SAUGUS — Kane’s Donuts President and CEO Paul Delios is suing his four siblings, all co-owners, over the future of the business.
Paul filed a lawsuit in Suffolk Superior Court last week against his siblings, Catherine, Maria, Peter and Stephen. Each of them own 20 percent of the company.
Given his role in the company, Paul said in the lawsuit that he has been primarily responsible for making executive decisions for Kane’s Donuts, decisions that yielded much success.
During the time he’s been running the company, Paul said he has increased annual sales from $500,000 to more than $8 million.
The lawsuit states that Paul would work seven days a week and travel to each store on a daily basis to check in on operations and meet with company employees.
“Each company thrived under Paul’s leadership, and each shareholder benefited from Paul’s hard work,” the lawsuit said.
Jerome Salerno, a senior vice president from North Shore Bank, the company’s largest creditor, is quoted as describing Paul as a “critical component to the growth and success of Kane’s,” and a “key person.”
The lawsuit describes his siblings — who have nicknamed themselves “The Gang of Four” — as being unfit to run the company, but the complaint said they have not stopped interfering with Paul’s leadership, wasting corporate assets, and trying to “freeze him out.”
“Paul offered up his interests for $1 million. After originally accepting Paul’s offer, the Gang of Four reversed course,” the lawsuit said. “Since he withdrew his offer, the Gang of Four has done what they could to push Paul out of the businesses. In breach of their fiduciary duties, the (siblings) amended the companies’ operating agreements to impair Paul’s voting power while increasing their own, reduced Paul’s salary, made misrepresentations that caused Paul to be investigated for wrongdoing (of which he was cleared), threatened to terminate his role as president of the companies, and otherwise advanced their interests at Paul’s expense.”
After this, Paul offered to buy Stephen’s 20-percent interest for $1 million.
That deal was supposed to close in November 2021, but the lawsuit said Stephen returned the money and “has not complied with his obligation to transfer his interests and rights.”
Paul said his siblings have wasted corporate funds on investigations that shouldn’t have occurred, lied and misrepresented facts during that investigation, voted to remove the company’s former counsel of six years after he sided with Paul concerning an internal dispute, and undercut Paul’s leadership of the company.
Paul asked the court to issue a temporary restraining order to maintain the status quo while the case is pending; issue a permanent injunction to maintain the status quo while the case is pending; and declare Paul to be the owner of Stephen’s interests in the company. He is also asking for monetary damages as will be proved at trial, plus interest, costs and reasonable attorneys’ fees; an order judicially dissolving the companies; and for an order requiring the individual defendants to pay all legal interest permissible.