We’re accustomed to seeing superstar players decked out in equipment from their sponsor’s line. For Bauer, the likes of Alex Ovechkin and other elite players have become the face of the company. But it seems nefarious actions are going on behind the scenes of one of the most popular hockey brands.
According to TSN, a fraud lawsuit has been filed against Performance Sports Group, which owns Bauer and Easton, another top hockey (and baseball) equipment manufacturer. On Wednesday morning, the company revealed that it is under investigation by securities regulators in the United States and Canada. Just two days earlier, the company said it was in default with its creditors.
Former CEO Kevin Davis, who appeared at an event with Ovechkin to announce his six-year sponsorship contract with the company back in 2011, is named as a defendant in the lawsuit. He resigned from his position earlier this year.
The lawsuit, filed in a New York district court, alleges “PSG [Performance Sports Group] moved future orders into earlier financial quarters by pressuring hockey retailers to accept sticks, skates and other product they did not need to increase the company’s sales.”
Alex Ovechkin shakes hands with former Bauer CEO Kevin Davis, who is named in the lawsuit. (Photos by Chris Gordon)
The lawsuit, whose lead plaintiff is a pension fund that is a PSG shareholder, also states that a company executive was fired for trying to stop the alleged fraud.
“PSG threatened customers with the loss of their discounts if they did not increase the size of their orders each year or if they did not agree to accept merchandise shipment early,” the lawsuit states. “Defendants knew that such channel-stuffing practices were not sustainable and would certainly catch up with them.”
PSG’s income increased 65 percent in fiscal year 2015, but its shares fell nearly 50 percent after news of the default. Shares are down around 90 percent from this time last year. In June, the company said it expected to end the 2016 fiscal year with more than $400 million in debt.
While the news of possible fraud comes as a shock, an industry source expects business to operate as usual for NHL players as more information is gathered about the allegations. Others, however, are already sounding the alarms.
“I have a meeting lined up with our marketing department to review all the endorsement contracts with our clientele,” hockey agent Don Meehan told TSN. “Looks like [PSG] is in serious financial trouble.”
