Commercial PropertyRWSSC Asks MLSNI For Shareholder Request For Information
The REALTOR(r) Association of West/South Suburban Chicagoland (RWSSC) has instructed its attorneys to send a formal shareholder request for information of MLSNI on the basis that the PriceWaterhouseCoopers" Report of Investigation "leave unresolved a number of serious questions about whether MLSNI"s officers, directors and professional advisors discharged their fiduciary duties to MLSNI and its shareholders."
Attorney Philip C. Stahl (Grippo & Elden LLC) has written the eight-page Shareholder"s Request for Information to Jay Huffman, CEO of MLSNI, in which he states, "Under Illinois law, a corporation"s business and affairs are managed by, or under the direction of, the board of directors. In discharging their responsibility, directors have a duty of care and a duty of loyalty, and they also have the benefit of the business judgment rule. That rule creates a presumption that directors are not liable for decisions made in the exercise of their business judgment. However, to invoke the business judgment rule, the directors must (1) make a business judgment, (2) in good faith, (3) on an informed basis, and (4) honestly believe that the decision is in the best interests of the corporation. Directors and officers are not protected from actions that are designed to benefit themselves, or others, rather than the corporation, where they did not honestly believe the action was in the best interests of the corporation, or where they negligently failed to inform themselves."
In a letter jointly addressed to MLSNI President Loretta Alonzo and CEO Jay Huffman, the president of RWSSC Chris Read informs the addressees of the reasons for the Shareholder Request for Information.
"The purpose of RWSSC"s review is to evaluate potential claims it (directly or derivatively) or MLSNI may have against officers, directors, consultants or professional advisors of MLSNI in connection with REBIG, and in connection with any agreements or duties that govern their relationship with MLSNI. The PWC Report raised serious issues about the conduct of MLSNI"s directors, officers and professional advisors in connection with the investment in and relationship with REBIG, the terms of REBIG"s operating agreement, Jay Huffman"s employment with MLSNI, and Brenda Huffman"s engagement as a consultant to MLSNI and CEO of REBIG."
Continues Read, "Directors" fiduciary duties of loyalty and care apply to decisions on how to handle potential claims raised by the PWC Report just as those duties apply to the conduct described in the Report itself. After gathering the facts and weighing the risks, costs, uncertainties, potential benefits, likely recoveries resulting from, and alternatives to, litigation the disinterested directors investigating this matter may recommend that no action be taken. For the directors to simply do nothing in the face of the questions raised by the PWC Report and the directive of the shareholders, however, is an abdication of responsibility which creates new and additional risks to the directors personally and further erodes members" confidence."
On September 3, 2004, following the dissemination of the PWC audit report of MLSNI and Jay Huffman, MLSNI President Loretta Alonzo had written MLSNI participants and subscribers that "the audit findings included no evidence of fraud, financial mismanagement, misappropriation of funds, or any inappropriate activity whatsoever by MLSNI staff, officers, or Board members."
MLSNI Board members voted to "discontinue funding REBIG," voted to "review the services of MLSNI accountants, and voted to retain its corporate counsel during the meeting. The board took no action to terminate Mr. Huffman, despite a vote of no confidence that also failed to gain momentum during the meeting.
Editor"s note: See tomorrow"s Agent News: Did The MLSNI Directors Read The Same Audit Report? Included will be additional notes on the Shareholder Request for Information from RWSSC.