Hershey sues ex-Filipino exec

Hershey, the world-famous chocolate maker based in Pennsylvania, has accused its former Filipino executive of providing “false financial information” after the Asian division he oversaw failed to meet annual sales goals.

Eduardo T. Cadiz Jr. of Weston, Florida, is accused of breach of contract, breach of fiduciary duty and breach of duty of good faith and fair dealing in the giant company’s suit filed in federal court in Fort Lauderdale, Florida.

The allegations stem from Cadiz’s five-year stint with Hershey between 1998 and 2003 when he launched, managed and expanded the Asia operations from Manila, Philippines, for the Pennsylvania-based confectioner.

Before he was terminated in September 2003, Cadiz had been employed by Hershey International, the company’s global division that was headquartered in Weston until recently.

The extent of the alleged financial improprieties are unclear because the suit does not provide details and the company has declined comment, the Daily Business Review reported.

Hershey is a 111-year-old company that manufactures, markets and distributes brands that include Hershey Kisses, Kit Kat, Reese’s Peanut Butter Cups, Almond Joy, and SmartZone health bars.

Hershey sells products in 60 countries and has annual revenue of $4.4 billion. The company’s stock traded at $62.42 a share on the New York Stock Exchange in trading Aug. 9, according to the Associated Press.

Hershey’s suit claims Cadiz himself provided false and misleading financial information to his bosses and their independent auditors, and then encouraged his employees and distributors to do the same.

Cadiz is also accused of “concealing and misrepresenting critical information” about Hershey’s clients in the region that stretched from Japan south to New Zealand.

“As a proximate result of Cadiz’s breaches and intentional wrongdoings, the Hershey Co. has suffered, and continues to suffer, substantial damages,” according to the suit.

The case was moved to federal court at the request of Cadiz’s attorney, Franklin Zemel, a partner with Broad and Cassel in Fort Lauderdale.

U.S. District Judge William Dimitrouleas has been assigned the case. Depositions are scheduled to start this month.

In an interview with the Daily Business Review, Zemel said Hershey is trying to “bully” Cadiz with the possibility of significant legal costs and damage to his reputation because Cadiz prevailed in his own complaint against Hershey in the Philippines.

Cadiz, a Filipino who obtained permanent U.S. residence since he began working for Hershey, has landed another job in South Florida. Zemel refused to name the company.

Zemel provided the Daily Business Review with a copy of a judgment in which the Philippines National Labor Relations Committee ordered Hershey to pay Cadiz about $950,000 in salary and benefits plus attorney fees for his “illegal dismissal,” according to the Jan. 10, 2005, order from the Philippines Department of Labor and Employment.

Philippine law requires an employer to follow established procedures before dismissing an employee.

The procedures include giving employees the opportunity to resolve deficiencies with their job performances.

The finding of the Philippine Government against Hershey means Cadiz is entitled to collect his $175,600 salary, a monthly housing allowance, an automobile stipend, health insurance, vacation and other employment benefits dating back to his Sept. 1, 2003, termination.

Hershey has appealed the ruling. A decision is expected by September, Zemel said.
“The question is why did they bring the suit here?” Zemel said of the company’s suit in federal court. “Why didn’t they deal with it down in the Philippines? Why wait until you lost and it is up on the appeal before you bring the action here? It is certainly suspect.”

A stock analyst who follows Hershey was unaware of the suit and declined to comment on it.

But the analyst, who asked not to be named, told the Daily Business Review that Hershey’s operations in Asia are relatively small, so any possible financial restatement coming from that division would likely have a limited effect on the company, which has a $15 billion market capitalization and pays an annual dividend of 88 cents, or a yield of about 1.4 percent, a share, according to Yahoo! Finance website.

Zemel said Cadiz intends to defend himself against the charges regardless of the legal cost. He said Hershey’s allegations about financial irregularities were never raised to Cadiz during review or after internal and external audits of the Asia division’s financial.

According to court documents, before joining Hershey, Cadiz had worked for more than 20 years in marketing and international business management with Kellogg’s and Procter & Gamble in Thailand, Japan, China and the Philippines.

Cadiz joined Hershey International in October 1998 to serve as the marketing director for the newly created Hershey Philippines operation in Manila, earning $130,000 annually plus a $13,000 starting bonus.

Cadiz was named the global brand marketing director in February 1999. Five months later, became general manager of the Asia region. Japan was added to Cadiz’s territory in April 2001.

Cadiz’s primary responsibility was to boost Hershey’s productivity, sales, profits and market share in the Asia region. He was also responsible for maintaining an “efficient” working environment at the offices and providing accurate financial data. He was expected to adhere to the chocolate company’s code of ethical business conduct, according to Hershey’s lawsuit.

By early 2003, Cadiz was stripped of many of his responsibilities and demoted to country director for the Philippines. He was terminated in September 2003 as a result of “contractual breaches, intentional wrongdoings and failure to abide by the ethical standards,” according to the suit.

Hershey claims that once Cadiz was fired, the permanent U.S. resident “implemented a plan to extract a substantial and improper financial payment” from the chocolate maker and tried to “disentangle himself from the effects and ramifications of his actions and intentional wrongdoings,” according to the suit.

Zemel said Cadiz’s firing was triggered by a strategy shift at Hershey that followed a management shakeup at the company in 2003.

Zemel said the new management looked to Hershey International to be an immediate profit center rather than a slow-growing market of the future that needed to be subsidized initially. He points to Hershey International shift of operations from Weston back to Hershey, as an example of the cost-cutting approach.

A Hershey spokeswoman said the company still has some employees posted in overseas locations, but the majority is at the company’s headquarters in central Pennsylvania.

Zemel said Cadiz’s job was made more difficult because sales slumped after the Sept. 11, 2001, terrorist attacks, the U.S. invasion of Iraq and the severe acute respiratory syndrome outbreak dried up tourism in Asia and sent the world economy into a slump.

Hershey chocolate products are considered a luxury in Asia, so they were some of the first expenses to be cut by consumers once the economies slowed, Zemel said.

Zemel told the Daily Business Review he recognizes Hershey’s right to restructure its international operations, but that doesn’t justify the actions against Cadiz.

“The company is entitled to say, ‘We don’t want to do this,’” Zemel said. “The problem stems from their behavior. If you don’t want the division or want to bring it in-house, they are entitled to do that, but they can’t beat up on this guy.”