Creditors have begun bankruptcy proceedings against the US-based Irish restaurant chain established by Supermacs entrepreneur Pat McDonagh, and a business partner with whom he is in dispute.
Three creditors claim that former Galway Supermacs manager Kevin Blair has been buying sports cars and living luxuriously since taking over as president of the Claddagh Development Group, which has 17 US branches. They claim the company is no longer paying its bills and hope a Cincinnati court will declare the chain bankrupt.
Meanwhile, Mr Blair is suing Mr McDonagh for ownership of the company, claiming Mr McDonagh would "ruin" him by squeezing funding from the Claddagh chain.
Mr McDonagh claims that he gave Mr Blair $20 million (€15.6 million) as a loan to establish the business and not as an investment in Claddagh, and was not responsible for its future investment plans.
Mr Blair, who is originally from Ohio, moved to Ireland to work for Supermacs before opening the chain of Irish-themed US restaurants in 2001 with Mr McDonagh's backing. The company opened 17 branches.
Two separate trials are now under way in Cincinnati to decide the chain's future. Judge Charles Kubicki at Hamilton County Common Pleas is hearing Mr Blair's lawsuit, in which he is trying to force Mr McDonagh to sell him his share of Claddagh for $31 million.
Mr McDonagh stated in a deposition that he had no equity investment in the venture. He says he has been seeking return of his $20 million loan plus interest since December 2004.
Mr Blair's lawyer, Deborah DeLong, read from an e-mail from Mr Blair to Mr McDonagh in December 2004 in which he wrote: "I am in desperate need of this money. As I communicated to you last week, I have been forced to continue operations and expansion without any funding other than cash flow, which you know is impossible."
In 2005, the disagreement became much more bitter, with Mr Blair writing: "You have not contributed capital to Claddagh since December, 2004 and have refused my request that you do so . . . The situation has become critical.
"As a result of your actions, Claddagh has no cash with which to pay anything other than essential expenses . . . most of my time is spent trying to appease angry creditors."
He added that he would not "sit back and let my reputation be ruined as a result of your actions".
Meanwhile, three Claddagh creditors: Great Lakes Concrete Restoration, Queensgate Food Group and John F. Gallagher Co claim, in a separate legal action, that Mr Blair was "siphoning" profits for wasteful use including attorney fees, a Lexus car and donations to an Ohio State University scholarship fund.
The bankruptcy petition documents claim that Blair's salary is just $65,000, that he lives in a $600,000 house with a $450,000 mortgage and has "two luxury cars". "This pattern of misappropriation and self-dealing is and should be of paramount concern to creditors," the petition notes.
However, Mr Blair's lawyers have questioned Mr McDonagh's relationship to the creditors and have suggested in court that Mr McDonagh may want to see Mr Blair removed from the company.
Judge Water has refused Claddagh's motion to dismiss the bankruptcy petition and has allowed a bankruptcy trial to go ahead this month. According to figures published in The Irish Times last year, Supermacs invested €16.02 million in Claddagh up to the start of 2004 and put €5.37 million into Claddagh in 2004.
According to company figures, Claddagh had sales of $55 million in 2004, up from $25 million in 2003 and expected to open at least six more outlets.
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