Before the Iron Chef, before Nobu, Japanese cuisine meant Benihana, with its chefs chopping and bowing at the table, grilling mutant stir-fry concoctions like “Seafood Diablo” and performing antics like flipping shrimp tails up in the air and catching them in their toques.
Its mascot was Rocky (né Hiroaki) Aoki, the mustachioed daredevil founder of the chain, whose love for powerful vehicles and charm with the ladies was a perfect match for the 1970’s mood. Fondue, meet “Teppanyaki.”
That era is long gone. Mr. Aoki resigned as chairman of the company in 1998 after being charged with insider trading unrelated to his company, pleading guilty the following year. According to Mr. Aoki, however, he’s maintained control by owning just a sliver more than half of the voting rights related to the company’s common stock. Benihana Inc. is now a public company traded on NASDAQ.
The company’s board voted last May to sell $20 million of convertible preferred shares of Benihana stock to raise money for renovations to the business-which also owns Haru, among other chains. Mr. Aoki saw his majority stake nosedive into a minority stake as the entity Benihana of Tokyo-run for Mr. Aoki via a trust overseen by some of his children-saw its percent of total votes in the company’s common stock drop from 50.9 to 42.5. According to court documents, that percentage will further fall to just 36.5 percent if the transaction is completed by the July 2007 deadline.
Mr. Aoki has retaliated by filing a complaint in Delaware’s Court of Chancery (Benihana is headquartered in Miami but, like everyone these days, was incorporated in Delaware), asking the judge to void the transaction that gave the Fort Lauderdale–based BFC Financial Corp. equity that diminished his voting share in the company. He claims the board abandoned its fiduciary duty by raising money without competitive bidding and by awarding the deal to a company in which at least one board member had a significant financial interest. Mr. Aoki is also seeking unspecified compensatory damages.
It’s hard not to conclude that Mr. Aoki’s trust is still shaken from having been deposed in 1998. Now 66, he was sitting in the 34th-floor midtown aerie that serves as his office. He had just flown back from Tokyo, where he was visiting some of the Benihana restaurants in his capacity as a consultant, for which he is reportedly paid $650,000 a year. (“Something like that,” was all he would say.)
“I think I am the idea person, and if I’m on the top of it, always better, always grow much faster; without me, sometime very difficult,” he said of Benihana.
In his heyday, Mr. Aoki seemed willing to do anything to promote his emerging restaurant empire: whether it was personally ballooning across the Pacific or competing in powerboat races (including a nearly fatal one: “I lost my gall bladder, spleen; I have Dacron aorta-but great promotion for Benihana,” he notes shamelessly) or Dogwood tree competitions; sponsoring backgammon and table-tennis championships and the Miss Benihana beauty pageants; co-producing Broadway shows or attempting to buy a stake in the San Francisco 49ers. Indeed, Mr. Aoki did all this and more, according to an unofficial and immodest history provided by his office. (In 1976, he “introduces the ‘saketini’ to American culture,” the document also notes.)
According to Mr. Aoki, the board of directors thinks he still does too much-though the circumstances are hardly as dashing as they once were.
“I do a little too much sometime, like when I go to restaurant bathroom, is not clean, I clean by myself-something like this. And they don’t want me to. Sometimes I fly coach to go to California-you know, try to save money-and Benihana people say, ‘No, you have to fly first-class.’ I’m down-to-earth guy.”
He continued: “I know board of director run the company, and I try to follow, but some of what they say, I don’t agree. So this one, I don’t agree.”
Though he looked like some sort of don with his gelled hair, sharp gray suit and tinted sunglasses (worn indoors to help him with a condition he called “dry eyes”), Mr. Aoki was a little garbled in his analysis of the lawsuit, seemingly baffled as to why the company he founded, even embodied, would have tried to diminish his authority-if that was indeed their goal.
“That’s my baby,” he said.
But at the heart of his lawsuit is Mr. Aoki’s conviction that some board members have set out to wrest control of Benihana Inc. from the trust that controls the company that owns his shares (a complicated entity which was erected in the aftermath of Mr. Aoki’s insider-trading conviction), in part because they don’t want his third wife, Keiko (whom Mr. Aoki married four years ago), wielding that authority, but also to protect themselves from being removed from the board, as Mr. Aoki had pledged to do.
Even worse, it’s become personal. According to the New York Post, Mr. Aoki’s son Kevin voted with the rest of the board, a fact that Mr. Aoki has a hard time believing. (He claims not to have actually broached the subject with his son.) “I just don’t believe it,” he said. C. Barr Flinn, a lawyer representing Benihana of Tokyo, disputed the Post’s account.
“Mr. [Kevin] Aoki did not approve those transactions,” he said.
In Benihana’s motion to dismiss Mr. Aoki’s suit, the lawyers wrote: “[Kevin] Aoki did not vote against the transaction, he merely abstained.”
The trial started in November 2004, with final arguments and closing briefs presented in April of this year, and the judge is expected to rule on the case this summer.
The defendants in the lawsuit are eight of the company’s nine directors-excluding Kevin Aoki, the vice president of marketing at the company and one of Mr. Aoki’s seven children. The complaint centers on the actions of three board members in particular: Joel Schwartz, Benihana’s chairman, president and chief executive; John Abdo, a Benihana director and the vice chairman of BFC Financial Corp.; and Darwin Dornbush, a Benihana director who was once Mr. Aoki’s trusted lawyer and advisor. The Observer could reach neither Mr. Schwartz nor Mr. Abdo by telephone.
Mr. Dornbush declined to comment, as did Gregory Varallo, a lawyer representing Benihana. Both men cited the pending litigation.
Benihana of Tokyo alleges in its complaint that Mr. Abdo was double-dealing when he negotiated the terms of the transaction: that his allegiances were muddled because he was a director of both companies. According to the complaint, he also didn’t disclose to other board members his role in shaping the deal, and Mr. Aoki believes that they paid an unfair price as a result.
In its motion to dismiss, Benihana Inc. said that no actual fraud had been demonstrated; the suit merely stated the “obvious and unremarkable proposition that the issuance of new equity dilutes existing stockholders,” the motion argues. It also rather sharply observes that “[p]laintiff’s primary thrust is that this stock issuance must, ipso facto, be a ‘wrong’ because its ownership interest in Benihana was diluted from 50.9% to 42.5% of the votes.”
In a preliminary memorandum issued on Feb. 4, the judge in the case, Vice Chancellor David Parsons, dismissed both that argument and another contention: that the court didn’t have jurisdiction over BFC Financial Corp. since Benihana was incorporated in Delaware.