Commercial PropertyREBIG Responds To Realty Times Coverage Of MLSNI Audit
Attorneys associated with REBIG have written Realty Times expressing their displeasure with a recent story, "REBIG Bluffs MLSNI Forensic Auditors, MLSNI Shareholders."
Dennis W. Fried is representing his client, the Multi Regional Multiple Listing Service, Inc., when he writes, "Regarding Blanche Evans article on REBIG and MLSNI, I am once again sorely disappointed that her zeal to be an "investigative reporter" has overwhelmed her objectivity as a true journalist. REBIG is a Limited Liability Company owned by five MLSs around the country, not just MLSNI. The money to start REBIG came from those five MLSs who own all the membership interests. I represent the Multi Regional Multiple Listing Service, Inc. in Southern California, one of the five REBIG owners. The owners of REBIG, through their representatives (that Board of Governors so easily dismissed in the article), are charged with the responsibility for running the Company with REBIG’s best interests in mind. REBIG, as a separate company has a responsibility to all its owners, not just MLSNI. Moreover, the confidentiality sought by REBIG is a STANDARD procedure designed to guard the intellectual and proprietary rights that every company is entitled to in our market driven environment. If one subscriber to Realty Times sought internal financial information on your company’s operations, would Realty Times be so eager to “open its books” and let them have a look?? Rather than presenting the “opinion” of the attorney for MLSNI, who is obviously trying to serve different masters in the audit and investigation, why not talk to some attorneys in Illinois who represent LLCs and ask them what they would expect REBIG to disclose without a confidentiality agreement if they were representing REBIG? That might be a good place to start."
He continues, "I am not authorized to speak on REBIG’s behalf except to the extent of MRMLS’ ownership interest which is comparable to the ownership interest of MLSNI through its Multiple Solutions subsidiary. Obviously, I’m not trying to hide anything. I will tell you that the Executive Director of MRMLS sits on the REBIG Board of Governors and makes monthly reports on REBIG’s activities to MRMLS Board. MRMLS’ Board has also met with Brenda Huffman and Ken Duke in the last few months and questioned them extensively on REBIG’s operations and plans relative to MRMLS ownership interest. MRMLS signed a confidentiality agreement with REBIG (as did all investors and affiliated entities) which, as I mentioned in my last email, is a standard practice in business. Finally, while I agree that my Realty Times subscriber example may not seem to you to be equal to the MLSNI investment, how about an investor who owns $5 million in General Electric stock? Does he have a right to demand that GE open its books to his auditors to determine if the company is making good choices and then go to the press with the results? I think not, and that’s a “public” company. REBIG is a private company, and although the owners may have a right to know what’s going on, you do not. I question your motives and who you are trying to “help”. Thanks for your email."
REBIG attorney Jaffrey S. Piell also expresses displeasure at editor Blanche Evans and her "unnamed sources" over the handling of REBIG"s response to MLSNI auditing requests to look into REBIG"s affairs.
To read the full text of the letter, click here.
"REBIG has agreed to cooperate with PWC in the MLSNI audit to the fullest extent possible while abiding by its pre-existing confidentiality obligations to the licensing MLSs, product producers, potential product producers, shareholders and employees with whom REBIG is affiliated," clarifies Piell. "REBIG has offered to provide PWC access to extensive documentation, including its Board of Governors minutes, quarterly financial statements, tax returns, bank statements and contracts with MLSNI and Multiple Solutions LLC, at REBIG"s facility at a date and time agreeable to PWC.
He continues, "To be clear, MLSNI owns Multiple Solutions, which is just one of five shareholders of REBIG, a privately held company. MLSNI is an investor; it does not operate or otherwise control REBIG. MLSNI"s shareholders sought a forensic audit of MLSNI, not REBIG. Indeed, MLSNI"s shareholders have no authority to call for a forensic audit of REBIG. Nonetheless, as part of its audit of MLSNI, PWC(PriceWaterhouseCoopers) has requested almost every document in REBIG"s possession, including documents containing confidential and proprietary information regarding REBIG, its intellectual property, business strategy, business plans and business affiliates, including REBIG shareholders (other than Multiple Solutions or MLSNI), REBIG"s licensing MLSs, product producers, potential product producers, and employees, whether or not those documents bear any relevance to MLSNI."
"Even though REBIG is not being audited," continues Piell, "REBIG has agreed to show PWC the documents reasonably related to Multiple Solutions" interests as a shareholder of REBIG subject to reasonable standards., in full compliance with the Operating Agreement (OA) governing operations at REBIG. The OA, executed by all of REBIG"s investors, does not entitle PWC to acquire or use REBIG information as they see fit; the OA does not authorize shareholders to demand production of the full range of these documents or to distribute or communicate confidential or proprietary information to third parties. The OA does authorize REBIG to impose reasonable standards on the production of company materials to a shareholder to protect sensitive or confidential information. Pursuant to the OA, REBIG cold place reasonable restrictions on Multiple Solutions or MLSNI if they sought review of the materials sought by PWC. As PWC"s right to the business and financial information of REBIG is based on - and is no greater than - Multiple Solutions" or MLSNI"s right to access that information, the OA authorizes REBIG to place reasonable limitations on PWC"s access to and use of the information requested."
He then goes on to list three reasons why the limitations exist.
"First, REBIG has pre-existing contractual obligations that limit disclosure....REBIG has NDAs in place with its licensing MLSs, product producers, potential product producers, and shareholders...
"Second, PWC has sought REBIG"s internal business documents containing information on business strategy, intellectual property and company financials. This information, if made public, would give an unfair advantage to any company wanting to compete with REBIG, and an unfair negotiating advantage to REBIG"s business partners and potential business partners....
"Third, REBIG has every reason to be concerned that the information it agrees to share with PWC will not remain confidential. REBIG has been informed that PWC, upon completion of its audit of MLSNI, will distribute audit reports to the shareholders of MLSNI. In recent months, REBIG has observed that certain MLSNI shareholders have not maintained the confidentiality of MLSNI"s own confidential, sensitive, and proprietary information and have shared that information with the press and other public outlets. Indeed, your sources at MLSNI quickly provided you information about Mr. Bochenek"s letter and the costs of the audit even though that information was confidential to MLSNI and not properly published. Some MLSNI shareholders have communicated misleading information about REBIG to member brokers, agents and the press in breach of confidentiality obligations to REBIG and with reckless indifference to the damaging business ramifications their actions could have on REBIG, its other investors and its other licensing MLSs. It is clear to REBIG that any information provided to PWC by REBIG, if reported in PWC"s audit report, would be communicated to the public almost immediately....
"....REBIG provided a draft of a proposed agreement that would enable the auditors to review the relevant information, interview the relevant personnel and complete REBIG"s participation in the audit of MLSNI....Unfortunately, PWC determined that it would not sign the agreement unless the shareholders of MLSNI directed PWC to do so.
"Contrary to your characterization, REBIG has not bluffed PWC or MLSNI"s shareholders, nor has it stalled the audit. REBIG has offered PWC cooperation and access to its documents and its officers. REBIG has acted appropriately and in compliance with the contractual obligations and professional standards that govern its corporate conduct....
"In closing, I have been asked to inform you that REBIG will not tolerate a smear campaign against REBIG and its officers. Your unnamed sources have used your articles as a vehicle for spreading meritless rumors, speculation and accusations under the cover of anonymity. On a going forward basis, can you really trust the veracity of sources who are not willing to stand up and be publicly and legally accountable for their statements or actions? The motivation of those secretive sources - whether it is political, professional or personal - is part of the story and should be investigated and reported if you decide that you want to provide balanced and objective coverage of the MLSNI audit."