Modell's CEO Accused of Expensing $7M on Trips and Food
UPPER EAST SIDE — She’s got major beef with the head of Modell’s Sporting Goods.
The Upper East Side sister-in-law of Mitchell Modell, the CEO of the family-owned athletic apparel chain, has accused him of bankrolling his lavish lifestyle with company funds, including spending $116,250 in a single day at a popular Chicago steakhouse with a corporate credit card.
Abby Modell also claims in a legal filing last week that her brother-in-law has charged more than $7 million to company accounts for vacations, massages and World Series tickets for family and friends.
Since becoming the CEO, Mitchell has more than tripled his pay and approved no-show jobs with six-figure salaries for his mom, his sister and her daughter, according to the filing in Manhattan Surrogate’s Court.
“The millions of dollars in excess compensation that Mitchell has taken for himself, and the millions in personal expenses which he has charged to the company, reduces what would otherwise be income available to distribute to the shareholders of Modell’s as dividends,” Abby said in the filing.
The spending spree began after Abby’s husband, Michael Modell, the former CEO of the chain, died at 48 in 2001 from Hodgkin’s disease, according to the filing.
Mitchell and Michael had earlier taken over the family business from their dad, William Modell.
Together they grew the business to the point where the company now has more than 140 stores in New York and throughout the East Coast.
Mitchell had been the chief financial officer while his brother was alive. But when Michael died, Mitchell became CEO and upped his annual salary from $1.8 million to $6.275 million — despite hiring another person to fill his shoes as CFO, Abby charges.
Currently, Mitchell controls half of the Modell’s empire. Michael’s half is in a marital trust, for which Abby acts as the executor. The trust, which provides for Abby and her children, is worth between $200 million and $300 million, according to a legal filing.
Mitchell and Joel Goldberg, a clinical psychologist hired years ago by the Modells to mediate disputes among family members, also serve as trustees of the marital trust.
The in-law imbroglio began in 2011 when Abby accused Mitchell of using the company as his personal piggy bank during the past decade, eating into her dividend.
In her latest filing, she demands that a Manhattan Surrogate’s Court judge suspend Mitchell as a trustee of the marital trust.
Abby itemizes hundreds of thousands in expenses that Mitchell made with company money, including a $38,655 jaunt on a private jet to take him and his two sons fishing in Ontario, Canada; nearly $50,000 for a family vacation to Puerto Rico; and more than $90,000 for three trips to Disney World.
Mitchell also spent $9,000 of Modell’s dough on masseuses at Midtown’s Friars Club, Abby claims. He blew at least another $180,000 of company money on a trophy of Yankees great Thurman Munson, which he displays in his media room at his home, according to the filing.
Mitchell, who has struggled with his weight, also dropped $116,250 with an American Express Centurion card connected to Modell’s at Morton’s steak house in Chicago, according to an earlier legal filing by Abby.
“These outlandish charges cry out for inquiry,” the filing said.
Mitchell spent so much company money that during an audit of Modell’s 2006 and 2007 tax returns, the Internal Revenue Services disallowed more than $1.5 million in travel, food and entertainment expenses that the sporting goods chain tried to write off as connected to business, according to Abby.
A spokesman for Modell’s did not return a request for comment.
Mitchell Modell's lawyer, Eve Rachel Markewich, said she had not seen Abby's latest filing, but was "confident Mitchell will prevail" in any litigation with his sister-in-law.
"I can tell you that, since the death of his brother, Mitchell has done nothing but fulfill his obligations as CEO of the company and trustee of the trusts of which Abby is a beneficiary," Markewich said.
Mitchell has accused Abby in previous filings of being greedy despite being well-compensated by the trusts set up for her and her children. In a 2011 filing, Mitchell claimed Abby had received more than $34 million from the trust since her husband’s death, plus $10 million in payments and compensation from Modell’s.
She also receives $60,000 per month to cover the expenses of her three children, the filing said.
Earlier this year, Mitchell made headlines when rival chain Dick’s Sporting Goods accused him in a lawsuit of masquerading as one of its vice-presidents to obtain trade secrets at one of its New Jersey stores.
That accusation “further demonstrates [Mitchell’s] unsuitability to run the family business,” Abby’s lawyer, Gary Freidman, said in an affidavit on Monday.