Fellow Intermediaries and Brokers

Fellow Intermediaries and Brokers

First I would like to thank all of you who sent me so many great expressions of sympathy and support.  It’s nice to know that I am not alone out there.  I appreciate that you have “circled the wagons.”

Secondly, I can tell you that our efforts, to-date, to get the original claims in the civil suit dismissed have not succeeded, so the legal actions are still on track.  As you can imagine, I am spending a lot of time and more money than I have to defend myself.  No more racing for Len in the foreseeable future, that’s for sure.  I now work to pay legal bills.  It seems ironic since I present a workshop for the IBBA called “Minimizing Business Broker Liability:  An Ounce of Prevention…”

Thirdly, yesterday I received the attached subpoena from the State of Nevada alleging violations of state securities law.  While this was, no doubt, prompted by the original case where I was named a third-party defendant in a civil suit, this is much broader.  As you will see, they are asking me to produce all my records since January 2006. Those records will include several deals, in addition to the original transaction, where the listing was for the sale of the business’s assets, but the parties decided, sometimes at the last minute based on tax considerations or continuity of existing contracts, to morph the deal into a stock sale.  So, the State will have evidence of numerous potential “violations” through the years. Each one is identical to the original one:

  • Started as the sale of assets,
  • Never advertised as the sale of equity,
  • Never assisted the parties in financing the deal,
  • Ended as the sale of stock,
  • I had nothing to do with that decision,
  • I obtained the signatures of the parties on my Stock Sale Notification, Disclaimer, and Indemnification Agreement.

Sound familiar?

I guess I am the “Test Dummy” for this problem we have.  If I fail to exonerate myself, then all the intermediaries and brokers out there, who do not even obtain the kind of agreement I have the parties sign, do not stand a chance of prevailing on this kind of charge.  Obviously, it will also set a legal precedent, which can, and will, be used against all of us in the future.

Maybe the only way to prevent this is for all business brokers to go ahead and obtain an SEC license, even if the broker only does small deals, never sells part of a company, and never raises capital or arranges financing.

What I do know is that we need to resolve this because when the parties decide to restructure the deal, the broker is “on for the ride” and cannot prevent themselves from being placed into a  potential violation of the law.  What started out as a sort of “abstract” potential problem has now become a “real” nightmare for me.

Stay tuned…

Len Krick, MBA, SBA, CMEA
Certified Business Intermediary
Merger and Acquisition Master Intermediary
Charter and Founding Member of the Nevada Business Brokers Association
President and Principal Broker
Sunbelt Business Brokers of Las Vegas, Inc.