October 17, 2021

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Just Do Travel

Investors sue local travel company founder for draining company assets for personal use following ouster over sexual misconduct allegations

4 min read

COLUMBUS, Ohio – Investors are suing the founder of a local student-travel company alleging he failed to repay a loan after draining the company of money through a series of insider deals, making him unable to repay them.

The lawsuit filed this month in Lake County Common Pleas Court says Henry “David” Venning, even after being forced out as CEO in 2014 over sexual misconduct allegations, abused his continued power over Rustic Pathways, diverting money and other corporate assets for his own personal gain while he knew the Willougby-based company was insolvent. The suit says that he also misrepresented the value of the Thai real estate he used as collateral to the private individuals who made the $6 million loan to the company in 2018 to help keep Rustic Pathways afloat.

“These breaches of contracts and perpetration of commercial torts were used to fund Venning’s louche empire-like playground for himself ranging from Lake County, Ohio to Thailand and elsewhere in South East Asia,” the lawsuit reads.

The suit seeks to seize Venning’s personal assets, including his home in Lake County and other real estate in Ohio, to cover the $6 million loan, plus $1.5 million in interest and lawyers’ fees. It names as defendants Venning, Willoughby lawyer Michael Lucas, a man named Chatchai Pongkan who lives with Venning, and RPOldCo, a company owned by Venning that was once Rustic Pathways’ parent company, but which was renamed after the company brand was sold to new ownership in 2019.

As part of the 2019 sale, Venning was paid $2 million in exchange for canceling various “insider arrangements” with Rustic Pathways, the lawsuit says. Rustic Pathways is now run through the new company, and a company spokesman said Venning no longer has any involvement.

Lucas, who’s served as Venning’s personal attorney in the past, declined to comment when reached by phone Tuesday. He said he would pass a message along to Venning.

The Rustic Pathways investors are being represented by Calfee, Halter & Griswold, a law firm with offices in Cleveland and New York.

In a statement, H. Jeffrey Schwartz, the partner-in-charge of Calfee’s New York office, said: “It is my privilege to lead the legal mandate to obtain justice for the unconscionably aggrieved Noteholders by obtaining redress for them in the Court of Common Pleas of Lake County, Ohio, as well as in Thailand, Laos, Myanmar, Australia, and Costa Rica – all venues in which much of Mr. Venning’s Loan collateral are located.”

(Scroll down to read the complete lawsuit, or click here for a PDF.)

Venning founded Rustic Pathways in 1990, with the company eventually growing into an international presence making millions of dollars in annual revenue, according the lawsuit. As revealed on cleveland.com in 2015, Venning resigned from leading the company, which arranged international trips for students, in 2014 after a confidential internal report concluded he had coerced three low-ranking Asian staff members into sexual contact with him at a company facility in Thailand.

The internal investigation, launched following a complaint by a student client in March 2013, found Venning as then-president and CEO had directed at least 10 Asian staff members to give him private, nighttime massages that sometimes led to the unwelcome sexual contact, as previously reported by cleveland.com. The company’s internal investigation found Venning’s actions could cause him to be prosecuted for sex trafficking by force or coercion, a federal crime.

The Lake County lawsuit cites the cleveland.com report and the internal Rustic Pathways investigative report, written by a law firm that recommended Rustic Pathways part ways with Venning “immediately and unequivocally.”

But, the Lake County lawsuit says Venning continued to own the company, and exercised “de facto” control through its corporate structure, which placed Venning’s 70% ownership into a revocable trust controlled by Lucas, and gave company board positions to Lucas and his personal accountant.

The lawsuit says the former Rustic Pathways company followed the recommendation to part ways with Venning “in form but not in substance, saying “Venning did not relinquish governance or financial control and substantially continued his siphoning off” Rustic Pathways’ capital through a series of insider transactions. The lawsuit says, for instance, that Venning used company money to buy real estate, which he then leased back to the company, and charged the company to hire employees to maintain the properties year-around, even though the student-travel season was only four months.

The lawsuit also says Rustic Pathways paid Venning nearly a million dollars a year after he left the company, through a variety of internal agreements, including a 2016 deal that paid Venning a $325,000-$425,000 “consulting fee” through 2019. And, the suit says Venning used company money to pay for a Rustic Pathways-branded family-travel business he operated after leaving his official job.

“Venning’s systematic extraction of millions of dollars from RP OldCo for his personal benefit via these intrinsically unfair insider transactions, which upon information and belief occurred while RP OldCo was balance sheet insolvent, only worsened the insolvency prior to 2018,” the lawsuit says.

Judge Patrick Condon has issued a temporary restraining order barring Venning or any of the defendants from transferring real estate while the case is pending. A court hearing is scheduled in the case on Oct. 14 for a different judge who’s now handling the case, Judge Eugene Lucci, to consider whether to make the restraining order more permanent by converting it into what’s called a preliminary injunction.

Court filings say that Venning and Pongkan were served with a copy of the lawsuit on Friday at Rustic Pathways’ former corporate headquarters in Geauga County. Venning sold the building, an eight-bedroom, five-and-a-half bathroom house, in 2016, according to property records.