Cosmetology Board Chairman Edwin Neill, III sued his financial savior Thomas Petrillo soon after he rescued Neill from dire financial straits; asserted a “hostile takeover” of his company’s distributorship was being orchestrated.

Edwin Neill, III, Chairman of the Louisiana State Board of Cosmetology, who sued Thomas Petrillo asserting that Petrillo was attempting a hostile takeover shortly after Petrillo is said to have rescued Neill Corporation and its affiliates from dire financial straits.

Only a couple of months ago, we published this feature wherein Louisiana State Board of Cosmetology (LSBC) Chairman Edwin Neill, III, had a nuclear reaction over Sound Off Louisiana founder Robert Burns sliding the bar across his silently-vibrating phone to attempt to confirm what he thought would be an automated confirmation of a dental appointment the next day.  Although Burns was startled when he encountered a live person wanting to confirm the appointment, he whispered the fact to the caller that he would be there for the appointment.

Prior to Burns’ call, Cosmetology Board Member James Williams’ phone RANG (not vibrate) on THREE separate occasions, and Neill had no reaction to ANY of those calls.  Let’s take just a brief moment to recount Williams’ three separate phone calls (with accompanying rings) and Neill’s explosive nuclear reaction to Burns’ effort to quietly confirm the dental appointment:

8/2/21 LSBC meeting:  Two-minute video highlighting Williams’ THREE ringing phone calls and Burns’ one silent phone call, which drew a nuclear reaction from Neill.

Now, the first thing that went through Burns’ mind after that August LSBC  meeting entailed training he received in Arlington, Virginia during his tenure as a Federal Government Fraud Investigator.  The training Burns received conveyed that conduct such as Neill’s explosive temper depicted above simply is not normal or rational.  Essentially, it would be as if an FDIC bank examiner classified a very minor commercial loan as “substandard,” and the loan officer exploded in inexplicable anger over the classification.  Being blunt, that sort of conduct is inexplicable on its surface and must be investigated beneath the surface to try and identify the underlying cause.  Accordingly, Burns began to dig into what may be behind Neill’s very obvious anger issues.

What he uncovered is the fact that Neill, who had actively pushed for an additional 250 hours of instruction to be crammed down cosmetology students’ throats for an “advanced” esthetician designation (with Burns and three active estheticians playing a very active role in defeating the bill Neill pushed so hard to pass), just may have needed the added school revenue to offset financial stress he may be facing at his Aveda schools and/or Aveda products distribution.

Why do we say that?  Because it certainly would not be the first time Neill experienced extreme financial distress entailing his business operations.  In fact, from the time period of 2008 – 2009, Neill’s financial operations were in such dire straits that, by his own admission, his main lender, Chase Bank, would not advance further credit to his companies.  As any financial analyst will quickly inform folk, whenever a company faces a liquidity crunch, it has got serious problems and may experience extreme difficulty simply paying its bills.

Neill became so financially stressed that, in 2010, he ended up seeking the assistance of Thomas Petrillo, founder of The Salon People (TSP) and TSP Consulting.

Neill, who is and has been an Aveda distributor since 1979, owns numerous Aveda Salons which operate under the name of Paris Parker Salons, and he and his companies also own The Aveda Institute, which is a large cosmetology school headquartered in Hammond, Louisiana and with locations in Baton Rouge, Covington, Hammond, Lafayette, and New Orleans.  Through another Neill Company, BBI, he owns several beauty schools in other states.

At the time of Neill’s father’s death in 2004, Petrillo even served as an outside director for Neill Corporation.  Neill, with fellow company principal Debra Neill Baker, enjoyed a long-standing business relationship with Petrillo.  Petrillo, in turn, was a former Aveda executive who launched his own operations in Florida (The Salon People) which serves as the sole distributor for Aveda products for the entire state of Florida.

As stated above, both Neill and Petrillo both admit that Neill Corporation suffered severe financial distress in 2010.  As a result, Neill reached out to Petrillo basically for financial salvation.  The result was an agreement between the two wherein Petrillo, through TSP Consulting, would be able to benefit Neill Corporation by, according to Neill, “advancing Neill Corporation’s relationship with Aveda.”

The extensive consulting agreement executed by the parties was pretty exhaustive, and it literally shifted daily operational control of all of Neill’s entities to Petrillo.  Neill’s agreement with Aveda was to run through June 30, 2019, and Petrillo’s number one goal, according to Neill, was to ensure that the agreement with Aveda was extended.

