Suit filed over obscure casino cart companies

David Strow

Friday, Aug. 13, 1999 | 11:08 a.m.

A California room service cart manufacturing company is suing PurchasePro.com Inc. of Las Vegas and its chief executive, Charles Johnson.

Reldom Corp., its Nevada subsidiary and its owners, Stephen and Peter Modler, accuse Johnson of tricking them with promises of forming a local hospitality cart business, then pocketing all of the proceeds from that business. Reldom also alleged that funds from the operation were diverted into PurchasePro's accounts.

Johnson denied the allegations, saying there was never a signed or oral agreement to form a company with the Modlers. He said Stephen Modler was an employee of Cart-It, a company he owned.

The suit alleged that in 1997, Johnson asked the Modlers to form a Las Vegas company called "Rel-Cart," with the goal of selling guest room carts to the casino industry. The suit claims Johnson told the Modlers that he would be able to bring in a great deal of business for the company because of his widespread connections in the gaming industry.

According to documents filed by the Modlers, Johnson would own 90 percent of the company, while the Modlers would own 5 percent each. The lawsuit also claims that Rel-Cart would purchase the assets of Reldom's Nevada subsidiary, assume its debts and give Stephen Modler an employment contract with the new company.

Johnson never formed the corporation, the Modlers claim, and instead registered the name as a d/b/a for Cart-It. The Modlers say they have never received any profits on the joint venture.

Reldom was to be the exclusive manufacturer for this company, the Modlers claim; however, the plaintiffs accuse Cart-It of not only going to other manufacturers, but also supplying them with Reldom's proprietary designs. The lawsuit also claims that Cart-It would take payments for Reldom's shipments to its customers, pocket the funds, then claim that it never received payment for the products. The lawsuit also claims the company was used to assume the business and personal debts of Johnson and PurchasePro.com.

Johnson denies this, saying that he invested $1 million in the company, and that it owed PurchasePro.com money. He also pointed out that any attempt to churn funds involving PurchasePro.com would have been noted by Arthur Andersen, which is auditing the company in preparation for an initial public offering.

Reldom claims it is owed at least $185,000 for shipments it made on behalf of Cart-It to more than 20 customers, including the Venetian, the Rio, the Orleans, Bally's Las Vegas and Mandalay Bay.

Johnson said Cart-It was shut down last month. He branded the lawsuit an attempt to wrangle a settlement out of PurchasePro.com while it prepared for its IPO.

"This is just some gold-diggers trying to get some money," Johnson said,

PurchasePro.com creates and operates Internet-based marketplaces that bring together buyers and suppliers in an attempt to streamline the procurement process. The company is preparing an IPO that could raise as much as $52 million.