Blades Come Out at Benihana As Rocky’s Influence Wanes

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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.

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.”

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.

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.

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.

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

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.

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.)

to Mr. Aoki, the board of directors thinks he still does too much—though the
circumstances are hardly as dashing as they once were.

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.”

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.”

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.

my baby,” he said.

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.

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.

[Kevin] Aoki did not approve those transactions,” he said.

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

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.

Dornbush declined to comment, as did Gregory Varallo, a lawyer representing
Benihana. Both men cited the pending litigation.

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.

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.”

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.

Blades Come Out at Benihana   As Rocky’s Influence Wanes