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I'm Fucked Strut (Shady Businessman Related)

DJFerrariDJFerrari 2,411 Posts
edited May 2006 in Strut Central
Wow... I'm having an awesome week. I hate to do another 'Strut to the Rescue' thread, but I may need some legal and/or banking advice here. Call this Ferrari is naive part II.Here's the backstory. I went to Santa Clara University, class of '02, right in the heart of Silicon Valley and just at the tail end of the startup craze. I caught the entrepreneur bug and founded a company with 3 of my friends... AllDorm Things started out real well, we got a lot of investment and a lot of press... the 4 of us were even on the cover of Entrepreneur Magazine before we had graduated college. But we couldn't grow fast enough to sustain the business so I left after I graduated because I needed a job with an actual salary. After I left, the voice of ethical business, things went to shit real fast. The main guy in charge quickly transformed into the shadiest business dude ever, screwing over anyone he could to make a quick buck. I did not realize this at the time because I was out of there and he hid it real well. So one of the things I asked for when I left was to be taken off as a co-signer to a Bank of America line of credit that was only meant to pay for a product while the money from the contracts came in. I was told that wouldn't be a problem and was then told that I was taken off of it. Now, my critical mistake was trusting this guy because he was a friend at the time. Turns out, he never took my name off the account and as of today, all the assets of said company have been foreclosed and all the debt is in the names of those that co-signed.Luckily I'm only on that one account. The other guys are way more screwed, but it's still $100K that I'm accountable for.I can't think of any potential legal action because all of this was done on dude's word, but could I sue this guy? He's broke, but his dad is loaded. There are tons of people that could testify against his character and there's even some proof of his lies.As for the account situation, my best idea so far would be for the 4 of us to split the account evenly and each take out another line of credit for that amount. Would a bank go for that? What happens if the rest of the guys have terrible credit? I'm the only one in a good financial spot so I'm worried about it all falling on me.Uggh, any thoughts?

  Comments

  • soulmarcosasoulmarcosa 4,296 Posts
    Oh man my stomach is hurting just reading that - sorry Iv*n.

    I wish I had some advice, but all I can say is to get a good business lawyer and see what action they recommend.
  • FatbackFatback 6,746 Posts
    You need to step away from the computer and get a lawyer right now.

    I am sorry this happened to you, but you shouldn't waste a second getting this taken care of. And yes, it will cost you...but not 100K.
  • Big_ChanBig_Chan 5,088 Posts
    Damn. Sorry to hear that. NEVER take a person's "word" as being good when money is involved even if it is a friend. If that kind of money was involved, you should have requested the paperwork and had a lawyer handle removing your name from the credit line contracts.
  • DORDOR Two Ron Toe 9,899 Posts
    What type of Corp was this? Wouldn't you personally be not responsible or accountable?

    Also, you should have filed or posted something when you left the company saying you no longer had ties with said company. Even if you did it in the local free paper. Would that not have saved you some trouble?

    But yeah... Never trust anyone and handle ur biz!
  • jaymackjaymack 5,199 Posts
    You need to step away from the computer

    life advice.
  • keithvanhornkeithvanhorn 3,855 Posts
    Wow... I'm having an awesome week. I hate to do another 'Strut to the Rescue' thread, but I may need some legal and/or banking advice here. Call this Ferrari is naive part II.

    Here's the backstory. I went to Santa Clara University, class of '02, right in the heart of Silicon Valley and just at the tail end of the startup craze. I caught the entrepreneur bug and founded a company with 3 of my friends... AllDorm

    Things started out real well, we got a lot of investment and a lot of press... the 4 of us were even on the cover of Entrepreneur Magazine before we had graduated college. But we couldn't grow fast enough to sustain the business so I left after I graduated because I needed a job with an actual salary.

    After I left, the voice of ethical business, things went to shit real fast. The main guy in charge quickly transformed into the shadiest business dude ever, screwing over anyone he could to make a quick buck. I did not realize this at the time because I was out of there and he hid it real well.

    So one of the things I asked for when I left was to be taken off as a co-signer to a Bank of America line of credit that was only meant to pay for a product while the money from the contracts came in. I was told that wouldn't be a problem and was then told that I was taken off of it.

