Frisch’s Restaurants Inc. is accusing one of its former top executives of a massive and systematic theft, claiming he stole at least $3.3 million over the last seven years.

On Tuesday, the nation’s largest Big Boy franchisee said in a regulatory filing that it has filed a civil lawsuit against Michael Hudson, its former assistant treasurer and 35-year company veteran, accusing him of embezzlement.

The Walnut Hills-based company says it discovered the alleged theft in late December after an internal audit revealed cost discrepancies. It also disclosed findings of an internal investigation to the U.S. Attorney’s Office in Cincinnati last week for potential criminal charges.

CEO Craig Maier says the alleged theft has rocked the close-knit company. A beloved local restaurant chain for decades, generations of Cincinnatians remember growing up eating at their neighborhood Big Boy.

At the corporate offices, Hudson was unassuming, but helpful and occasionally sent coworkers pictures of jackpots he won at the Horseshoe Casino. Unbeknownst to colleagues, some years he allegedly embezzled so much he took home more than the CEO.

“It’s like a family member did this to you,” Maier said. “You take it personally. You wake up in the middle of the night and say ‘I can’t believe he did this to us – to me.'”

The scandal comes as Frisch’s looks to reignite growth and investors have showed renewed faith in the company.

Maier is skeptical the company will recover any of the missing money, but doesn’t believe it will have to restate results.

Frisch’s expects theft by some employees. It fires workers every week for stealing – usually a cashier with sticky fingers or wait staff that neglects to charge friends. But Hudson’s alleged theft was in a whole other league.

Maier says the alleged embezzlement was so large it lowered company profits by about 5 percent over seven years. In the last seven years, Frisch’s has booked annual profits from $2.1 million to $10.7 million.

A helpful coworker who didn’t stand out

Frisch’s officials say there were no red flags about Hudson. He started at the company before graduating from the University of Cincinnati and spent his whole career in the accounting department. He steadily rose to become assistant treasurer in 2004.

For over a decade, he was one of the top nine corporate officers at the restaurant chain that operates 96 diners in Ohio, Kentucky and Indiana and employs 6,100 workers.

A few coworkers in accounting knew he gambled occasionally because he sent them pictures from the Downtown casino.

Still, Hudson didn’t drive a flashy car or live in a lavish home. He blended into Frisch’s low-key atmosphere at corporate headquarters on the second floor, which also includes advertising, operations and the IT department. He had his own office, but like most top officers, he mostly kept the door open.

“He’s like every accountant you ever met: boring,” Maier says.

But Hudson was also helpful: somehow he ended up doing some of the work for colleagues that might have exposed his alleged theft.

Frisch’s officials are also still trying to figure out how Hudson allegedly managed to program the company’s payroll computer to pay himself hundreds of thousands extra annually. The company says he then hid the depleted cash by allegedly forging internal and vendor statements to show higher costs at store operations.

The missing money wasn’t noticed by Frisch’s because they were recorded as expenses spread throughout the year and across almost 100 stores.

Frisch’s says Hudson was allegedly stealing about $500,000 a year.

Discrepancies, then millions found missing

A routine review of records in mid December uncovered discrepancies. A new worker conducting a internal audit got credit card transaction records from the processing company that did not jibe with Hudson’s records.

A Dec. 27 meeting was scheduled to figure out the discrepancies. Hudson abruptly resigned five minutes before the meeting, turned off his computer and left.

Frisch’s scrambled to investigate. An initial review suggested hundreds of thousands of dollars were missing. Then it was millions.

In a January meeting, Frisch’s officials say Hudson admitted to auditors and a private investigator he took the money – he lost track of how much.

He said he worked alone. He was also broke.

Hudson claimed he gambled it all away, Maier says.

But Frisch’s officials think the money might not have all been lost gambling.

Maier says auditors discovered thousands of dollars of withdrawals from his personal accounts at the Horseshoe Casino Cincinnati. But they also found Hudson purchased more than $400,000 worth of land and some jewelry.

Through its lawsuit, Frisch’s plans to subpoena Horseshoe Casino video and other records to determine how much Hudson lost there. Company officials suspect Hudson might have used gambling as a cover to hide money he spent elsewhere.

Criminal charges have not been filed against Hudson.

Getting back to selling hamburgers

Frisch’s officials are still looking for missing money, but hope the damage is done. It’s unclear how shareholders will react or if regulators might take some action.

So far this year, Frisch’s stock has outperformed full-service restaurant chains rising 5.2 percent to $27.63 as of Friday’s close. The chain has seen more investor interest since 2012 when it sold off its unsuccessful Golden Corral operations.

Maier says Frisch’s has already made changes to its accounting procedures and will make additional improvements after auditors and investigators complete their work.

If Hudson failed to report all his income to the Internal Revenue Service, the tax agency would be first in line to collect from recouped funds.

Frisch’s officials say the company will cooperate with the U.S. Securities and Exchange Commission in what is expected to be a thorough review.

Maier says one silver lining is Frisch’s has been advised by its forensic accountants from Deloitte the restaurant chain won’t have to restate it financials or record any charges. That’s because Hudson already booked his alleged theft as an expenses.

Had Hudson booked tons of bogus assets, such as buying non-existent equipment expenses, Frisch’s would have had to restate financials – potentially triggering months of expensive regulatory review.

Looking ahead, Maier says Frisch’s operations are running smoothly. Sales are up for the 12 months ending September 2014 and the company is virtually debt-free.

“We want to get back to selling hamburgers now that I don’t have a thief on the payroll,” Maier says.