Potbelly Accuses Nitel of Kickbacks, Racketeering Conspiracy

Potbelly Sandwich Works LLC has accused satellite telecommunications company Nitel Inc. of conspiring with two Potbelly IT employees in a kickback scheme aimed at driving business to Nitel.

Nitel bribed the Potbelly employees with secret cash payments that increased in size for each fraudulently obtained Potbelly service order, ultimately costing the sandwich chain hundreds of thousands of dollars, according to the July 9 lawsuit filed in Chicago federal court.

“Nitel’s actions are part of a concerted effort by its executive leadership team to defraud Potbelly and reaches the highest ranks in the company,” the suit says.

The 10-count fraud and racketeering suit also targets the two IT workers, Nitel’s board, and two Illinois LLCs allegedly created to launder the payments. The suit identifies Nitel by a corporate alias, Network Innovations Inc.

According to Potbelly, Nitel’s top executives engineered the scheme after failing to win service agreements with any of Potbelly’s 430 company-run sandwich shops or 40 franchise stores. One of the two employees who got the bribes was a former network administrator for Nitel, and the other was Potbelly’s senior director of information technology, the suit says.

Nitel ultimately serviced more than 60 locations, kicking back tens of thousands in profits, “disguised as commissions,” to each of the two Potbelly employees, according to the complaint. The employees allegedly covered up the conspiracy by leaving blank the portion of the “service order forms” they filled out that required them to state who was responsible for the orders.

After Potbelly discovered the fraud and began investigating it, leading to the termination of its two IT employees, those employees first password-protected and later “wiped” their company-issued laptops, the suit says.

Cause of Action: The Racketeer Influenced and Corruption Organizations Act; breach of fiduciary duty; civil conspiracy; unjust enrichment; multiple counts of fraud.

Relief: Treble and punitive damages; disgorgement; rescission, without conditions, of any contracts between Potbelly and Nitel; costs and fees.

Response: Nitel didn’t immediately respond to a July 9 request for comment.

Attorneys: Potbelly is represented by Roeser Tanner & Graham.

The case is Potbelly Sandwich Works LLC v. Grason, N.D. Ill., No. 19-cv-4613, complaint filed 7/9/19.