Three years ago, John Lees was looking to expand his seafood business in New Bedford. Prices for scallops were skyrocketing and Lees sensed the time was ripe to make a big move.
So it appeared fortuitous when, seemingly out of nowhere, a Lithuanian business tycoon offered to buy a majority stake in Lee’s company, Marlees Seafood, which the veteran fisherman founded 27 years ago out of the back of his car.
“They told me they wanted to buy up the entire industry,” Lees recalled of the offer from Julius Numavicius, whose family members are owners of a holding company with retail interests throughout Europe. “I was looking at becoming a big part of something. This was going to give me the scale that I believed I needed.”
Instead, what seemed like a promising marriage has soured into a dock fight.
Numavicius is accusing Lees of bilking him out of more than $22 million, according to papers filed in US District Court in Boston in October. Numavicius alleges that Lees, who remained Marlees’s chief executive for two years after the September 2010 deal, inflated Marlees’s value at the time of the sale, engaged in a series of schemes and kickbacks and secretly competed with Marlees by investing in friends’ businesses.
“Lees used his insider executive position at New Marlees to orchestrate round-trip seafood transactions and ultimately to cause New Marlees to pay inflated prices for the seafood, all to generate kickbacks to Lees and profits to his coconspirators,” the lawsuit reads.
Lees expressly denied the allegations in Numavicius’s lawsuit. And he has countered with his own court actions, including a motion asking the judge to dismiss the lawsuit. Separately Lees filed a lawsuit in Suffolk Superior Court seeking $6.3 million in damages from Numavicius for their falling out. That case is in arbitration.
Lees also contends that if Marlees Seafood is in trouble it is because Numavicius doesn’t understand the industry and hired a convicted felon as president.
Lees said he was fighting the lawsuit to preserve his reputation in the tight-knit world of New Bedford, where he owns four scallop boats.
“I’m proud of where I came from,” the 49-year-old Lees said. “My dad was a commercial fisherman for 35 years. For me, pride is extremely important.”
Numavicius’s Boston-based lawyer, Nicholas Theodorou, declined to comment. Marlees executives didn’t respond to calls. Numavicius did not respond to requests for comment left at several companies in Florida, London, and Lithuania where he has interests.
Numavicius and his two brothers were founding members of VP Group, a Lithuanian holding company that owns supermarkets, pharmacies, and home improvement stores in Eastern Europe. Numavicius appears to have had a falling out with the brother who now controls VP Group and it is unclear whether he remains an owner of the company.
Once a down-on-its-keel fishing port after the collapse of groundfish stocks in the 1990s, New Bedford now boasts the richest commercial fishing take in the United States, thanks to the sweet, briny sea scallops harvested in the nearby North Atlantic. The scallop harvest alone was worth nearly $400 million in 2012, and in a few short years dock prices have doubled to about $12 to $14 a pound.
The prized mollusk has made New Bedford a global supplier to customers stretching from China to Spain, and in turn major seafood processors are flowing to this busy seaport.
In October Canada’s High Liner Foods purchased American Pride Seafoods, a New Bedford processor of frozen seafood and scallops, for $34.5 million. American Pride reported revenues of $190 million in 2012, according to the companies.
Numavicius, meanwhile, paid $22 million in 2010 for 80 percent of Marlees and struck an agreement that Lees would continue to manage its 60,000-square-foot processing plant. Lees was also not to compete against his old firm.
But soon after the 2010 sale, Numavicius said he discovered Lees’s wife had invested $1 million in NorAtlantic 21, a competing New Bedford seafood processor owned by Lees’s friend and former worker, a violation of the noncompete language in their contract, he said.
Lees argued that Numavicius was misinterpreting routine business in New Bedford, where suppliers constantly buy and sell fish from one another to satisfy a chaotic market of widely varying customers. “This is such a small industry,” Lees said.
Numavicius’s lawsuit also cites an alleged scheme in which Lees received kickbacks from deals he made with friends in the harbor, where he allegedly had Marlee purchase fish from a local supplier that Lees had inflated in price.
The local supplier in that transaction, Zeke Shahin, meanwhile, became friendly with Numavicius, and sold his business to the Lithuanian for $5 million. Lees alleged in his lawsuit that Shahin subsequently spread lies about Lees’s conduct and then usurped him as head of Marlees. Shahin is currently president of Marlees.
In his countersuit, Lees notes that Shahin was convicted of larceny in 2005 for pocketing funds that he promised to invest in a Washington state seafood company. A state appellate judge sentenced Shahin to spend weekends in jail for six months, court records show.
Marlees now appears to be in the unusual position of struggling at a time the scallop business in New Bedford is booming. Lees said Marlees has begun to lay off its staff recently, including workers he personally knows.
Fishermen have always braved bad weather and unstable economic conditions, Lees said. He never expected a court dispute to upend his livelihood.
“I’ve put everything I had into this company,” he said. “You can lose it overnight.”