7-Eleven Sues Long Island Franchisee for Siphoning Money

NEW YORK – 7-Eleven Inc. filed a lawsuit against the franchisee of five Long Island stores, accusing him of siphoning hundreds of thousands of dollars for at least four years, according to a report by the Wall Street Journal.

Filed in a Brooklyn federal court last week, the lawsuit seeks $1 million in damages and alleges that Tariq Khan, along with his wife, son and others, diverted cash to buy merchandise inventory from suppliers and never reported the invoices to 7-Eleven.

"In as much as merchandise does not simply grow by itself on the shelves, the most viable explanation is that the stores brought in merchandise that was not reported to 7-Eleven in violation of the franchise agreements," the complaint states. "Such an anomaly is also indicative of a franchisee's operating a 'business within a business.'"

A routine review in 2010 first turned up evidence of possible wrongdoing, according to 7-Eleven. The Dallas-based company then launched an undercover operation. In some of the subsequent 246 "secret buys," Khan's employees bypassed the register, never reporting the received cash. In others, they misidentified the product as a less-expensive item when entering it into the cash register to underreport the sale, according to the Journal.

Although 7-Eleven ended its franchise agreement with Khan, the complaint states that the defendants "have declined to voluntarily vacate the stores."

Khan is the former head of the National Coalition of Associations of 7-Eleven Franchisees. He was not one of the nine 7-Eleven store owners and managers charged with harboring and hiring illegal immigrants on June 17.

Khan did not respond to the news outlet's request for comment.

7-Eleven Inc. operates, franchises or licenses more than 10,110 7-Eleven stores in North America.