Commercial PropertyREBIG Blasts Realty Times, Shareholder Members Who Called For MLSNI Audit
REBIG is upset by the forensic audit called for by MLSNI Chicagoland shareholders and wants the recipients of its "Update for Licensing MLSs" update to know that the audit is an "ill-informed and careless action hastily taken; at worst; it was an outrageous and malicious action taken to further a political or anti-competitive agenda."
The organization chastises the North Shore-Barrington Association of Realtors and its shareholder representative for making the motion to pursue a forensic audit. "This motion for a forensic audit was advanced and approved even though no factual allegation or evidence of any wrongdoing by Mr. Huffman, MLSNI or any entity affiliated with Mr. Huffman or MLSNI had been identified," said the update.
Editor"s note: According to information provided to Realty Times at the time of the initiation of the forensic audit, the audit was called for because of irregularities with regard to the lateness of financial reports due to MLSNI shareholders, which included two quarterly reports and an annual report which were months overdue.
Explained Huffman to Realty Times in April, 2004, "The audit was late, which delayed the end of year financials and first quarter financials. All have been distributed to the shareholders. The audit was received 2 days after the shareholder meeting of April 6th."
REBIG also takes a certain Internet real estate news service to task.
"Those who called for the audit did so without specific allegations or wrongdoing and no rational reason to do so," writes REBIG. "Some of the MLSNI shareholders and an internet industry publication deliberately and maliciously reported REBIG was not cooperating with the audit process which they all were fully aware was false and misleading information. These parties have reported false and misleading information regarding REBIG over and over again."
Editor"s note: REBIG was asked for interviews repeatedly and its responses were included generously in Realty Times" coverage of the situation. Numerous questions put to the company were never answered.
That aside, REBIG requested a nondisclosure agreement be executed with regard to release of REBIG confidential and proprietary information, which PriceWaterhouseCoopers, the auditing firm was instructed by MLSNI shareholders not to sign.
While the forensic audit report did not reveal any fraud, it did uncover enough information that the Chicago Association of Realtors sent out a press release following the shareholder meeting a week after the report was issued. "Representatives indicated that even at this stage, it is safe to say that the audit report raises several issues that will require quick and decisive action," said CAR after reviewing the report.
Of concern is the relationship between MLSNI CEO Jay Huffman and his wife, Brenda Huffman, CEO of REBIG.
"The audit report seemed to be more about the inferred relationships of the principals of REBIG and MLSNI and the relationships of vendors providing services to REBIG and MLSNI than reporting any fraud whatsoever. Since Brenda Huffman and Jay Huffman have both had highly successful careers in real estate-related fields for over 20 years each, it is fair to think that they both have generated relationships with most of the industry leaders from all over the US. If the criteria for possible conflict-of-interest is any executive can not do a business deal with anyone they have known previously in the industry, than there is no MLS or commercial venture in the country that is capable of putting together business with anyone who has a career in our industry, or they have worked with prior to today, or they have known from any other company at any other time in the last 20 years. We can all agree this is ridiculous. It is obvious the auditors did not understand the reality of our industry," writes REBIG.
Editor"s note: According to the findings of the audit, the term "sweetheart deal" was taken to new levels by the Huffmans.
According to the auditor"s report, MLSNI hired Mrs. Huffman on April 5, 2002 to "develop, administer, and provide final analysis and recommendations for a feasibility study project for MLSNI to determine the opportunities available for Multiple Solutions, LLC (also headed by Mr. Huffman) in the real estate information industry relating to business development and revenue potential....Compensation: $21,000 upon execution of the agreement and $13, 335 per month for six months and $25,000 upon completion of the agreement." (total: $282,630)
The auditors said they did not find "any discussion related to Ms Huffman"s Consultant Agreement in the Board of Executive Committee minutes provided to us. According to Mr. Huffman, the hiring of consultants is not always presented to the MLSNI Board for a vote as such decisions are within his authority as CEO.
"On October 7, 2002, the Huffmans signed an Extension to the Consulting Agreement (Appendix 5 of the audit) which directed Ms. Huffman to finalize the business plan for REBIG, negotiate Product Partner contracts and supervise implementation of the REBIG corporate structure and MLS Marketing Plan."
Included was this statement: "MLSNI shall insist to REBIG that Consultant ( Ms. Huffman) is offered the position of CEO of REBIG prior to the execution of REBIG"s final documents by MLSNI or Multiple Solutions, Inc. at a salary of no less than she is currently making and negotiated override, benefits, and other. A verbal offer of the CEO position was extended to Consultant by David Charron (11) on behalf of REBIG on September 12 in accordance with a vote and approval and authorization by the Founding Associates (12) of REBIG."
Jay Huffman, board member of REBIG abstained from the vote, according to the REBIG update, which failed to mention the statement above.
The audit says, "We did not find any discussion related to Ms. Huffman"s amendment/extension to the Consultant Agreement in the Board of Executive Committee minutes provided to us. As indicated above, Mr. Huffman stated that not all agreements for consulting services are presented to the MLSNI Board for a vote and that he had been instructed by the Board to negotiate with Ms Huffman around the Consultant Agreement and Extension."
Despite concerns by the shareholders of the MLS that put REBIG into business with over $1 million in investment for a majority stake, the multiple MLSNI board members who voted for a forensic audit, and the results of the audit itself, REBIG maintains, "The basis for the forensic audit was to willfully and maliciously destroy the reputation and successful 20+ year career of the MLSNI CEO who was looking out for the interest of a majority of members instead of a few with loud voices and dissenting opinions. The basis for the forensic audit was to willfully and maliciously destroy the reputation and successful 20+ year career of the REBIG CEO and to destroy the reputation and success of REBIG."
REBIG writes that it has been "target of the before-mentioned Internet industry publication and more specifically one reporter within this organization who repeatedly, without proof or any real confirmation of fact, reported allegations and innuendoes. These false and misleading news articles by a sensationalist author on behalf of a real estate "news" Internet site, has caused several MLSs in the process of licensing to take a wait-and-see attitude. With this irrational audit process behind MLSNI and REBIG, the REBIG business plan can now rapidly move forward as evidenced by movement from both Product Producers and MLSs in the licensing process."
Editor"s note: According to the auditors" report, REBIG"s compiled "financial statements as of December 31, 2003, report revenue of approximately $34,000 and expenses of approximately $2.1 million, including depreciation and amortization expense of approximately $576,000, since inception at May 7, 2203 PwC (the auditor) has questions regarding the status of the business and financial condition of REBIG as a result of reading the compiled financials. One of our specific questions related to the difference between the REBIG loss through Dec. 31, 2003 - the loss is disclosed as approximately $1 million in MLSNI audited financials, but was reported by REBIG at approximately $2 million. As discussed in the Detailed Findings, Mr. Huffman was not able to explain this apparent discrepancy."
With questions remaining, the MLSNI board on August 25, 2004 voted down most of the requests put forward by some shareholders including the Chicago Association of Realtors to end MLSNI"s relationship with the counsel who represented MLSNI, Multiple Solutions LLC and REBIG at the beginning of the relationship, nor did the board take any action against Mr. Huffman or curb his authority to continue managing the monies of MLSNI and Multiple Solutions, LLC, the subsidiary that loaned money to REBIG.