Petrillo, for his part, asserts that he was instrumental in reversing the dire financial straits of Neill Corporation and that, through his efforts, Neill Corporation and its companies, “are now very successful financially.”  Petrillo touted the formation of a joint website, Neill-TSP, that utilized the combined strengths of the two companies working together.  It should be noted, however, that Petrillo emphasized the importance of him (Petrillo) serving as CEO of each Neill company.

Now, according to Petrillo, during the difficult financial times, the Neill Corporation owned and operated a distribution and fulfillment center where products were stored and subsequently shipped to their customers. TSP also used this distribution center and paid its share of the associated costs. That fulfillment center needed renovation and upgrading, which would require a significant capital investment. With Neill Corporation distributor agreements set to expire in four years, it was in Neill Corporation’s best interest for Petrillo to seek assurance that Neill Corporation would be able to continue to distribute Aveda products for a longer period of time before Neill Corporation committed the necessary capital investment to improve the distribution center.

At a principals’ meeting at Debra Neill Baker’s house on October 21, 2014, the Neill Principals and Thomas Petrillo agreed that they would jointly seek an extension of their respective distributor agreements. They further agreed that Thomas Petrillo would discuss that proposal with the leadership of Aveda the following week.

According to Petrillo, when he subsequently discussed the matter with representatives of Aveda, they expressed some concerns about the proposal and informed him that approval would probably be conditioned on a requirement that the extended distributorship arrangement be structured in a manner where Petrillo had control.

Petrillo contends that he kept Edwin Neill and Debra Neill Baker (as the majority Neill shareholder) and the other Neill shareholders fully informed of his conversations about extending the distributorship agreement throughout the process; nevertheless, he contends that Edwin Neill and Debra Neill Baker ultimately rejected Petrillo’s proposal.

Irrespective of whether or not Petrillo has ever heard the term “no good deed goes unpunished” or not, he found out a mere 148 days after the aforementioned meeting at Debra Neill Baker’s house when, on March 18, 2015, Neill sued Petrillo in 21st JDC, alleging, in essence, that Petrillo was engaging in “self dealing” and essentially attempting to conduct a “hostile takeover” of Neill Corporation’s distributor agreement.

Before we go any further, we want to dispel a myth.  We’ve been informed that many legislators believe that the Louisiana Cosmetology industry is small-time.  While there certainly are smaller salons, spas, and schools, the industry is dominated by heavy hitters.  Neill is one of those “heavy hitters.”  For evidence of that fact, let’s pull out just one term defined in the consulting agreement referenced above and included as an exhibit on the just-linked lawsuit:

“BBI Threshold Amount” means Eight Million Five Hundred Thousand and No/100 Dollars ($8,500,000.00).

Now, that’s a substantial amount of money, no?

Also, as a quick accounting primer, an outside auditor has a very serious obligation to those parties whom the auditor knows may rely upon its statement to ensure that an entity has an ability “to continue as a going concern.”  What does that mean?  It typically means the auditor must assess an entity’s ability to meet its financial obligations over the next year.  If auditors have serious questions about an entity’s ability to “continue as a going concern,” they have a duty and obligation to so note that fact in any opinion rendered on the statements of the entity.  It is a serious red flag to investors and, if the company is publicly traded, such a pronouncement that the entity under audit is “unlikely” to continue as a going concern or “may be unable” to continue as a going concern unless some specified action or event transpires, it typically triggers a T-total tank in the company’s stock price on the day the auditor makes such an announcement.

With that accounting primer out of the way, let’s take a moment to highlight another definition in the consulting agreement at this time, with the term being “available cash”:

“Available Cash” as of any date means the amount of cash in excess of the amount needed by the Neill Companies to avoid jeopardizing the ability of the Neill Companies to continue as a going concern, which amount the Parties agree shall be determined as follows:
(a) all funds that are on deposit with a financial institution and that are readily available for withdrawal or other use by any Neill Company on such date, provided that such withdrawal does not place any Neill Company in default of applicable loan covenant
requirements under the 2010 Bank Credit Facility; less
(b) amounts accrued as of such date for federal, state, and local taxes, including payroll taxes and sales taxes; and less ·
(c) the amount, if any, that the Neill Companies must pay to third parties to become current as of such date with respect to (i) the debt service owed by the Neill
Companies under the 2010 Bank Credit Facility, and (ii) the Neill Companies’ accounts payable;
and less

(d) cash reserves or lines of credit reasonably established by the Neill Companies, in an aggregate amount of up to Five Hundred Thousand Dollars ($500,000.00). Except as otherwise agreed by the Parties, such Available Cash amount shall be determined in accordance with past accounting practices, consistently applied.

The above definition of “available cash” should speak for itself, so we’re not going to provide further commentary on it.

