Defrauded O.C. Piano Distributor Wins $3.36 Million

WESTMINSTER — Former piano distributor Vernon Schafer Jr., who sued the U.S. affiliate of giant Daewoo Group for allegedly destroying his business, won a $3.36-million jury verdict Thursday and the right to seek more in punitive damages.

An Orange County Superior Court jury found that Daewoo International (America) Corp. had defrauded Schafer and ruined his once-thriving Schafer & Sons Piano and Organ Co. in Santa Ana.

The jury also found that Daewoo America’s conduct was “oppressive, malicious or fraudulent,” giving rise to punitive damages. The jury will hear evidence today on punitive damages and determine the amount owed.

“For Mr. Schafer, the jury did what we asked: It put honor back in a handshake,” said his attorney, Ronald Rus of Irvine. “In America, if you make a promise, you should be bound by that promise. It doesn’t matter how big you are.”

Lawyers and executives for Daewoo America, a subsidiary of South Korea’s giant conglomerate Daewoo Corp., were not available for comment.

Schafer had accused Daewoo America of a scheme to take over his business. In 1989, when it entered into a contract with Daewoo, Schafer & Sons had $20 million in sales and was known for distributing affordable, quality pianos.

Schafer charged Daewoo America wrongly drew down his line of credit, reneged on promises to supply him with quality pianos, refused to service the pianos and continued to use the Schafer & Sons name without his consent for at least two years after his company fell into bankruptcy in 1991.

During the eight-week trial, witnesses testified that Daewoo wanted to use Schafer & Sons, which started selling pianos in 1955, to grab and build a large chunk of the U.S. market for itself.

Schafer, who lives in Anaheim, tried to start over with a new venture, Ruston Music Corp., but the jury found that Daewoo America’s conduct scuttled that effort as well.

The jury awarded Schafer $2 million on a fraud claim plus punitive damages to be determined, and $1.25 million on a claim of negligent misrepresentation. It awarded Ruston $112,500 on a fraud claim, plus punitive damages to be determined.

Daewoo America, based in Ridgefield, N.J., is the main conduit for its parent company’s products.

Daewoo Corp. in Seoul, one of Asia’s largest industrial behemoths, accounts for 8% of South Korea’s total exports. Through its 38 subsidiaries, it makes home computers, industrial machinery, steel and steel pipe, woven textiles, shoes, luggage, chemicals and pianos, under the Sojin label.

It also is involved in automobile production, trading, construction, shipbuilding, aerospace and financing. It recently outbid General Motors Corp. for the right to take over a Polish car company.

Both Daewoo America and Daewoo Corp. pleaded guilty 10 years ago in federal court in Los Angeles to various criminal fraud and conspiracy charges for illegally importing South Korean steel.