In his opening statement, attorney Michael Sherwood didn’t tiptoe around his views of the more than 200 fraud charges facing his client George Leslie Manlove, the former CEO of Vann’s Inc.
“What the prosecution has told you is things that just aren’t the truth at all,” he said. “They’re not going to prove that George intended to defraud Vann’s at all.”
After four hours of jury selection in U.S. District Court in Missoula on Tuesday, eight men and five women were selected as the jury and an alternate to decide on the charges facing Manlove. The former CEO was indicted in December 2015 of defrauding Vann’s, an electronics and appliance retailer that closed in 2013 after declaring bankruptcy.
U.S. District Court Chief Judge Dana Christensen said he didn’t know how long the case would last, saying he expected it to be between 10 and 15 days. The judge read a list of more than 50 people who may be called as witnesses in the case over the coming weeks.
In questioning potential jury members on Tuesday, Christensen touched on everything from what news coverage the pool had read about the case, to any accounting or finance experience they had, to who had been a customer of Vann’s when it was open.
While nobody was dismissed for having purchased a refrigerator, several people were let go because they said they had read stories in the newspaper about the case and had already formed an opinion about Manlove.
The charges against Manlove and former Vann’s chief financial officer Paul Lyn Nisbet included allegations they created real estate holding companies, bought property (including one building already owned by Vann’s) and had Vann’s lease those properties back from them, all without approval from the company’s board of directors. Manlove also allegedly used company funds to pay for tuition, vacations and gifts for himself and family members.
“Mr. Manlove profited personally while Vann’s shareholders paid the price,” Assistant U.S. Attorney Adam Duerk said.
Under terms of a plea agreement, Nisbet was sentenced to 14 months in federal prison on a single count of conspiracy.
On Tuesday, the opposing attorneys presented very different views about what they believe Nisbet will say when he testifies.
Duerk said Nisbet had taken his orders from Manlove. “He will tell you that some of these orders made him sick to his stomach,” he said.
Sherwood’s version is that Nisbet will testify there was no conspiracy to defraud the company, and that he had only entered into the plea agreement to “make these people smile,” with a gesture to the prosecution’s table.
Among the allegations of personal gain at company expense, Duerk said Manlove traded company goods to a Missoula jeweler in exchange for a $11,750 pair of princess-cut diamond solitaire earrings, and that he spent money to send family on a vacation.
“What benefit was there to Vann’s for a mother-daughter shopping trip to New York City?” Duerk said.
Sherwood responded to the accusation by saying he would prove the New York trip was paid for by Manlove’s wife.
Manlove’s attorney asked the jury to keep in mind that there was a difference between having potentially done something wrong and meeting the specific elements of the charges his client is facing.
Manlove, he said, started at the company in the mid-1980s to work for his father-in-law and Vann’s founder Pete Vann. Over the next two decades, annual sales increased from just under $2 million to more than $147 million, Sherwood said.
“Vann’s fiscal problems had nothing to do with George,” he added.
Sherwood said one of the same things Manlove is accused of doing, buying buildings and then leasing them back to the company, was a practice Vann had used for years, and was also done by other members of the company’s senior management. Richard Samson, a bankruptcy lawyer installed as trustee after Vann’s declared bankruptcy, testified Tuesday that there were never any signed leases for these rental agreements.
When Sherwood came to the dozens of charges of wire fraud facing Manlove, he indicated that they weren’t legitimate. By the time the company used the “wires” to pay American Express for the company credit card charges Manlove racked up, his client had already profited, and therefore hadn’t himself used the “wires” to take money, the attorney contended.
Sherwood said that Manlove believed he needed more education to help the company as profits slipped in the late 2000s, and decided to enroll in an executive MBA course at the Kellogg School of Business outside Chicago, where he was a student at the same time as being CEO.
Duerk said Manlove spent more than $200,000 on the schooling, all without ever receiving approval from the company’s board of directors, and that he took a job with another company shortly after finishing the degree.
But Sherwood declared that Manlove was well within his power as CEO to charge the schooling to the company. “He thought he had the authority and he did have the authority,” he contended.