority shareholder, have engaged in a scheme of fraud and corruption that has cost the company hundreds of thousands of dollars.

"It's company money," said Joseph V. Sedita, a lawyer for the three executives. "They believe the majority shareholders of the company were using the company treasury for a lot of personal expenses and luxuries."

The Pawlaks insist the allegations of fraud are baseless and suggest the three executives suing them have provided no proof that company assets were used for anything but legitimate business expenses.

"We're certainly denying the claims and have filed our own counterclaims," said Randall Andreozzi, a lawyer for the Pawlaks.

They also contend that, under their leadership, Armor Electric, a motor and equipment repair company, has seen "exponential growth" in revenue.

"My day-to-day duties and my husband's day-to-day management of Armor Electric pose no danger to the financial health and viability of the company," Lisa Pawlak said in an affidavit, "The business has been grown significantly since its inception in 2005, due in large part to my efforts and those of my husband."

In just seven years, the company's annual sales increased from $750,000 to $5 million, and with that has come an expansion of its workforce.

Armor employs about 22 people, up from only four in 2005, and recently moved to a new 25,000-square-foot facility on Elk Street.

The executives suing the Pawlaks – they also own about 45 percent of the company – acknowledge the company's growth but claim the couple is squandering company funds. To make their point, they included in their court papers more than 17 pages of line by line expenses they contend the Pawlaks paid using company checks, debits cards or wire transfers.

They include payments allegedly made to Brierwood Country Club in Hamburg, an art gallery in Key West, Fla., and a travel agency in Australia.

The list also includes payments allegedly made to Jaguar, Buffalo Harley-Davidson and the Buffalo Gun Center.

"Lisa Pawlak also wrote tens of thousands of dollars in checks directly to herself and to "Cash" without authorization," the executives say in their court papers.

The three men also claim the Pawlaks transferred Armor funds to other companies they own or used Armor funds to buy equipment for those other companies.

As minority shareholders in Armor, the three men – Richard J. Kramer, Christopher Gates and Glen E. Webster – say they have a right to look at the company's financial records, a right they claim the Pawlaks have thwarted.

"Concealing the credit card statements from Armor Electric's other employees is part of the Pawlaks' scheme to defraud plaintiffs and Armor Electric, which has allowed them to hide, and continue, their fraudulent activity," they said in their court papers.

The suit also claims Thomas Pawlak retaliated against Kramer by firing him from his job at Armor earlier this month, an action the Pawlaks claim was necessary.

"Kramer's termination was in no way an act of aggression, retribution, or done in bad faith by Mr. Pawlak. It was simply a business decision," the Pawlaks said in their papers.

Sedita says his clients' goal is to ensure that all of the company's profits are distributed equitably among its shareholders.

"The objective is not to kill the company," he said. "This is something my clients have invested a lot of time in."

This is not the first time Armor has made headlines. In 2009, Thomas Pawlak complained publicly when Armor lost a $90,000 contract with Erie County to a company owned in part by then-County Executive Chris Collins.

County auditors found no evidence of Collins interfering in the contract process, but they did note a few oddities in how the Purchasing Division conducted the bidding.

When the County Legislature complained about the deal, Collins said his company, Volland Electric Equipment Corp., would give up the contract to repair small motors for the county sewer system. He also said he would ask any company he owns to refrain from bidding on county work.