Gary Lewellyn, the founder, chairman, and chief executive of Dallas-based Performance Nutrition Inc., was ousted last week by the company's shareholders, and the company now is reviewing financial records from a portion of Lewellyn's tenure.
"The actions were taken following the publication of an article indicating that Mr. Lewellyn had been convicted in 1982 of embezzling $16.7 million," the company stated in a press release announcing Lewellyn's firing.
In a June 27 cover story, "Hot Product," the Dallas Observer published a detailed account of Lewellyn's checkered history, including his earlier conviction for embezzling money from his father's small-town bank in Iowa.
A federal court sentenced Lewellyn to 20 years in prison, and he served five before being released. Lewellyn was a rising stockbroker when his embezzlement scheme was discovered.
Eight years ago, the 47-year-old Lewellyn founded Performance Nutrition. The Dallas company sells powdered nutritional supplements under the names PLEX and KidsPLEX, and reported $4.2 million in sales last year. The products are primarily marketed through infomercials featuring Lewellyn and celebrity endorsers.
In 1994, the Observer reported, Lewellyn was sued in Oklahoma federal court by the U.S. Securities and Exchange Commission for allegedly artificially inflating the price of Performance Nutrition stock. That lawsuit is still pending.
Performance Nutrition's prospects had been rising earlier this year after it began pitching one of its products--KidsPLEX Jr.--as a natural alternative to Ritalin for children with Attention Deficit Disorder.
Since the Observer story appeared, the company's stock--which is listed on the Bulletin Board, a place for companies with capitalization too small to qualify for a NASDAQ listing--has fallen from about $2.38 to about 88 cents a share.
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In its press release, Performance Nutrition also said it intends to conduct an investigation into company financial reports for the fiscal year ending September 30, 1995, and the nine-month period ending this past June.
"The company's new management indicated at the present time it cannot verify the accuracy of such financial statements and that it intends to engage an independent certified public accounting firm to assist in the investigation," the press release said.
Tamara Halling, Lewellyn's wife and Performance Nutrition's corporate secretary, also was removed from her job, and was replaced by communications director David Wynne.
Wynne, ironically, was the Performance Nutrition spokesman who responded after the Observer's initial story. In a letter to the editor, Wynne called the story a "smear," and defended Lewellyn. "Gary Lewellyn, PLEX, and KidsPLEX will be fine," Wynne wrote.