Before the sale, the Company likely had the most to risk as it was a guarantor of the mortgage loan made by the commercial bank to the Partnership. An increase in the property’s value would slightly benefit the Company. Following the sale, the “partners” (CEO, Senior VP, and Director of Product Development) would bear the most risk from the arrangement, however their loan was now from their own company, greatly diminishing their level of risk since, as officers of the company, they held the execution of that lease’s terms. In essence, the officers made a loan to themselves, from themselves (their own company), for personal financial gain.
I believe this loss from legal proceedings is part of a legitimate claim. The company states that it does not wish to comply with the arbiter on what it believes is firm legal footing. I think the company is trying to get out of its legal obligations by using some fancy legal footwork, despite that a wrong seems to have clearly been committed. I would suggest the company recognize a loss of $267,000, the original arbiter’s number, because this number has been derived on a solid basis of information, and seems likely to be required ultimately.
Other posts on the Versatility, Inc. case study:
Versatility, Inc. Case Study, Cash Flows
Versatility, Inc. Case Study, Preferred Stock
Versatility, Inc. Case Study, Mortgage Guaranty
Versatility, Inc. Case Study, IPO Initial Public Offering
Versatility, Inc. Case Study, Accounts Receivable
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