It could boil down to a simple failure to communicate, but the 10 shareholders of MLSNI, the nation's largest MLS and serves the Chicagoland area Realtors, have agreed by a narrow majority rule to a motion put forward by The North Shore-Barrington Association Of Realtors (NSBAR) to have a forensic audit conducted of MLSNI and its CEO Jay Huffman.

Explains Huffman, "There are ten shareholder Boards and Associations in MLSNI. The motion advanced by the NSBAR was adopted, but not unanimously, and requested an investigation of any entity I personally own or have an ownership interest in, along with entities MLSNI has an ownership interest in."

The audit is to be conducted by PricewaterhouseCoopers in the next 60 days and is being overseen by Steve Bochenek, attorney for the Illinois Association of Realtors.

Darcy Dougherty CEO of the Chicago Association of Realtors says, "When the shareholders were given this motion by North Shore, they were surprised by it. I don't believe they knew the full extent of what a forensic audit is all about. I think that with the exception of North Shore that the shareholders approved the action to squelch rumors that had persisted regarding the relationship between MLSNI and the REBIG component."

A forensic audit, as defined by Business.com's accounting section is "an examination of evidence regarding an assertion to determine its correspondence to established criteria carried out in a manner suitable to the court.  An example would be a Forensic Audit of sales records to determine the quantum of rent owing under a lease agreement, which is the subject of litigation. The audit is an investigation, which is defined as "the utilization of specialized investigative skills in carrying out an inquiry conducted in such a manner that the outcome will have application to a court of law.  A Forensic Investigation may be grounded in accounting, medicine, engineering or some other discipline."

One source said what pushed her to agree to the audit was the fact that an annual audit is done every September but the results of the September 2003 audit were never given to the shareholders, nor were quarterly financial reports from September and December 2003. The March 2004 report is due shortly.

When the motion carried, the two financial reports and the September 2003 annual audit were given to the shareholders within a week, says the source.

Explains Huffman, "The audit was late, which delayed the end of year financials and first quarter financials. All have been distributed to the shareholders. The audit was received 2 days after the shareholder meeting of April 6th."

Terry Penza, president and COO of NSBAR, would not explain why North Shore took the initiative to request a forensic audit. "It would be better if I don't say anything at this time," Penza said. "It is an investigation, and after the report is given, that's when we can respond."

Defends Huffman, "I do not own, nor do I have ownership interest in, any entity or company. (While I do have a stock portfolio, my personal investments are in publicly traded companies, and are of no concern in this.)

About the MLSNI holdings, Huffman says, "MLSNI has a wholly owned subsidiary, Multiple Solutions, LLC, which is a partner in several entities, including a public records company and REBIG. Multiple Solutions, LLC, is a partner in REBIG, but does not solely own REBIG. While this has been explained to the shareholders, it appears they don't understand it. I will be bringing this matter up in the next REBIG Board meeting."

Dougherty says, "I don't think anyone sitting in that room really believes there is anything that has happened at MLSNI that isn't what we expect it to be. There is a great deal of confidence in them, and their control of their operations and respect for Jay Huffman. They feel everything is being managed properly but when there is a perception in the marketplace by a shareholder or certain companies throughout Illinois, then it may be important to clarify that MLSNI is a well-run organization."

"I initiated the forensic audit of MLSNI as requested by the shareholders less than a day after the motion was adopted," says Huffman. "I am confident this audit will verify there has been no impropriety."

Published: April 21, 2004

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