Trial by fire

It could have been straight out of a bad Hollywood movie. In 2005, the fun-loving company Buca Inc. found itself in the middle of a securities fraud scandal. The CEO and other executives were accused of receiving undisclosed compensation and failing to disclose other transactions, which affected the accuracy of Buca’s proxy statements. The entire executive team was replaced and a new position deemed necessary — general counsel. Rich Erstad took the job, revived the company from its legal mess and set the precedent for a blemish-free future. I sat down with Erstad to discuss his career and the challenges he’s encountered.

Minnesota Lawyer: How did you get into the practice of law?

Erstad: I got a political science degree from South Dakota State University and went to work for the federal government in D.C. I later ended up in public relations and realized it wasn’t what I wanted to do, so I decided to go back to law school.

ML: Tell me about your journey from law school to where you are now.

Erstad: The end of law school was a crazy time. I remember that my wife gave birth to our third daughter right before my last law school final — thankfully it was multiple-choice. After school, I went to work for Faegre & Benson in their corporate and public finance group, where I stayed for nine years. Buca was one of our clients and I did quite a bit of work for them over the years. In 2005, when the position opened, I inquired about it and they asked me to come on board.

ML: Why did you want to move in-house?

Erstad: It seemed like a unique opportunity to be part of a brand new team and to have a broader impact than I did as outside counsel. I also liked the idea of being involved in business decisions and felt my public relations background was a good fit.

ML: Did you have concerns going to Buca given what had just happened there?

Erstad: Yes! The day I was supposed to interview with the CEO was the day that he was firing two of my references, people who had been my client contacts while at Faegre. They ultimately pled guilty to defrauding the company, so I had to explain how I was independent from them and still good for the job. I obviously did not know what they had been doing. It is hard when you think you know someone and here they are doing things you would never suspect. I still don’t understand how I couldn’t see it, but when you’re outside counsel, you only know what they are willing to tell you.

ML: What is your favorite part of this job?

Erstad: I enjoy the general advising. Some is entirely legal and some is not legal at all. I’m helping the company walk through the process of resolving problems and I get something new every day.

ML: What do you like best about the hospitality industry?

Erstad: Positive thoughts are usually associated with hospitality. Buca has a good brand and people enjoy and recognize it and are usually happy when they talk about it.

ML: So do you get free food?

Erstad: Yes! They bring some in every day and we get to try different foods at the restaurant to check on quality, service and the like.

ML: You’ve mentioned some of the problems that Buca went though, but tell me more about how it affected you specifically.

Erstad: The first week was interesting. NASDAQ was having a hearing about delisting our stock and the SEC was also investigating, so the first week I was involved in audit committee meetings. We attended the NASDAQ delisting hearing in D.C., and I got a subpoena from the SEC saying that if I didn’t respond I was going to jail — talk about being thrown into things. Then in May 2005, I got a call from someone saying, “You’ve been ripped off and you don’t even know how much.” He said he had the documents to prove that certain former executives had been stealing from the company. I put him in touch with our internal investigation team, and ultimately, the FBI got the incriminating documents leading to their guilty pleas.

ML: What is the new executive team doing to reverse the negative effects of what happened?

Erstad: First, we cooperated with all government entities and gave them all the information we had. We had meetings with the SEC, FBI, DOJ and the Postal Inspection Service and said we’re doing everything to clean up the company and avoid any more problems. There has also been a total change in the management team, so that has helped a lot. We’re learning from the mistakes of others — it’s surreal to realize that the guy who used to sit at my desk is now in federal prison. That keeps you focused. Plus, the new CEO has set strong goals for our team. What happened is in the past — let’s do it right going forward.

ML: What have you learned from this experience?

Erstad: You have to do what’s right. You need to be able to stand in front of your grandmother and explain why you made a certain decision. It’s important to have integrity and not cut corners or compromise.

ML: Since 1993, Buca has grown to 93 restaurants. Why do you think the company has remained so successful despite hard times?

Erstad: It is a fun experience and a good product. All our food is made with the finest ingredients. People like to have fun and enjoy good food. Plus, it is a unique concept that you can’t find anywhere else.

ML: What is your favorite food at Buca?

Erstad: I’d have to say the chicken cannelloni.

ML: Have you ever been to Italy?

Erstad: No, but I’d love to go. I’m from small town South Dakota, so when I moved here the only Italian I knew was the make-it-yourself boxed pizza.

ML: What are some of your hobbies?

Erstad: I enjoy traveling. I used to live in Norway as an exchange student, so I’ve taken my family back there and continue to keep up on the language.

ML: What is a little known fact about you that you can share with us?

Erstad: Hmm… I once drove the submarine that Michael Jackson was on.

ML: What?!

Erstad: Well, I was a submarine driver on the 20,000 Leagues Under the Sea ride at Disney World, and Michael Jackson was getting off a submarine just I was starting my shift. So I drove the submarine that Michael Jackson was on.

Lacee Bjork Anderson is an attorney placement director with The Esquire Group, A Special Counsel Company in Minneapolis.