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    7 Replies Latest reply on Feb 5, 2008 5:16 PM by AFriend

    Full Disclosure

    AFriend Newbie
      I bought a business from one of my neihbors and trusted the financial they gave me. Now after running the business for several months, I found out they lied about all their numbers and did not give me full disclosure. Since they were my neihbors, I did not ask for any tax returns or financial statements from their accountant. Any suggestions on what should I do?
        • Re: Full Disclosure
          Iwrite Pioneer
          Your best course of action is to get a lawyer. If you haven't discussed this with your neighbors, don't until you have consulted with a lawyer. That is the best you can do now.

          Really sorry.
          • Re: Full Disclosure
            LUCKIEST Guide
            Full Disclosure, Welcome to this web site. Tell us more. Go to Members page
            and add info about you and your business.
            How long did you know your neighbor?? Are you still neighbors??
            Remember the old saying "Buyer Beware"??
            Did you have a Lawyer on your side when you bought the business??
            Before we give you suggestions, What do you have in mind??
            LUCKIEST
              • Re: Full Disclosure
                AFriend Newbie
                We are still neihbors but I learnt an expensive lession, never to trust anyone if money is involved. I did not have a laywer at the time when I signed the contract, but they did. I have gone to a lawyer now. Since I did not ask for any tax papers or papers from their accountant it will be a little bit challenge but I have several small documents and proof that they lied about their numbers and did not give me a full disclosure. I sent them a letter with the proof, they did not reply back. Then I went to a lawer and had him send them a letter. Now I am hearing they are responding back but still saying they gave me full disclosure. So I might have to sue them. They did not report all their sales to the State and Federal govt. So they stole money on Sales tax and income tax. Let's see what happens.
              • Re: Full Disclosure
                DomainDiva Ranger
                There may be some kind of fraud here on their part, your best bet is a really sharp attorney and the realization that the friendship is gone. Be prepared to spend some money.

                However let this be a painful lesson..always do a complete 'due diligence' which includes an examining of the books by a forensic accountant.
                • Re: Full Disclosure
                  CEO Space Scout
                  AFriend,

                  Welcome to the forum.

                  Yes, you did learn the lesson of "trust but verify". It is called "due diligence".

                  You are seeking legal advice now which is good. I would also try to handle it directly with the neighbor
                  depending how much money was involved. Maybe they would agree to mediation.

                  Another word of caution is that you may not want to post matters such as this in a public forum. It could get turned around on you and you be sued.

                  I hope it can all be worked out with the neighbor.

                  Good Luck,

                  Kathy
                  • Re: Full Disclosure
                    Lighthouse24 Ranger

                    I know this is an upsetting and frustrating situation. Most of the following is a paraphrase of my attorney's take on this (we just had lunch together). As your attorney has probably advised you, your only satisfactory recourse will likely be if the seller committed fraud. For a seller to be less than honest with a buyer, take advantage of the buyer in the deal, or treat the buyer unfairly is not necessarily fraud. (It may be a nasty way for someone to do business or treat another human being, but that doesn't make it illegal.)

                    The definition of fraud varies from state to state, but all five of these basic elements generally have to be proven: (1) a false statement of material fact was made by the seller to the buyer, (2) the seller knew it was false, (3) the seller made the statement intending to deceive the buyer, (4) it was reasonable that the buyer would accept and believe the statement, and (5) the buyer suffered injuries or tangible losses as a result.

                     

                    The important point in the sale of most businesses is that if you asked a material question and they lied, it may be fraud if you can prove those elements. If you didn't ask and they didn't voluntarily disclose it, it isn't fraud (and it's your bad, unfortunately).

                    As others have advised above, speak only with and through your attorney on this matter. I wish you the very best for a quick and satisfactory outcome.
                      • Re: Full Disclosure
                        AFriend Newbie
                        Thanks for your response. There are so many laws to protect consumer from fraud. Even IRS now has the burden to prove the tax payer of wrong doing and not the tax payer to prove himself innocent.

                        There has to be a law that protects the buyer. All buyers may not have all the necessary know how to ask the right questions. All buyers may not go to lawyers. So there has to be a state or Federal law protecting buyers.