Mattress Firm’s former real estate broker, whom the retailer is suing claiming he was part of a massive fraud and bribery scheme, has filed a countersuit alleging Mattress Firm executives knew and encouraged the deals they are suing their former real estate team over.
Mattress Firm accused Former Colliers International Atlanta executive Alexander Deitch of being one of the ringleaders — along with former in-house real estate executives Bruce Levy and Ryan Vinson — in a scheme to steer the company toward high-priced real estate in exchange for developer kickbacks and other incentives in a lawsuit filed in November. Deitch filed his countersuit Wednesday, claiming Mattress Firm’s aggressive growth strategy and desire to corner the mattress retail market was why it entered into leases that were above market rates, including at times to steal market share from competitors. Mattress Firm’s real estate committee — which was manned by a number of top executives, including current CEO Steve Stagner and former CEO Ken Murphy — had full knowledge of those deals and signed off on them, Deitch said in the lawsuit. “Mattress Firm essentially weaponized the real estate department and its brokers to advance the larger agenda of removing all competition it could,” Deitch’s attorneys wrote in the claim. “Mattress Firm’s aggressive roll-up was reckless, resulting in massive clustering of stores, assumption of bad locations which needed to be propped up, and astounding redundancies in certain markets.” Deitch’s attorney, Schulten Ward Turner & Weiss Partner Kevin Ward, told Bisnow that Mattress Firm’s main focus on real estate was projected store performance. That was determined by a proprietary software program Mattress Firm used to predict store performance, Ward said. “The amount of rent was way down the line,” he said.
Calls seeking comment from Mattress Firm officials were not returned as of press time. Mattress Firm accused Deitch, Levy and Vinson of accepting gifts, including expensive trips and hotel stays and even co-ownership of a yacht, in exchange for favorable real estate deals in its initial lawsuit. But Deitch claims in his rebuttal, filed in Harris County, Texas, District Court, that Mattress Firm engendered a culture that allowed company executives and employees to receive gifts and trips from vendors, including tickets to the Super Bowl, the Master’s, the Kentucky Derby and even weeklong trips to Spain. Murphy resigned as CEO of Mattress Firm in January, and Stagner, Mattress Firm’s chairman, assumed the CEO role at that time. He had previously served as CEO from 2010 to 2016, when Murphy was promoted.
Mattress Firm’s parent company, South Africa-based Steinhoff International Holdings, late last year tapped PwC to investigate accounting irregularities that is forcing it to restate earnings as far back as 2015. Markus Jooste resigned as chief executive of Steinhoff soon after the announcement, and the company’s shares lost as much as 80% of their value.
Mattress Firm’s ‘Reckless Roll Up’
Steinhoff purchased Mattress Firm in 2016 for $3.8B, or $64 per share, which was a 115% premium on its closing price.