Roger Wallentine, left, and his son Jonathan Wallentine, left, are suing Black Rifle Coffee Company for allegedly stock manipulation (Photo courtesy of Jonathan Wallentine)
A conservative-leaning coffee business that returns a portion of its profits to veterans is at the center of a brewing legal battle between two Orange County investment companies amid allegations of stock manipulation, fraud and harassment.
The nasty dispute, which also includes allegations of a phony law firm and a shadowy website, additionally has spawned a libel suit and a request for a restraining order from fearful employees.
At the center of the conflict is 1791 Management LLC, operated by former Laguna Niguel City Council candidate and actuary Jonathan Wallentine. 1791 is suing Salt Lake City-based Black Rifle Coffee Co. and one of its major stockholders, hedge fund Engaged Capital of Newport Beach.
The civil complaint filed in Orange County Superior Court in May accuses Black Rifle and Engaged of securities law violations, fraud, breach of contract and negligent misrepresentation. It seeks more than $5 million in damages.
Black Rifle and Engaged declined to comment.
Black Rifle was formed in 2014 by former Army Green Beret Evan Hafer with a “mission to serve coffee and culture to people who love America.” It gained national attention three years later when it employed about 50 people and vowed to eventually hire 10,000 veterans in reaction to Starbucks’ announcement that it would hire 10,000 refugees.
Black Rifle is pro-gun, pro-military and pro-police and has supported the policies of former President Donald Trump.
Much of the company’s business centers around its online coffee subscription service and merchandising. Black Rifle plans to open as many as 25 retail stores, known as outposts, by the end of the year.
Black Rifle’s second quarter 2022 revenue increased 27% to $66.4 million from $52.4 million in the second quarter of 2021, the company said in a statement. Wallentine, 40, said 1791 has invested at least $20 million in Black Rifle, but those figures could not be immediately verified.
Stock manipulation alleged
1791 alleges Black Rifle officials defrauded shareholders out of billions of dollars in February by delaying a filing with the U.S. Securities and Exchange Commission, keeping the available shares of stock artificially low and resulting in a so-called “squeeze,” so company executives could issue exempted stock to themselves and reap huge profits.
“We believe your plan was designed to artificially inflate your stock price by keeping the availability of Black Rifle’s stock off the market,” Wallentine wrote in a May 17 letter to Hafer. “Your official response was that Black Rifle was currently waiting on SEC comments and would make the (filing) effective as soon as possible. We have our own documented communications with the SEC that make us believe your statements were false.
“Are we really to believe that Black Rifle’s recent meteoric stock price rise and ultimate collapse were just natural forces of the collective judgment of Black Rifle’s business prospects?”
According to financial experts, the SEC — not companies — decide the timeline for filings.
1791 also has taken aim at Engaged Capital, and, more specifically, Chief Executive Officer Glenn W. Welling, linking him to 1791’s inability to obtain and trade Black Rifle stock before prices plummeted.
“Glenn Welling steals millions from $BRCC public shareholders,” 1791 said in a July 26 Twitter post. “Mr. Welling, it must be nice for you to have the money in the bank account while you are enjoying the sunshine in Newport Beach. Where is the justice?”
Welling said Friday he could not comment on pending litigation.
Another Twitter post from 1791 on Aug. 11 features a photo of Welling under a headline that reads “Greed & Lies.”
Engaged filed a libel suit in July against 1791 as well as Wallentine and his 74-year-old father, Roger Wallentine, a wounded and decorated Army veteran, for what it describes as a series of “false and defamatory internet attacks.”
The lawsuit said the Wallentines are known for their “hyper-aggressive, hyper-combative approach to perceived adversaries” and frequently use 1791’s website to publish so-called research on Black Riffle “loaded with negative headlines and unfounded pejorative claims.”
A bogus law firm
The Wallentines also are behind a website for a phony legal services firm named Hittelman Strunk that solicits investors to file claims against Black Rifle and has stated it is staffed by “experienced investment fraud attorneys,” according to the suit.
“The non-law firm Hittelman Strunk LLP is a fiction devised by the Wallentine defendants and 1791 Management,” the suit states. “There are, in fact, lawyers named Hittelman and Strunk who practice in California at separate law firms, but they had nothing to do with the website. The Wallentine defendants appear to have selected their names because they had personal disagreements with them as well.”
Steven G. Hittelman, a Newport Beach attorney who at one time represented Jonathan Wallentine’s ex-wife in divorce proceedings against him, said in an email that 1791 appropriated his name and that of his former law partner, Kerri Strunk.
“My name and law office are in no way affiliated with 1791 Management and neither is my former law partner,” Hittelman said. “I sent them (1791) cease-and-desist letters months ago; apparently that caused them to include a statement on their website that they are not a law office.”
The younger Wallentine said some of his employees purchased the hittelmanstrunk.com domain in 2019 to cheer him up after his nasty divorce, with the plan of aggregating and posting unflattering consumer reviews of Hittelman gleaned from the internet.
“I said, ‘No, you can’t because it would only hurt the terrible situation I was in (and) the last thing I wanted was to piss off the other lawyer,’ ” he said. “At the time, I wasn’t even leaving my house. My family, friends, former employees were worried about what a terrible thing I was having to go through. They were just trying to cheer me up.”
After 1791 became embroiled in the stock dispute, it decided to use the hittelmanstrunk domain to solicit information from other Black Rifle investors who may have been harmed, Wallentine said.
In another twist, a shadowy website named 1791 Management Facts lives on the web, detailing Wallentine’s “messy divorce,” his failed 2016 bid for the Laguna Niguel City Council, and purported legal problems.
Although the website makes no mention of who is behind the content, Johnathan Wallentine is convinced Black Rifle and Engaged are responsible.
Restraining order sought
On Sept. 15, Welling sought a temporary restraining order in Orange County Superior Court against Wallentine, alleging that 1791 employees were “hanging around” Engaged’s office and that 1791 social media posts threatened possible gun violence.
“He (Wallentine) is obviously unbalanced and irrational, and has a personal vendetta against Engaged,” Welling wrote in the restraining order application. “I and other Engaged employees do not feel safe going into work.”
Orange County Superior Court Commissioner Glenn Mondo denied Welling’s request pending a hearing scheduled for Thursday, stating the social media posts aren’t relevant and are outside of the scope of a temporary restraining order.
Meanwhile, Wallentine described Welling’s allegations against him as pure fantasy.
“It appears they are trying to discredit me to my employees,” he said. “My dad and I, including the lawyers, had a big laugh just because it is so ridiculous.”
Originally published at Scott Schwebke