Accusations Cloud Franck Muller Watchland

The start of 2004 was bumpy for Swiss luxury watch firm Franck Muller Watchland S.A., whose brands include Franck Muller, Pierre Kunz, and European Company Watch. A dispute between watchmaker Franck Muller and Vartan Sirmakes, who co-founded the company in 1991, helped spark a government investigation and delay the company’s first stock offering. Muller left the company in 2002.

On Jan. 5, Daniel Zappelli, attorney general of the Swiss canton of Geneva, began a preliminary investigation of claims that Watchland had used undocumented workers. Officials of Watchland, located in the Geneva suburb of Genthod, denied the accusation.

According to Swiss press and radio reports, Zappelli acted on complaints by Franck Muller, two Geneva government officials (Micheline Spoerri, minister of justice, and Carlo Lamprecht, minister of economics), and a major trade union, FTMH. Muller allegedly questioned Sirmakes last April about 20 supposedly unlicensed Watchland employees, most of them reportedly Armenian, and about cars and apartments allegedly provided to them by the company.

In August, after leaving the company, Muller reportedly went to Spoerri and also contacted FTMH, which press reports say gathered information about allegedly questionable dismissals at Watchland. Just before Christmas, Muller filed a formal deposition with Geneva’s attorney general, say the reports. The prosecutor said he’d wait for results of the preliminary investigation before deciding how to proceed.

On Jan. 8, Groupe Franck Muller issued a statement accusing co-founder Muller of “bitter and cutthroat tactics” intended to “destroy his partners and the group” and “damage the image” of both them and the brand. The accusation of illegal workers was “totally unfounded,” said its statement, which also expressed “dismay” that Geneva officials aided “a smear campaign” against a company providing almost 500 local jobs.

An arbitration proceeding, separate from the Geneva investigation, was under way in January to settle disputes involving Muller, Sirmakes, and the company. The two sides also had filed legal suits against each other. The group statement, though, claimed Muller wanted to liquidate the company and settle the dispute “not through mediation, but … absolute confrontation.”

After leaving his former company, Franck Muller opened an office in Geneva. On Jan. 7, watch industry veteran Jean-Claude Biver, former president of luxury brand Blancpain and a top executive of the Swatch Group—the world’s largest watchmaker and distributor—took a year’s leave of absence to “help” Muller in “various activities,” said a Swatch Group statement. In response, Groupe Franck Muller warned that Muller was “bound by non-competition and confidentiality commitments” and couldn’t develop “any activities in the watchmaking field without prior consent of his partners.”

Meanwhile, the group’s plan for its first public offering of stock apparently was delayed by the dispute. Miguel Payró, the group’s chief financial officer, has spent several months consolidating accounts and introducing new accounting standards in preparation for the IPO. However, documents for the banks and investors had to be signed by both Muller and Sirmakes, and as of January Muller allegedly hadn’t signed anything concerning the company for several months.