Clayburn Industries Ltd. and Clayburn Refractories, Ltd. v. Recor Services, Inc.
My Analysis: Why Recor Got Burned by Burnyeat
I believe Burnyeat stacked the deck against Recor because he was sending the message that he wasn't going to let small American companies try to compete with big Canadian companies. First, he knew we had to change lawyers midstream because Schoen changed his testimony and our lawyer decided to represent Schoen, and yet he gave our new lawyer only a few weeks to prepare his case, although council for the plaintiffs had more than 3 years to prepare!
Then the judge wrote that he accepted Schoen's testimony in spite of the fact that Schoen lied in his deposition, and rationalized that Schoen's trial testimony was truthful.
Then the judge dismissed Recor's evidence that Schoen had been fired for cause. After monitoring Schoen's expenses we found his expense reports were out of line. We found one expense report for four people that Schoen claimed he took to a Vancouver country club for golfing and dining. Ryan checked with the club and found that on the date in question Schoen had no tee time, no restaurant reservations and no receipts to substantiate any charges. I told Ryan to fire Schoen, but not to do anything that could cause problems with Canadian labor laws. I ordered him to pay Schoen whatever his employment agreement said he's entitled to, including bonuses, vacation and severance pay. I didn't want Schoen or anybody else to be able to say we didn't abide the law. But the judge interpreted our ethical actions as an attempt to pay Schoen off because we had something to hide. So much for wanting to do the right thing.
The judge wrote that Ryan had lied and withheld some documents, which I found out later was true, including Ryan's lie that he didn't hire Schoen until after Schoen quit Clayburn. But the fact that Ryan was untruthful had nothing to do with the judge's absurd ruling that that Schoen "took unfair advantage" when he knew the names of superintendents in various mills and contacted them by phone." The fact that you can get those names and phone numbers out of any industry directory apparently was beside the point.
The judge ignored what was clearly in front of his nose: that Clayburn's lawsuit against Recor was a blatant attempt to acquire Recor for pennies on the dollar. Though I have to admit that at first, as old and experienced in business as I was, I was naïve enough that it didn't register what Harris was up to-that is, until he told me about some other buyouts he'd been involved with. He said he never paid what a company's worth and he always saw to it that he got it for next to nothing.
I was so furious about the ruling that I composed a letter to Justice Burnyeat on January 26, 1999. I sent it to our lawyer to forward to Burnyeat. I refuted, point by point, the arguments Burnyeat made in his ruling. For instance, he said that we didn't know anything about refractories and therefore all the refractory work that we took away from Clayburn was the result of illegally gained knowledge obtained from Schoen and Piper. I pointed out that I'd forgotten more about refractories than these guys would ever learn; that I'd competed successfully against Clayburn time and time again in the past; and that they couldn't teach me anything about refractories. I also had twenty-five years of experience before they came along. I pointed out to the judge that the company and the people Clayburn maligned so much were the very same company and people who Clayburn wanted to buy and hire, that during the litigation, Clayburn hired the entire Canadian management team of Premier Refractories in Ontario so Clayburn could expand into Eastern Canada. (Apparently Clayburn had a double standard: it's OK if they hire employees from their competitors, but not if their competitors hire employees from Clayburn.)
In my letter to Burnyeat, I also defended Mark Ryan as a young and naïve businessman. I came to learn that I was wrong in this assessment of him-he actually turned out to be quite untrustworthy, but I didn't learn this until later.
By the time the judge submitted his ruling I had retired from Recor. When I heard that Recor didn't have enough money to pay the $500,000 judgment, I made an offer to pay Clayburn a settlement amount of $100,000.
Clayburn turned me down. They thought they could get Recor for nothing. I seriously considered putting Recor into bankruptcy, but decided it was worth saving, and that innocent employees shouldn't lose their jobs because of my naivety. I tried to take back the company, but I needed a minimum 51 percent majority of stockholders' votes. Mark Ryan voted no, Jerry Jones voted with Mark (little did he realize that Mark would squeeze him out a couple of years later), and John Pace let Ryan and Jones convince him to follow their lead, a decision, he later told me, he regretted ever since.
