Commercial PropertyDid MLSNI Directors, Shareholders Read The Same Audit Report?
MLSNI Directors should have known that the PriceWaterhousCoopers Report of Investigation would not be swept under the rug without a fight for the broom, but what"s interesting is how shareholders disagree on what"s dirty.
In April, 2004, MLSNI shareholders had requested a forensic audit of MLSNI, its holdings, and its CEO Jay Huffman. The Report was delivered to the board of directors and shareholder representatives the first week of August. But in-fighting suggests that the board members failed to reach the same conclusions from reading the Report.
Some wanted to discontinue the audit as a waste of money. Others want heads to roll.
According to meeting minutes, Earlene Williams, AE of West Towns, denounced the Report as a "personal vendetta" by some shareholders against MLSNI CEO Jay Huffman. She accused some associations of acting in collusion "and appear to be forming a conspiracy to unlevel the playing field at the command of big brokers."
"They are reacting to threats of big broker membership loss and not acting in the best interest of the largest part of their membership and MLSNI," she said, according to the minutes.
Another AE with the Aurora Association questioned the validity of the Report because of the limited number of interviewees.
On the other hand, the Chicago Association of Realtors read a resolution which included a number of recommendations to the board.
Hold a special meeting as soon as possible;
Terminate Mowery & Schoenfeld, LLC as auditors for the company (MLSNI);
Terminate Miller & Cooper as its public accounting firm (MLSNI);
Terminate Robert T. Cichocki and Arnstein & Lehr as corporate counsel for the company;
Cause its wholly-owned subsidiary, Multiple Solutions, Inc. ("MSI") to make written demand on REBIG"s Board of Governors to obtain for MLSNI, as a member of REBIG, monthly financial statements and other related information bearing on the business and financial condition of REBIG and its affiliates, investors, and officials;
Cause MLSNI and MSI to discontinue all further funding of REBIG unless and until REBIG provides MSI with copies of the REBIG financial statements and such other business and financial information that MSI has requested from REBIG pursuant to the REBIG Operating Agreement or otherwise;
Request that the board resolve all issues regarding Jay Huffman and the activities of REBIG and related parties.
Joan Berngen, MLSNI shareholder representative for the REALTOR(r) Association of West/South Suburban Chicagoland read to the assembled directors and shareholders on August 8, 2004 a prepared statement which asked a number of questions that suggested that the MLS had strayed far afield of its duty to provide services that members want and understand.
"We embarrass ourselves with these disagreements," she stated. "Let"s think about questions the members would ask of us if they had seen this report. We are all responsible to our members."
Among the questions Berngen proposed:
When we authorized the start of this research and the original consultant contracts, was anyone certain about the actual direction this research was pointed?
Were the contracts viewed by the Board, and the monies spent for the hours spent, truly understood and necessary for the function of the MLS?
Would the members feel comfortable that we authorized this research, without knowing the money we would spend on it? (approximately $2.2 million, according to the audit report.)
Would the members feel comfortable with the fact that we did not do an outreach to the "researchers" available to run the project, instead of choosing from a pool of one - the CEO"s wife?
Would the members feel comfortable with the money we spent on that person, if they saw her salary for the total sum of the consultant agreement? ($282,630 total compensation, according to the audit report.)
Would the members feel comfortable with the fact that we at MLSNI did not own the intellectual property rights after we spent that kind of money, and that it later went into REBIG as property of the consultant? (After we were the ones that paid for the time and resources to research it?) Why did the intellectual property rights go to the consultant, instead of the founding company? (Ms. Huffman through Dona LLC received intellectual property interest which was contributed to REBIG in the amount of $155,838, while MLSNI which paid for the business plan development of REBIG received a value of $31,168 for its half of the intellectual propert, according to the audit report.)
When REBIG was formed - who negotiated on MLSNI"s behalf?
Who decided on a salary for the CEO in an experimental company that exceeded the salary in our multi-million dollar functioning company? ($315,000 annually for Ms. Huffman, Jay Huffman earns $206, 818, according to the audit report)
Which of the BOD at MLSNI at the time asked those questions, as this MLSNI got more and more complex, so complex that we had to start subcorporations that we would have little or no control over?
When all this was going on, and money was flying out the window, who did we put our trust in to lead us and advise us?
Is this what our members want?
The board of directors met on August 25, 2004 to discuss shareholder concerns but it was clear that the board was in confusion about what to do.
While the Aurora Tri-County, McHenry, Fox Valley and West Town Associations voted to cease the audit without a final report, the Chicago, North Shore Barrington, Northwest, West/South Suburban and Three Rivers Associations opposed. Neither Huffman nor the attorneys were removed, and the board voted to review the services of its accountants.
The Realtor Association of West/South Suburban Chicagoland contacted an attorney and has demanded to inspect and copy books and records of MLSNI.