Now, who were the attorneys who filed suit representing Neill?  Well, that would be Randall Smith (of Fawer and Smith, LLC) and, more importantly, State Rep. Sherman Mack (R-Albany).

Longer-term Sound Off Louisiana subscribers will recall it was Mack who, accompanied by Neill, came across  as appearing to be a bumbling idiot in his efforts to collude with Neill to cram a 40% licensing fee increase down cosmetologists’ throats.  Mack initiated that attempted fee increase a little over two years after having filed the suit representing Neill Corporation against TSP.  The efforts of Mack and Neill were defeated entailing obtaining that massive increase in income for the LSBC!

Now, Petrillo, through his high-powered attorneys (Jones-Walker in New Orleans), easily recognized the “home cooking” that Neill and Mack were attempting to pull off in filing in 21st JDC (where Mack’s close ties with 21st JDC judges has been well exposed), as evidenced by the link two paragraphs above, wasted little time transferring the matter to Federal Court (Eastern District in New Orleans).

Petrillo wasted little time filing this answer and countersuit against Neill.  It’s a very interesting read, but perhaps even more of an interesting read is this Motion to Compel Discovery Responses filed by Petrillo against Neill.  An attorney files a Motion to Compel whenever informal efforts to resolve differences (e.g. telephone conferences between the attorneys) regarding obtaining discovery material prove fruitless and therefore intervention by the court is deemed necessary by the moving party (Petrillo in this instance).  Let’s take just a moment to view a few of Neill Corporation’s responses to Interrogatories supplied as part of the Motion to Compel, shall we?

INTERROGATORY NO. 7:
Identify and describe in detail the financial difficulties that you claim you experienced during 2008-2009, including in your answer the reasons therefor.
ANSWER TO INTERROGATORY NO. 7:
BBI objects to this Interrogatory as not reasonably calculated to the lead to the discovery of admissible evidence. Subject to and without waiving this objection, BBI answers as follows:
In 2009, BBI was experiencing a cash shortage and an inability to obtain credit because of the financial crisis that began in the fall of 2008.

INTERROGATORY NO. 8:
Identify and describe in detail the financial difficulties that you claim you experienced during 2008-2009, including in your answer the reasons therefor.
ANSWER TO INTERROGATORY NO. 8:
Neill Corp. objects to this Interrogatory as not reasonably calculated to the lead to the discovery of admissible evidence. Subject to and without waiving this objection, Neill Corp. answers as follows:
In 2009, Neill Corp. was experiencing a cash shortage and an inability to obtain credit because of the financial crisis that began in the fall of 2008.

INTERROGATORY NO. 7:
Identify and describe in detail the financial difficulties that you claim you experienced during
2008-2009, including in your answer the reasons therefore.

ANSWER TO INTERROGATORY NO. 7:
Neill Tech. objects to this Interrogatory as not reasonably calculated to the lead to the
discovery of admissible evidence. Subject to and without waiving this objection, Neill Tech.
answers as follows:
In 2009, Neill Tech. was experiencing a cash shortage and an inability to obtain credit because of the financial crisis that began in the Fall of 2008.

INTERROGATORY NO. 7:
Identify in detail the financial difficulties that you claim you experienced during 2008-2009,
including in your answer the reasons therefor.
ANSWER TO INTERROGATORY NO. 7:
Vital objects to this Interrogatory to the extent it assumes that TSPC’s breaches of the Consulting Agreement were susceptible to cure and/or that such opportunity needed to be afforded TSPC. Subject to and without waiving this objection, Vital answers as follows:
In 2009, certain of the Neill Entities were experiencing a cash shortage and an inability to obtain credit because of the financial crisis that began in the fall of 2008.

Sure does sound like, by Neill’s own admissions in the above interrogatories, that his companies were in dire need of a financial savior, no?

Now, on April 18, 2016, U. S. Judge Jay Zainey basically chastised both parties similar to the way a parent would chastise a child throwing a temper tantrum.  As we read the ruling, we couldn’t help but recall Neill’s temper tantrum depicted in the video above!  Let’s take a moment to highlight a few of Judge Zainey’s comments, shall we?

What started as a simple and straightforward case in state court is now a morass of counter-claims and third-party demands which evince the parties’ desire to harass each other in any way possible including via this litigation. Beauty Basics, Inc., Vital Information Systems, Inc., Neill Technologies, Edwin H. Neill, III, Thomas C. Petrillo, and TSP Institute, Inc. have all been joined as additional parties in this case. In response to the plethora of allegations and claims that have been made, the parties now call upon the Court to test the legal validity of each claim that every other party in the
case is asserting against them.