Clayburn finally agreed to settle for $175,000. I put the case behind me until one day in 1999, I wrote my name in an Internet search engine, and Burnyeat's complete Clayburn/Recor ruling popped up. Not the preliminaries, not the depositions but just the judge's ruling, with its unflattering references to Recor and me. I was furious but there was precious little I could do. And that wasn't the end of it. In 2004, the Bricklayers International Union sued Recor because Ryan had gotten some Canadians to work on a job and hadn't cleared it with Immigration. Also, he'd made the mistake of paying the members' Health and Welfare contributions to their respective Union Trust Funds instead of to the union local that had jurisdiction over the job, resulting in the local not getting its percentage cut, or being able to retain any contributions not requested to be transferred in writing by the respective worker. In other words, they were perfectly willing to screw their own union brothers, if it meant keeping the money. By this time I'd had nothing to do with Recor for over seven years, but some lawyers in Washington, D.C. managed to drag my name into the case. They found Burnyeat's ruling on the Internet and also spoke with a former Recor employee, John LaRiviere. In a telephone interview, not under oath or subject to cross examination, he told them that Recor's former bookkeeper (my wife, Cory) had been cooking the books and that she and I taught Mark Ryan to cook the books. The lawyer backed this up by stating even a judge in Canada said how dishonest Nothman was.
Rumors spread that my wife and I had been crooks. My son Kent, who works at Recor, came to me and said, "Do you know what they're saying about at Recor? That you and mother are crooks and that you kept double books." That was how I found out about the lawsuit filed by the Bricklayers International.
Seeing the ruling on the Internet and learning about this new lawsuit against Recor prompted me to call Recor's Canadian lawyer and asked him if he ever sent my letter to the judge. He said no, he didn't wish to rile the judge in case of an appeal. I told this lawyer that I wanted to come to Canada and take a polygraph test. I said, "This ruling is haunting me and ruining my reputation. My good name is the only thing I have to take to my grave and it's being bandied about without my being able to defend myself."
The lawyer found a renowned polygraph expert, Robert McKeddie, in Burnaby, B.C., who worked for the Royal Canadian Mounted Police and the Canadian courts. I flew to Vancouver to take the polygraph test in January, 2005. It showed an accuracy of ninety-nine-plus percent that I was truthful. McKeddie wrote me a personal letter that said he would testify in any court that I was telling the truth. Click here to read McKeddie's letter. I don't know if it was a coincidence or not, but after I took the lie detector test, Burnyeat's ruling disappeared from the Internet.
Eventually, I had the opportunity to confront John LaRiviere, the former Recor employee who had told the Bricklayers International lawyers that Recor cooked the books. When he worked for me, LaRiviere had been in charge of job costing. I would give him the hours that people worked, to be processed for payroll and job costing. I prepared the invoices for him to type. As smart as he was, he didn't understand that while we paid salaried employees at a monthly rate, we charged customers an hourly rate. In order not to pay salaried employees twice, you circled their hours and told payroll to charge the customer for those hours at a timekeeper rate, but don't pay the salaried employees, because they are already getting their monthly salary and travel subsistence. To LaRiviere's mistaken mind this was double bookkeeping.
LaRiviere had had his own problems at Recor, including hoarding information and harassing women. After I left Recor, Ryan fired LaRiviere. So when he was contacted by the union's lawyers, LaRiviere took the opportunity to retaliate for being fired.
I was eventually able to confront LaRiviere when I saw him at a soccer game and asked him, "How could you do this to someone who treated you almost like a son? You tell people that Cory, who hasn't treated you with anything but kindness, is a crook and that she cooked the books." I said these were horrible accusations to make and he should be ashamed of himself. He just mumbled something and walked away.
After all is said and done, I take full responsibility for the events that led up to the lawsuit. I should have supervised Ryan and Schoen more closely. I trusted people who I should not have trusted, and I paid the price. I hope that by getting out into the open the evidence that wasn't presented at trial, and the evidence that the judge ignored, people who hear Clayburn's assertions that Recor stole employees and trade secrets, or rumors that Recor cooked the books under my watch, can read for themselves that these false accusations were generated by people who had everything to gain and nothing to lose by besmirching Recor's and my good name.