June 15, 2012

Ba-Bum! David Netto Sues Farzad Rastegar For Fraud

Law & Order, baby, and this time it's personal.

I was doing my periodic check of the docket on the Maclaren bankruptcy case, when, whaddya know, a new lawsuit showed up under Farzad Rastegar's name: he's being sued by pioneering modnursery designer David Netto for fraud.

Netto, who sold his NettoCollection nursery furniture business to Maclaren in 2009, and became the creative director of Maclaren Nursery, is the biggest external creditor in the Maclaren bankruptcy; he's owed $1.1 million, plus unspecified royalties potentially bringing the total owed to $5 million.

Though judging from Netto's complaint, that $5 million was never gonna happen. The designer claims that after acquiring NettoCollection, Rastegar and Maclaren ran the business into the ground, lied about expansion plans and fixing problems that arose, and then secretly moved production of Netto/Maclaren Nursery furniture from Europe to China, which resulted in quality and inventory problems that further ruined the business and the brand.

Throughout the process, Netto's complaint claims, Rastegar strung him along, paying him a way-below-market $50,000/year consulting fee while repeatedly giving "personal guarantees" that Rastegar would honor Maclaren USA's $1.1 million purchase agreement.

And then while he secretly prepared Maclaren USA for bankruptcy by transferring assets and cash offshore, Rastegar asked Netto to do out-of-scope work like running media interference after the 2009 Maclaren stroller recall, designing company stores in Asia, even advising Rastegar on his art purchases [which, Hockney, Hirst? hmm].

Even as Rastegar and Maclaren CEO Bahman Kia gave repeated reassurances about Maclaren USA, the lawsuit makes it sound like it was Netto's formal notification of the final payment being due--on June 12, 2012, the very day Netto filed his lawsuit--and his request to review the books of Maclaren USA and 2Fab2, the subsidiary which held the Nursery business, which ended up triggering the timing of the Maclaren liquidation filing.

[correction: No it doesn't. I got it backwards. Netto's notice, sent in Feb. 2012, did not trigger the bankruptcy filing, which went down Dec. 29, 2011; it triggered a Sunday morning phone call by Rastegar who

erupted in a profanity-laced tirade dismissing Plaintiffs' concerns, stating that if he were in Plaintiffs' position, that he would have commenced litigating this matter a long time ago. Further he vowed that Plaintiffs would never be paid the money they are owed under the Agreements.
Daddy Types regrets the error.]

How this all relates to the bankruptcy case, I have no idea. Netto's suit was filed in US District Court in New York. so it appears to be entirely separate from, but parallel to, the ch. 7 proceedings, which are in federal bankruptcy court in Connecticut.

But it all does underscore the theory that Rastegar gutted Maclaren USA and put it into stealth liquidation as a way to get out of paying Netto $1.1 million for a brand and a business that the company destroyed.

More to come on this story, obviously.

Read the entire complaint in Netto v. Rastegar here. [157k, pdf]

1 Comment

Your article is on point. If all signs point in the same direction, that usually is a core indicator of hitting the target. David Netto deserves every penny he is owed and suing F. Rastegar for. Simply "Google" Farzad Rastegar and you will see the countless law suits (e.g. recent Laser Performance suit) of which he cheats and dilutes all contracts or agreements with any monetary commitment. He's a ruthless business man and his lawyer is expected to be Maclaren "CEO". If that doesn't spell s-h-a-d-y then what does? Buying a Maclaren stoller or any product he owns fuels his greed and gross dealings. daddytypes - this is one company to stroll far away from.

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