Family feud in local construction company leads to criminal charges, lawsuit

WEST CHESTER >> Competing accusations of embezzlement at a venerable Chester County construction firm have landed two brothers in court, one facing criminal charges and the other a defendant in a civil lawsuit.

Mark A. Davis, the former chief executive officer at C. Raymond Davis & Sons in Kimberton, was arrested and charged last month by East Pikeland Police with felony theft by unlawful taking, access device fraud, and receiving stolen property for allegedly taking more than $300,000 in company funds just days before he was dismissed from his position at the 90-year-old company.

Three days after the charges were filed against him, Mark Davis filed a lawsuit in Common Pleas Court against his younger brother, Kyle L. Davis, the company’s chief financial officer; his father, T. Raymond “Ray” Davis, the son of the founder of the general contracting business and former owner; and the company itself, which has offices in Kimberton, Princeton, New Jersey, and Bolton Landing, New York, in the Adirondack Mountains.

Kyle Davis is the main accuser in the criminal complaint against his older brother, having told a township investigator that Mark Davis was not authorized to write a check for $308,344 to a business he owned outside the construction firm, Kimberton Company. On the other hand, Mark Davis is the sole plaintiff in the lawsuit, which generally accuses his younger brother of using company funds for his own benefit, including a surreptitious bonus of $150,000.

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The criminal charges against Mark Davis are scheduled for a preliminary hearing later this month at the district court in South Coventry. The civil action, which charges breach of contract, breach of fiduciary duty, and wrongful termination, has been assigned to Judge Allison Bell Royer. No trial date has been set.

An attorney representing Mark Davis in the criminal action, Thomas Schindler of Kennett Square, said that he believed the police had become improperly involved in what essentially is a business dispute between family members. The civil suit was filed on Mark Davis’ behalf by attorneys James Sargent Jr. and Guy A. Donatelli of the West Chester law firm of Lamb McErlane.

“This clearly is a civil dispute,” Schindler said in an email on Friday. “We do not know or understand the justification for the filing of criminal charges; we see this as an absolute misuse of law enforcement resources.”

An attempt to reach Kyle Davis at the firm’s home office on Friday was unsuccessful. It is not known who is representing him or the other parties in the civil action, which was filed at the Chester County Justice Center in West Chester on Sept. 23.

According to its website and court documents, C. Raymond Davis established the construction firm that bears his name in 1926, first as primarily a home builder and then later as a commercial building contractor. Over the years the business expanded as the founder’s son, Ray Davis, opened Devault Contracting, which worked on high-end projects such as One Liberty Place and Veteran’s Stadium, both in Philadelphia.

In recent years, C. Raymond Davis has been the general contractor and management firm for such distinctive projects as the East Brandywine Baptist Church and the numerous new Citadel Federal Credit Union offices across the county.

Mark Davis, 59, of East Pikeland became involved in the company upon his graduation from King’s College in Wilkes-Barre. He was promoted to CEO in 1992, and began branching the company out into upscale residential building projects, expanding the firm’s reach from the Delaware Valley to suburban New Jersey and upstate New York. The company has approximately $50 million in annual gross receipts, according to the lawsuit.

Kyle Davis, 58, who lives less than five miles from his older brother in West Vincent, is also a graduate of King’s College. He too began work at the firm upon graduation, taking on financial duties that suited his business administration college degree. He was promoted to CFO in 1992.

The two brothers worked side by side in complimentary roles for years, each being paid the same amount of salary and having equal benefits, and sharing stock in the firm. But in the suit, Mark Davis states that over the years, he had raised “his view that Kyle Davis should be compensated only at a level reflecting his very limited contribution particularly since outside consultants … continually criticized Kyle Davis for poor accounting practices.”

On June 8, Kyle Davis contacted East PIkeland Police and ultimately spoke with Cpl. Bernard Martin about the alleged theft of funds by his older brother. In his arrest affidavit, Martin identified himself as a 10-year veteran police officer who has worked previously on fraud and theft cases in his capacity as a township police officer.

Kyle Davis told Martin, according to the complaint, that there had been “numerous issues” over several years regarding his brother’s use of corporate funds for his own purposes, and that he and his father had “continually” attempted to curb his spending. Those efforts eventually led to the adoption by Kyle Davis and Ray Davis of an expenses and reimbursement policy that stated that no employee of the company could issue a check for over $1,000 without agreement by the board of directors — essentially Mark Davis, Kyle Davis and Ray Davis.

But on May 13, Mark Davis wrote the check for $308,344 to Kimberton, which is a holding company he uses for, among other purposes, ownership of a 42-foot Sea Ray cruiser boat he docks in Delaware and a Cessna airplane. Both are used for C. Raymond Davis business to entertain clients and provide transportation to job sites, according to the lawsuit, but Kyle Davis told Martin that Mark Davis had not been authorized to write the check to the firm.

When interviewed by Martin, Mark Davis admitted writing the check, but said that he had been advised by a company attorney that he was entitled to do so, since it represented expenses charged to C. Raymond Davis & Sons from Kimberton. He told the officer that he had been underpaid by the construction firm and was owed “hundreds of thousands of dollars.” He also acknowledged that he had taken the check out of sequence in the company’s books so that it would not be noticed immediately and stopped.

He did so, he said, because he and his brother had been arguing over the expenses and that Kyle Davis and Ray Davis had called an unusual board of directors meeting for May 16, at which he suspected they intended to fire him. They did.

Martin wrote that he was filing the charges because he believed that Mark Davis was not entitled to write checks for that amount without authorization, and because Mark Davis attempted to conceal the transaction.

In the lawsuit, however, Mark Davis contends that it was not he that was improperly using company funds for personal use, but Kyle Davis. The suit contends that the younger man used the company’s resources to fund $250,000 for renovations to his Hallman Mill Road home, and the unauthorized bonus. Mark Davis claims to have spoken to his brother about those alleged abuses in the past, to no avail.

The suit also alleges that Kyle Davis improperly drew up the expense policy in December, and passed it without a proper meeting of the company’s board. He was not given the opportunity to review the policy beforehand, even though he was a member of the board, and never saw any minutes of the “purported board meeting,” the suit alleges.

The civil complaint alleges that ahead of the May check, Mark Davis consulted with a senior manager at the Davis company about what he said were outstanding, legitimate expenses owed to Kimberton. The employee, Dan Donatelli, sought advice from corporate counsel, Dave Davis (no relation), and was told that Mark Davis was free to write a check to Kimberton, since the expenses came before the reimbursement policy was changed.

The role of Ray Davis in the affair is ambiguous. The suit alleges that Ray Davis was not involved in the day-to-day operations of the company that bears his father’s name after 1992, and that although he arrived for work everyday from 1992 to 2005, he was “clearly disengaged in the management of the business.” By 2005, he had given up all but a small portion of the firm.

Now, 86 years old, Ray Davis is “no longer competent” to understand the operations of the business, the suit alleges. His “independent judgement has been co-opted and overridden as a result of misinformation provided and undue influence exerted by … Kyle Davis,” it reads.

Source: Daily Local