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Fired Mattress Firm Exec Files To Depose CEO, Executive Team Over Prior Knowledge Of Kickback Scheme

The in-house real estate executive accused of defrauding Mattress Firm is looking to open the books on his former employer, what real estate deals company leaders were invested in and what executives knew of the alleged scheme of inflated rents and kickbacks.

Mattress Firm's headquarters in Houston

Attorneys for Bruce Levy, who headed Mattress Firm's store-growth strategy from 2010 until 2016, filed a motion to compel Mattress Firm to reveal documents showing any real estate investments current CEO Steve Stagner and former CEO Ken Murphy participated in with developers of Mattress Firm stores between 2010 and 2016.

Levy also is attempting to force Mattress Firm to reveal any gifts, trips, meals, tickets and other outside compensation to Stagner, Murphy and a host of other Mattress Firm executives, according to documents filed in Harris County District Court in Houston.

Mattress Firm has accused Levy and his former deputy, Ryan Vinson, and former Colliers International Atlanta executive Alexander Deitch of accepting bribes from a group of preferred developers. All defendants have issued denials over the allegations.

Levy is the second defendant to attempt to turn the tables on Mattress Firm and claim the retailer had some prior knowledge of the alleged scheme. Vinson in January claimed his former employer has no right to sue him because it has “unclean hands,” and that Mattress Firm’s “alleged injuries are caused in whole by plaintiff's own acts and not the acts of Mr. Vinson,” according to court filings. The "dirty hands doctrine" is a common response in lawsuits, and allows the defense to dig for more information in the discovery process.

Houston-based Blizzard & Nabers co-founder Edward Blizzard, who is representing Levy in the lawsuit, did not return calls seeking comment. Hicks Thomas partner John Thomas, who represents Mattress Firm, also did not return calls as of press time. Thomas filed a motion asking the court to reject Levy's Feb. 1 demands. A Mattress Firm spokesperson declined to comment.

Ken Murphy, who stepped down Friday as president and CEO of Mattress Firm

Levy is seeking documents and information about any locations the retailer alleges were part of the scheme, documents from Mattress Firm's real estate committee, annual sales and other performance metrics. Levy is seeking to force Mattress Firm to disclose how much its parent company, Steinhoff International Holdings, was aware of the allegations when the South African company was in talks to buy the retailer, according to court documents.

Steinhoff paid more than $3B, more than 100% of the company's stock value at the time, in the 2016 acquisition of the mattress retailer.

Levy also is seeking any communications Mattress Firm may have had with law enforcement regarding both the allegations and any stock sales Stagner or Murphy made after March of last year.

In early December, Steinhoff announced it tapped PwC to investigate accounting irregularities and was likely to restate earnings as far back as 2015, Bloomberg reports. Markus Jooste resigned as chief executive of Steinhoff soon after the announcement, and the company's shares lost as much as 80% of their value.

Earlier this week, Steinhoff's acting chair, Heather Sonn, told lawmakers in South Africa that an anti-corruption unit of the police was investigating Jooste, the Financial Times reports.

“The matter is now in the hands of the Hawks [police division] for further investigation and prosecution,” Sonn was reported as saying.

On Jan. 26, Murphy resigned as CEO of Mattress Firm. In his place, Stagner — who was chairman of the mattress retailer — was named CEO.

“The joint decision by Mr. Murphy and the Board of Directors reflects the need for a singular voice of leadership for the company as it navigates the next phase of its growth story,” company officials said in a press release.