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Mere weeks after John “Punk” Nylander and his nephew Ryan Nylander halted operations at Redwood Meat Co., citing rising utility and insurance costs, John’s three children have filed a lawsuit against the pair, accusing them of grossly mismanaging the family company through fraud, embezzlement, tax evasion and document shredding.

The three litigants — Stephanie Nylander, Rachel Nylander Flores and Russel Nylander — only recently learned that they are minority shareholders of Redwood Meat Co., the only USDA-certified slaughterhouse, processing and delivery service for nearly 200 miles.

Russel Nylander worked at Redwood Meat Co. for more than 30 years, starting when he was just a teenager. In a declaration submitted to the court on Monday, he says that shortly before he learned that the business might close down, his cousin Ryan, who is the company’s secretary and chief financial officer, instructed him to throw away about 80 bankers boxes full of documents.

“Those boxes were thrown into a dumpster and disposed of,” Russel says in his declaration. “Two women who worked in the front office of RMC also shredded documents for a week, which I witnessed. These records appear to be RMC financial records.”

His testimony continues adds that Redwood Meat Co. has apparently racked up about $900,000 in debt to the IRS that’s “believed to be for unpaid payroll taxes,” and Ryan sold a house belonging to the company for $600,000 without notifying shareholders. The proceeds are unaccounted for.

“I have no information about the whereabouts of the monies paid in this transaction despite requests,” the declaration says.

Now, according to Russel and his sisters, their dad and cousin are trying to complete a short sale of the slaughterhouse property at 3114 Myrtle Avenue in Eureka without proper notification and involvement of shareholders.

“The sale of this real property would completely decimate RMC and would make it entirely impossible for the company to be saved from total closure,” Russel says in his declaration.

The lawsuit filed this week accuses John and Ryan Nylander of breach of fiduciary duty, corporate waste and unjust enrichment, and a temporary restraining order was requested to prevent them from selling the company headquarters and destroying any more financial records.

Appearing before Humboldt County Superior Court Judge Timothy Canning Wednesday afternoon, attorney Cyndy Day-Wilson, representing the plaintiffs, said time is of the essence, given the possibility of the business being sold out from under her clients.

“Thus the emergency to come in and see you, Your Honor, to stop that sale … to put it on hold to find out what’s going on,” Day-Wilson said.

Neither John Nylander (who’s listed as the company CEO) nor Ryan Nylander showed up for Wednesday’s hearing, and neither did an attorney to represent them. But after confirming that they’d been legally served with notification of the proceedings, Judge Canning granted Day-Wilson’s motion for a temporary restraining order, which prevents the company’s executives from closing the pending property sale or liquidating any assets. A preliminary injunction hearing has been scheduled for later this month.

Calls to Redwood Meat Co. this week have not been answered.

As outlined in an Outpost story last month, Redwood Meat Co. has served the needs of local ranchers, farmers, retailers and deli counter butchers for more than 70 years, offering government-sanctioned kill facilities, packaging and distribution of cattle, lamb, goats, hogs and more. One Humboldt County farmer described the company as “critical infrastructure for local beef,” and its closure has upended operations for many local meat producers, forcing them to transport livestock to the Central Valley, Siskiyou County or beyond for processing.

In the hallway after Wednesday’s hearing, Day-Wilson declined to talk to the Outpost about the case, saying she can’t discuss pending litigation. She did not reply to a subsequent email asking to be put in touch with her clients.

In arguing for the motion in court, Day-Wilson said she and her clients have been trying since May or earlier to get copies of Redwood Meat Co.’s corporate records, but they haven’t gotten much.

“[B]asically, the corporate records stopped in 1994,” she said. “Since 1994 there have been no board meetings, no notice of sales, purchases, anything like that.”

The lawsuit says that the defendants have apparently been using corporate funds to pay for insurance policies on their personal residences, logging activity at their own properties, personal phone bills and more.

“It also appears that Defendants have taken out loans purportedly for the business, which have then been used for their own personal expenses, or have conversely used RMC funds to pay off personal loans,” the suit alleges. “Plaintiffs believe that payments have been purposefully miscategorized in RMC’s books to appear like they are for business expenses … to banks that, to Plaintiffs’ knowledge, Redwood Meat Co. does not have loans with.”

There are other discrepancies in the books, too, including the tally of outstanding shares of the corporation and the record of how those shares have been allotted, transferred and redeemed, the suit says.

“I recently learned that my name is listed on the statement of information as a director [of Redwood Meat Co.],” Russel says in his declaration. “I was never informed of this nor do I consent to it.”

Per the company bylaws, on file with the Secretary of State, Redwood Meat Co. shall have three directors, to be elected an annual shareholder meetings, but there hasn’t been a shareholder meeting in the last three decades, the suit says. 

An agreement from 1984 indicates that Stephanie and Rachel each held 18 shares of company stock, while John and his late brother (Ryan’s dad, Allen “Butch” Nylander) held 405 shares apiece. Russel appears to have inherited 18 shares sometime thereafter. There have been deaths, divorces and family disputes in the intervening 40 years, and with scarce corporate records it’s unclear how many outstanding shares there are, and who owns them, according to the lawsuit.

Despite Russel’s status as a director, neither he nor his shareholder siblings were ever sent notices of board meetings, requests for approval of corporate business decisions or records of sales of company property, according to the suit.

After a series of unfulfilled requests for more detailed records, the plaintiffs and their attorney went directly to the company’s headquarters on May 30 and spoke with Ryan Nylander’s wife, Molly.

“Molly Nylander, who to the minority shareholders’ knowledge is not a shareholder, director, or officer, indicated a stack of files and records that purported to be the corporate records,” the lawsuit reads. “When asked if there were other documents, Molly responded that what was being shown to the minority shareholders and their counsel was the extent of RMC’s corporate records.”

With the company in such dire financial straits and a community of longstanding customers invested in its survival, many have hoped that Redwood Meat Co. could be sold to someone else who can keep it in operation.

“The minority shareholders are informed that multiple offers to purchase RMC have been received, but that Ryan and/or John have refused to provide the books and accounts to potential buyers,” the lawsuit says.

On July 16, Day-Wilson sent a list of questions to John and Ryan Nylander, asking for bank statements, tax returns, board meeting minutes, a list of company assets and explanations of various financial mysteries.

“To date, no response to these questions has been received,” she wrote in the suit.

Ferndale’s Foggy Bottoms Boys recently wrote in a Facebook post about how the absence of Redwood Meat Co.’s services has left a gap in the local food system, forcing them and countless other ranchers to alter their operations in numerous ways.

Russel says in his declaration that he and his sisters would like to preserve Redwood Meat Co. for the sake of such farmers and ranchers who have come to rely on it.

“Saving RMC from closure is imperative to both the company itself and the local community,” he writes.