In lieu of posting its third quarter earnings results, today Re/Max announced that the company is conducting an internal investigation into co-CEOs Dave Liniger and Adam Contos and looking into “allegations of wrongdoing in employment practices and conduct.”
“In October 2017, the Board of Directors appointed a special committee of independent directors (the “Special Committee”) to investigate allegations concerning actions of certain members of the Company’s senior management including an allegation of a previously undisclosed loan of personal funds from David L. Liniger, the Company’s Co-Chief Executive Officer and Chairman, to Adam M. Contos, the Company’s Co-Chief Executive Officer, and allegations of wrongdoing in employment practices and conduct. These matters could constitute violations of the Company’s codes of ethics and business conduct and policies.”
The personal loan was used in the purchase of a residence for $2.4 million “at a below market interest rate,” as well as in the exchange of both cash and non-cash gifts, Liniger and Contos confirmed, but the transactions did not involve any funds from the company, according to the release.
How long will the investigation — being conducted with the help of “independent outside advisors” — last, and will it influence the company’s financial state?
“Management of the Company does not currently believe material adjustments to its previously issued financial statements are required as a result of the loan and gift transactions described above. However, the investigation by the Special Committee is ongoing and the Company is currently unable to predict the outcome or the timing of its completion,” the report noted.
After a brief break from running Re/Max caused by an illness in 2012, Liniger stepped back into the CEO’s seat in 2014. In May 2017 he announced that he would begin sharing the CEO title with Contos, who was before that Re/Max’s COO.
It’s unclear if and when Re/Max will be able to post its financial results for the quarter ending September 30, 2017. The company said it will release an updated announcement with the revised time “as soon as practicable.” If it is unable to do so, the company will have to file its required noticed with the SEC.
Dave Liniger founded Re/Max with his wife Gail in 1973 and grew it into being one of the largest real estate franchisors alongside Keller Williams, Coldwell Banker and Century 21. In its most recent second quarter 2017 earnings announcement, the company posted net income of $7.5 million in the second quarter, up 8.2 percent year over year, as revenue rose by 12.5 percent to $48.8 million. Re/Max says its closed units per agent number is 17.2, claiming to be the highest in the industry.
The company noted that it “remains confident in its strategy and long-term business plan,” with a 5.7 percent agent count increase to 117,568 agents as of the third quarter’s end.