    Now, my critical mistake was trusting this guy because he was a friend at the time. Turns out, he never took my name off the account and as of today, all the assets of said company have been foreclosed and all the debt is in the names of those that co-signed.

    Luckily I'm only on that one account. The other guys are way more screwed, but it's still $100K that I'm accountable for.

    I can't think of any potential legal action because all of this was done on dude's word, but could I sue this guy? He's broke, but his dad is loaded. There are tons of people that could testify against his character and there's even some proof of his lies.

    As for the account situation, my best idea so far would be for the 4 of us to split the account evenly and each take out another line of credit for that amount. Would a bank go for that? What happens if the rest of the guys have terrible credit? I'm the only one in a good financial spot so I'm worried about it all falling on me.

    Uggh, any thoughts?

    did you have a buy-out agreement with your partners where one of the conditions was that your name would be taken off of that line of credit?

    do you have anything in writing? was this just an oral promise? if it was just an oral promise, did he (or the other partners) get anything in return for promising to remove you from the credit line? was the credit line for goods already purchased while you were still there and did you benefit from these purchases?
  • DJFerrariDJFerrari 2,411 Posts
    did you have a buy-out agreement with your partners where one of the conditions was that your name would be taken off of that line of credit?

    do you have anything in writing? was this just an oral promise? if it was just an oral promise, did he (or the other partners) get anything in return for promising to remove you from the credit line? was the credit line for goods already purchased while you were still there and did you benefit from these purchases?

    Unfortunately, it was an oral agreement. I was too young and stupid to know any better and made the mistake of trusting the person involved. I need to do some digging for any documents I have from my time at the company.

    I don't know what the money was spent for, but I will most definitely look into that. I cosigned on the stregth of the contracts and the accounts receivable. I should have watched it closer and really should have confirmed that my name was not on the account anymore, but I can't change that.

    I'm trying to set up a meeting with all of us and B of A to discuss our options. I want to pay first, sue later because it's affecting my credit as we speak.

    Thanks
  • bluesnagbluesnag 1,285 Posts
    did you have a buy-out agreement with your partners where one of the conditions was that your name would be taken off of that line of credit?

    do you have anything in writing? was this just an oral promise? if it was just an oral promise, did he (or the other partners) get anything in return for promising to remove you from the credit line? was the credit line for goods already purchased while you were still there and did you benefit from these purchases?

    Unfortunately, it was an oral agreement. I was too young and stupid to know any better and made the mistake of trusting the person involved. I need to do some digging for any documents I have from my time at the company.

    I don't know what the money was spent for, but I will most definitely look into that. I cosigned on the stregth of the contracts and the accounts receivable. I should have watched it closer and really should have confirmed that my name was not on the account anymore, but I can't change that.

    I'm trying to set up a meeting with all of us and B of A to discuss our options. I want to pay first, sue later because it's affecting my credit as we speak.

    Thanks

    No advice from me here, just wanted to pass on a related story. My brother went into business with a college friend (in landscaping). My brother was in charge of the outside business, and his friend was in charge of the books. Over about 5 years, it came out that my brother's friend had embezzeled about $250,000, and lost it gambling. Of course, my brother on paper was just as reponsible for that money that was basically stolen from clients. Had to go to court and it took awhile, but my brother's name was finally cleared and he was cleared of any debt. Last I heard that little fucker went to jail for some other shit.
  • keithvanhornkeithvanhorn 3,855 Posts
    did you have a buy-out agreement with your partners where one of the conditions was that your name would be taken off of that line of credit?

    do you have anything in writing? was this just an oral promise? if it was just an oral promise, did he (or the other partners) get anything in return for promising to remove you from the credit line? was the credit line for goods already purchased while you were still there and did you benefit from these purchases?

    Unfortunately, it was an oral agreement. I was too young and stupid to know any better and made the mistake of trusting the person involved. I need to do some digging for any documents I have from my time at the company.

    I don't know what the money was spent for, but I will most definitely look into that. I cosigned on the stregth of the contracts and the accounts receivable. I should have watched it closer and really should have confirmed that my name was not on the account anymore, but I can't change that.

    I'm trying to set up a meeting with all of us and B of A to discuss our options. I want to pay first, sue later because it's affecting my credit as we speak.

