Business

Quiznos owners accuse Schadens of scamming them

Marc Lasry is not taking his $200 million-plus loss in the bankrupt sandwich chain Quiznos lying down.

The hedge fund billionaire’s Avenue Capital and Wes Edens’ Fortress Investment Group, co-owners of the chain, said in court papers that the business failed because they were scammed in 2012 by the company’s former owners.

Rick Schaden and his father, Richard, used two forecasting models when restructuring the company in early 2012 and only revealed the “model that contained inaccurate and inflated data,” the current co-owners claimed in a bankruptcy court filing.
Avenue and Fortress intend to sue the Schadens for fraud and breach of fiduciary duty to recover hundreds of millions in damages, the filing said.

In 2012, Avenue invested $150 million in Quiznos.

It and Fortress agreed to exchange $150 million of senior debt into a more junior debt position to take ownership of the sandwich chain.

Avenue got a bigger than 70 percent stake. Quizno’s filed for Chap. 11 reorganization on March 14 with a plan that will wipe out its equity holders.

The Schadens, at the time of the 2012 out-of-court Quiznos restructuring, were working with adviser Perella Weinberg Partners, a source said.

A spokesperson for the Schadens told The Post: “To our knowledge, there has not been any litigation filed. We cannot imagine that anything filed will be meritorious, and we will fight any allegations vigorously in the appropriate legal forum. We do not comment on rumored litigation and won’t have further comment until an action is actually commenced.”

The Schadens now control hamburger chain Smashburger, which is working with Bank of America and North Point Advisors on a strategic review.

A strategic review could mean a sale or an initial public offering is in the works.

In court papers, Avenue names the Schadens’ Cervantes Capital, the company that controls Smashburger, as a potential target of legal action.

In November, Smashburger CEO Dave Prokupek resigned suddenly after he and the Schadens disagreed on what the company was worth, said restaurant consultant John Gordon.

“They had a buyer, and the Schadens believed they could get a higher multiple,” Gordon said.