On July 2, 2015, the Court granted the parties’ joint motion to stay the litigation and close it so that the parties could engage in settlement negotiations.   The Court was encouraged by the reasonableness of this course of action because this case is one that should settle for business reasons.

On November 14, 2016, both parties heeded Judge Zainey’s admonition to settle the matter, and the matter was formally dismissed after God only knows how much each side spent in attorney fees.

The Neill-TSP website referenced above (which indicates Neill Corporation has exclusive Aveda distributor rights in Texas, Oklahoma, Arkansas, Louisiana, Mississippi, Tennessee, and Alabama) depicts the two entities still being partnered and collaborating with one another.  Of course, there’s no way to know to what degree Petrillo may “call the shots” since the settlement terms of the litigation above aren’t public.  Common sense, however, would dictate that the relationship may not be the coziest in the world after the bitter litigation outlined above.

So, according to the Interrogatory responses supplied above, the credit crunch apparently caused extreme financial stress for Edwin Neill, Neill Corporation, and all of its affiliates.

Perhaps if Neill may be experiencing financial stress again, he may feel compelled to continue his dogmatic efforts to cram the 250-hour added coursework down students’ throats for the “advanced” esthetician designation to further boost tuition payments to his schools in Louisiana.

Of course, Neill just may be concerned that this review site of Aveda isn’t very flattering with a staggering 63% of 114 respondents rating Aveda as “bad” (with only 24% rating Aveda as “excellent” or “great”).  Let’s cite Farlda Hosein’s recent review as an example, shall we?:

Usually had awesome experience with them over the years. Been cutting my hair here for 10+ years. Went back today after covid and growing out my hair for a while. Left less than pleased. My hair looks and feel like it needs a good washing. It’s heavy and sticky with styling product, looks oily and feels dirty. I did not leave with a happy clean bouncy styled head of hair. My hair cut itself lasted less than 10min. I was scheduled for 330p and seen at 350p. What I experienced was a mad rush job with a less than 10 min haircut and two people blow drying my hair at the same time to get me out the door as Closing was 430 it seems.
It took 3 shampoos to my hair to get to lather, then I was able to wash the gook that is Avada’s styling product out of my hair. I blow dried and style, voila ! A healthy shiny light head of hair. Poor layering and the ends weren’t cleaned up, but i suppose it could have been worse.
I wont be back.
Edit:7/27 Aveda corporate contacted me right away because of my google review. Asked for info and that was that. It’s been two weeks, the store never followed up, neither did they. But with the large number of horrid reviews I see that they have been getting, I am not surprised.
They don’t care.
One star for all around bad service.

We can only attest to two facts:  #1) without Neill’s explosive temper depicted in the video above, Burns would have never even bothered trying to investigate via PACER searches why anyone may even possess that type of temperament (again recalling from his FDIC training in Arlington, Virginia), and #2) the “committee” being formed to advance that Neill failed 2021 initiative is on the agenda for the October 11, 2021 meeting of the LSBC.  The long-term goal of this “committee” is to pass legislation in 2022 to require the additional coursework which, obviously, would directly benefit Edwin Neill personally!

We’ll be there to see if Neill’s temperament has cooled to any meaningful degree from what it was at the last meeting of August 2, 2021, and we’ll report on that meeting soon after its conclusion!

Before we wrap up this feature, however, we need to address one more issue, and that is the ongoing litigation which the Institute for Justice (IJ) filed against the LSBC regarding hair braiding.  As we previously reported, IJ’s Lee McGrath attempted to work with the LSBC to avoid litigation.  However, as we reported, the LSBC members let McGrath’s words to them go in one ear and out the other, thus triggering the litigation.

Little was noted to have transpired in the public filings entailing the lawsuit since its original filing on June 20, 2019.  That all changed on September 10, 2021, however, when IJ filed this Motion for Summary Judgment.  When one party files a Motion for Summary Judgment, it is asserting that there are no issues of material fact existing in the matter and that the moving party (IJ in this instance) is entitled to a judgment in its favor as an operation of law without the need for a trial.  IJ is posing just such an argument in the just-linked Motion.

As of the date of this publication (Tuesday, October 5, 2021), Judge Wilson Fields has not yet set the matter for a hearing.  Once he does, IJ will pose oral arguments supporting its Motion, and the LSBC will pose its own oral arguments (after first submitting an Opposition Memorandum no less than eight days prior to the hearing) for why it feels IJ’s Motion should be denied.

Again, we’ll be at Monday’s LSBC meeting to gauge Neill’s temperament and report on any developments thereof.

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