    Thanks

    your not my client, so i cant give you legal advice except to say that getting a lawyer should be your first step. if you pay now, you may never get that money back. it may only take a phone call or letter from a lawyer to get the creditors to lay off while you sort out liability.
  • DJFerrariDJFerrari 2,411 Posts
    your not my client, so i cant give you legal advice except to say that getting a lawyer should be your first step. if you pay now, you may never get that money back. it may only take a phone call or letter from a lawyer to get the creditors to lay off while you sort out liability.

    Thanks for the "unofficial" advice... I appreciate it. I'm meeting with the other 2 good guys tonight to form a strategy.
  • BeatChemistBeatChemist 1,465 Posts


    Man I don't have any advice but I just wanted to chime in and wish you luck sorting this out. First that lame dj gig, and now this... you've had a full week.

    Hope everything works out for you.
  • DJFerrariDJFerrari 2,411 Posts
    More pieces to the puzzle have been revealed...

    Enter Evil Business Man #2 (EVB2)

    EVB2 loans the company $250K and in return gets a secured note meaning he can foreclose on the company if the loan is not paid back. EVB1 "agrees" to this without any shareholder approval and EVB1 never intends to pay this back.

    EVB2 starts Company B. Company B is nothing... no money, no investors, no employees, nothing. When Company A does not pay the loan, as intended, Company B forecloses and takes all of Company A's assets: contracts, brands, websites, etc. and leaves all the shareholders and stakeholders of Company A with the outstanding debt. Then EVB2 hires EVB1 as the president of Company B.

    Basically, this whole thing was a scam for EVB1 and EVB2 to continue running the business as is while forcing out all the investors and "erasing" all the debt.

    Hmmm... shady much?
  • DjArcadianDjArcadian 3,630 Posts
    More pieces to the puzzle have been revealed...

    Enter Evil Business Man #2 (EVB2)

    EVB2 loans the company $250K and in return gets a secured note meaning he can foreclose on the company if the loan is not paid back. EVB1 "agrees" to this without any shareholder approval and EVB1 never intends to pay this back.

    EVB2 starts Company B. Company B is nothing... no money, no investors, no employees, nothing. When Company A does not pay the loan, as intended, Company B forecloses and takes all of Company A's assets: contracts, brands, websites, etc. and leaves all the shareholders and stakeholders of Company A with the outstanding debt. Then EVB2 hires EVB1 as the president of Company B.

    Basically, this whole thing was a scam for EVB1 and EVB2 to continue running the business as is while forcing out all the investors and "erasing" all the debt.

    Hmmm... shady much?

    Ouch! So is what we see at alldorm.com an evil company or was the brand bought out? What happened?
  • DORDOR Two Ron Toe 9,899 Posts
    Like I asked above. What type of company was this? A corporation of some sorts correct? So you shouldn't be financially responsible in any way correct???


    But damn... White collar crime is nagl. Hope dudes put in some time.
  • DJFerrariDJFerrari 2,411 Posts
    It started out as an E-Commerce company providing students at college the products they need to furnish their dorm rooms. When I left, the company turned into a direct marketing company that partnered with schools and gave them products (with advertisements of course) to give to the students for free. What you see there is still Company A.

    We were a full on corporation with shareholders so all this happened behind our back and without our approval. This was all the doings of 2 people that did not have a majority stake in the company. That's gotta be illegal.
  • DjArcadianDjArcadian 3,630 Posts
    It started out as an E-Commerce company providing students at college the products they need to furnish their dorm rooms. When I left, the company turned into a direct marketing company that partnered with schools and gave them products (with advertisements of course) to give to the students for free. What you see there is still Company A.

    We were a full on corporation with shareholders so all this happened behind our back and without our approval. This was all the doings of 2 people that did not have a majority stake in the company. That's gotta be illegal.

    It's called malicious intent. As a shareholder in a company it's the duty of said shareholder to work with the best intents of the corporation in mind. Basically you're not allowed to stab your own company in the back. I actually have a lot of background with stuff like this if you want to do lunch sometime. I was part owner of a corporation similar to this years ago and ALMOST had to deal with some of these problems. One of the owners did some shady stuff like this too but luckily it never involved big loans like this. PM if you're interested.
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