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Re/Max Launches Internal Investigation on an Undisclosed Loan by CEO Liniger

Denver-based Re/Max Holdings announced last Thursday that it was indefinitely withholding its third quarter earnings results due to an internal investigation regarding an undisclosed $2.38 million loan CEO David Liniger provided to co-CEO Adam Contos. On Friday, the company's stock plummeted more than 21 percent.

The SEC filing newswire on November 2, 2017 stated that board of directors appointed a special committee of independent directors in October to conduct the investigation concerning actions of certain members of the company's senior management including an allegation of a previously undisclosed loan of personal funds from David Liniger to Adam Contos, and other allegations of wrongdoing in employment practices and conduct.

It further states, "These matters could constitute violations of the Company's codes of ethics and business conduct and policies."

A Denver Post report stated that Liniger provided Contos with the money so that Contos could purchase a residence at a below-market interest rate. The company emphasized, "no company funds were used or otherwise involved in any of these transactions."

The Post stated that Sanjai Bhagat, a provost professor of finance at the University of Colorado at Boulder, said, "one its face, $2.38 million is not a lot of money for one executive to loan or even pay out to another, but the failure to disclose such an arrangement to the Re/Max board upfront is troubling." The articles said, "Bhagat had previously worked at the U.S. Securities and Exchange Commission and has written books on corporate governance and executive compensation."

Last May Contos, who started with Re/Max in 2004 in the company's mountain state region, became the co-CEO with Liniger, hinting that his position would be part of an eventual CEO transition. An earlier Denver Post report stated that Liniger, as co-founded, lead Re/Max in what became a global franchisor of real estate brokerages 44 years ago. Bringing Contos on board allowed Liniger to focus on "strategic initiatives" and furthering the company's leadership position in the industry. Contos was named vice president of region development in 2013, senior vice president of marketing in February 2015, and chief operating officer in 2016, LLC, the real estate brokerage arm with 110,000 agents worldwide and Motto Franchising LLC, which the company describes as a fast-growing network of mortgage brokerages launched a year ago. Re/Max was founded in 1973 by Dave and Gail Liniger.

Previous CEO Margaret Kelly served in the top position from 2005 to 2014 and led the company through its initial public offering in 2013, even while David Liniger was fighting a nearly fatal staph infection he developed in 2012. Liniger later told about his illness stating he awoke in the middle of the night to find himself paralyzed from the neck down. He said the undiagnosed staph infection, apparently acquired when he tripped and scraped his arm lugging groceries, had gone septic. His spinal column was ravaged.

ReMax reported in its October Re/Max National Housing Report that September had been the fifth month this year to post a decline in home sales compared to a record-setting 2016, while marking the 71st consecutive month of rising sale prices year-over-year. On Friday the franchise company's stock closed at $52.65 per share after trading in late October at $67.20, an all-time high for Re/Max.

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About Janet Sparks

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Janet Sparks is the former publisher of the Continental Franchise Review, an industry newsletter that covered the franchise community for over 30 years. She has also been a columnist for a leading franchise magazine for the past 13 years. Today she is an independent journalist who engages in investigative reporting, tackling complex issues that impact the franchise industry.

Janet can be reached at or at 303-799-7398.