CHARLESTON - A Kanawha County couple has sued their co-investors, claiming those people tried to freeze their assets and take over their business, and the couple is seeking $10 million in punitive damages.
Clark and Kathi Diehl filed the suit against Charles Winkler M.D., Kim Winkler, Jonathan Diehl and Eric Diehl, all co-investors in Premiere Liquors LLC.
"Charles Winkler, M.D. and Kim Winkler have conspired with one another and others to acquire and maintain total control of Premiere Liquors LLC, even going so far as to concoct false and outrageous criminal accusations against Clark and Kathi Diehl that have caused them severe emotional distress, and enlisting (the Diehl's) own family members in their scheme," the suit states.
Clark Diehl is the owner-operator of Wallpapers in Stock, a Charleston home decorating business. In mid-2005, he learned the liquor store in Charleston's Patrick Street Plaza was for sale, and he began taking the steps to buy the business on his own.
The store was to be known as Premiere Liquors, and the members of the business would include Clark, his brother Jonathan and his son Eric.
The complaint states that in the fall of 2005, Kathi Diehl casually mentioned to Kim Winkler that she and her husband were buying the liquor store. Shortly thereafter, Charles Winkler contacted Clark Diehl and asked is he could become a partner in the venture.
The lawsuit states that Diehl initially told Winkler that he did not want any additional partners and his family alone would operate Premiere Liquors.
But Winkler "would not take 'no' for an answer," the suit says. He continued to pressure Diehl until he finally gave in and agreed to accept Winkler into the business.
At the start of the business venture, each of the Premiere Liquors members was required to make a specified contribution of capital. Clark Diehl and Winkler each made his own, but Clark Diehl also made some of the capital contribution of Jonathan Diehl and all of capital contribution of Eric Diehl. Also, each agreed to make a loan to the business, which would be paid back to the members.
In an Operating Agreement made at the beginning of the project, Clark Diehl was named as manager. The manager "may make all decisions and take all actions for the company not otherwise provided for in this operating agreement," the lawsuit states.
Jonathan Diehl was to be operating manager, Eric Diehl would devote half-time responsibility to general duties at Premiere Liquors, and Winkler did not have any membership responsibilities.
The business was in full swing by the 2005 holiday season and was immediately profitable, the suit says.
By the spring of 2006, the Winklers recognized the high profit potential.
"They decided they no longer wanted to share profits with Clark Diehl, and came up with a plan to eliminate him from the picture," the suit says.
First, the Winklers needed to obtain cooperation from Eric Diehl and Jonathan Diehl, which they got "through a devastating and outrageous combination of lies, threats and bribes," the suit says.
The suit also says that as the cornerstone of their scheme, the Winklers concocted a series of false accusations of tax law violations against Clark and Kathi Diehl, among them that the Diehls have not paid taxes for years and are concealing large quantities of gambling proceeds and other cash in various offshore bank accounts, and in a secret "money room" at Wallpapers in Stock.
The Winklers confronted Eric Diehl and Jonathan Diehl with tax fraud allegations and threatened to implicate them personally if they did not turn against Clark and Kathi Diehl. On the other hand, if they helped, the Winklers would compensate them for their efforts.
Jonathan Diehl's shares in the company would be bought, and Eric Diehl would be offered a generous salaried position, the suit alleges.
"In the spring of 2006, Kim Winkler went to the IRS and presented false tax violations supposedly committed by Clark and Kathi Diehl, with Eric Diehl by her side to give her allegations the aura of credibility," the suit says.
The Winklers paid Jonathan Diehl $130,000 for his shares, secretly, without notifying Clark Diehl, in violation of the operating agreement.
On April 18, 2006, the Winklers got Eric Diehl and Jonathan Diehl to sign a resolution removing Clark Diehl as manager of Premiere Liquors, LLC and replacing him with Charles Winkler.
Because of the deliberate false statements to the IRS, Clark and Kathi Diehl have been visited and interrogated by the Criminal Division of the IRS on several occasions, the suit states.
"Despite their protestations of innocence, and the failure of the IRS to turn up any evidence to support the outrageous accusations, they remain under investigation, and continue to suffer emotional distress, mental anguish and financial harm," the suit says.
At all relevant times, the Winklers and Eric Diehl knew that the tax-related allegations against Clark and Kathi Diehl were false and utterly baseless.
"During the summer and fall of 2006, the Winklers continued their intimidation tactics, hiring lawyers to accuse Clark Diehl of financial wrongdoing and demanding that he give up his interest in Premiere Liquors for far less than the true market value," the suit says. "The Winklers have used, and continue to use, the funds of Premiere Liquors to pay these lawyers."
Meanwhile, Clark Diehl claims the Winklers have refused to provide any accounting of the business receipts and profits.
"The Winklers informed Diehl no such records have been kept for months, a frank admission of gross neglect and/or intentional misconduct," the suit states.
The Diehls claim everything was done to freeze Clark Diehl out of Premiere Liquors.
Clark Diehl is seeking reimbursement for the loans made to Eric Diehl and Jonathan Diehl. The suit state the loans of $93,500 and $30,000, respectively, were not family gifts, and he expected repayment.
The Diehls are seeking compensatory and consequential damages, punitive damages in the amount of $10 million, appointment of a receiver for Premiere Liquors and a constructive trust over the assets of, dissolution of, and judicial supervision of the winding up of Premiere Liquors, quantum meruit and restitution of unjust enrichment in an amount to be determined by a jury, other fees and court costs.
Clark and Kathi Diehl are being represented by Stephen B. Farmer. The case has been assigned to Judge Charles King.