Iredell steel company wins $2.2M judgment against co-founder Leon Rives II
A judge in Iredell County ordered Leon Rives II and his Lexington CPA firm, Rives & Associates, to pay $2.2 million in damages to Statesville-based Steel Tube Inc. and its owner Avalon Potts, according to a report from The Lexington Dispatch.
Steel Tube Inc. manufactures carbon steel tubing for a variety of industries and employs about 50 workers. The Rives & Associates CPA firm has offices in Lexington, Raleigh, Durham and Charlotte.
Rives, who co-founded Steel Tube in 1990, was accused of using his position as manager, director and 50% owner of Steel Tube to siphon funds for personal gain. He reportedly purchased half of the company’s stock from partner Walter Lazenby in 2015 for $600,000, using a line of credit on behalf of Steel Tube without Potts’ knowledge. He paid $20,000 upfront with monthly payments of $6,000. In that agreement with Lazenby, Rives gave management of Steel Tube to a company controlled by Rives, of which Potts was unaware. The year prior, Potts refused to sell his 50% stake to Rives for $2 million.
Between June 2015 and June 2016, Rives also allegedly transferred $90,000 to himself in monthly installments, followed by a nearly $63,000 transfer to an account held by him and his wife.
During that time, Rives continued to serve as co-owner of the business. Rives & Associates, which he owned, continued to provide tax preparation services to Steel Tube Inc.
Potts filed the lawsuit in 2016 and gained full control of the company in 2017.
This past December, Rives was convicted of committing civil fraud and breach of duty, among other counts. The jury found him guilty of converting more than $100,000 in company funds to his own use from 2015 to 2016, while Rives & Associates was found liable for professional negligence toward Steel Tube.
Rives told The Dispatch that he is in the process of appealing the ruling.