By Al DavidSAN FRANCISCO—A Bay Area business broker thought that he had just beaten the Better Business Bureau while turning the business brokerage industry’s ultimate double play. But instead of winning a $500,000 judgment against the BBB and earning a $520,000 broker's fee from the sale of Neinhardt Industries, Shane Marsen’s dream was soon shattered—leaving the business broker broke.
A week earlier, the DravMark Group (Marsen’s buyer) had been eager to complete their $5.2 Million purchase of Neinhardt Industries. In fact, DravMark Group president Tim Dravers had already signed the paperwork and was arranging the final payment.
It was at about this time when Dravers’ CFO burst into the president’s office to tell him that a red-flag had shown up on his background check into broker Shane Marsen. CFO Walter Shenkle told Dravers that the Better Business Bureau rating of Marsen & Associates had dropped from “AA” to “D”.
Since much of the information Dravers and Shenkle had used to evaluate their purchase of Neinhardt Industries had come from Marsen, this recent development was not only very unsettling, but it placed the entire deal into jeopardy.
After Dravers called Marsen to question him about the sudden BBB backslide, Marsen made a Beeline to the nearest BBB office. Armed with his attorney and insisting that he had done nothing to warrant his sudden rating demotion, Marsen demanded to know what had happened. In a particularly emotional moment, Marsen slammed his fist onto the desk of the Bay Area BBB regional vice-president Arness McVickers.
Unfortunately for McVickers (and his son), Marsen’s fist inadvertently struck a plastic bag, which contained a toy piggy bank that McVickers had just purchased for his two year old son Travis.
Marsen’s attorney apologized for the broken bank, but informed McVickers that he believed there were legal precedents which established the BBB’s liability of up to $1 million for their error. Apparently, about $500,000 would be due to his client’s lost broker's fee, while the other $500,000 would be for negligence.
After a short meeting with his staff, McVickers was able to determine that Marsen’s rating drop was in error. Shortly thereafter the mistake was corrected and Marsen and counsel were happily on there way back to the DravMark Group headquarters.
Two days later the deal was closed and Marsen had a sweet $520,000 check in his hand. All’s well that ends well…or so he thought.
It turns out that the First Bay Bridge Bank, whose funds that the DravMark Group’s check was drawn from, had just reported record quarter losses from an astounding number of sub-prime mortgages which had slipped into foreclosure.
As a result, the bank’s stock had plummeted earlier that day, causing mass confusion at the branch that issued the $520,000 check. This, combined with an opportunistic computer hacker, left the branch without enough liquidity to cover the suddenly rubber check.
In a panic, Dravers called off the deal with Neinhardt Industries, who was more than happy to oblige. It turns out that Neinhardt Industries had just found (with the help of another business broker) a buyer willing to pay $6 Million for their company.
Seeing his financial ship sinking, Marsen made a desperate plea to his attorney to see if he had a "legal leg to stand on" by trying to sue the BBB for delaying the deal. After spending about an hour reading rules, regulations and laws aloud to his client, Marsen’s attorney said, “no.” Then he said, “by the way, where should I send your $2,000 bill for this week’s services?”
Trying to be a pragmatist about the day’s debacle, Marsen thought to himself that he was really only out a total of $2,000 (in legal fees) from all of this. He still had a beautiful wife, a nice house and an investment totaling $300,000.
Unfortunately, when he returned home, he found a First Bay Bridge Bank foreclosure sign on his front lawn. “That’s right”, he thought. “I was going to use my broker's fee from the Neinhardt Industries sale to catch up on my house payments.”
That wasn’t the only surprise. It turns out that his wife had left him for a more successful business broker—the one who had just earned a $600,000 broker's fee for the $6 Million sale of Neinhardt Industries. Of course, it turns out that Marsen's $300,000 investment was with First Bay Bridge Bank’s parent company, whose stock had dipped from $43 per share to $21 per share that day.
Now, with under $150,000 in assets and over $200,000 in debts, this broker truly was broke. The next day he was reportedly seen enrolling in a credit counseling school and applying for a job at a local Dairy Queen.
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