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Jury orders Atcheson to pay former partner $280k
Jury orders Atcheson to pay former partner $280k
April 26, 2012
By Mary Pechar
On April 13th a Jackson County jury returned a unanimous verdict of guilty against prominent Lee’s Summit realtor and developer, Michael Atcheson and awarded his former business partner, Major Hammett II $280,650.00. It says Atcheson was found guilty on all five counts including two counts of fraud. Hammett had filed suit last year claiming that Atcheson had committed several wrongful acts resulting in Hammett suffering a pecuniary loss.
Also included in the suit were Simon Square Development, LLC, a development company started by Hammett and Atcheson, Nancy Blackwell, attorney for both individuals and Simon Square, the firm of Chinnery Evans & Nail, and Larry Haas.
The petition states that on or about June 2005, Hammett began working with the City of Bolivar and a group later formed and known as the Tax Increment Financing Commission of Bolivar, Missouri (TIF Commission) on an investment and development opportunity concerning real estate located East of Highway 13 in Bolivar.
Hammett was aware that Atcheson was a member of the planning and zoning commission for Lee’s Summit, had substantial wealth, and had substantial experience with major real estate development projects. Acting on the recommendation of his attorney, Dick King of King Hershey Law Firm, Hammett approached Atcheson to become his partner in the Simon Square Development Project in Bolivar, Missouri.
Simon Square was organized with the Secretary of State of Missouri on February 22, 2006, for the sole purpose of buying and developing real estate in Bolivar, Missouri.
As part of the organizational documents of Simon Square, Hammett and Atcheson, on behalf of Atcheson’s Trust, executed the Operating Agreement dated February 16, 2006.
Pursuant to the terms of the First Operating Agreement, Hammett and Atcheson’s Trust were each listed as members with a fifty percent (50%) ownership interest, and Hammett and Atcheson’s Trust had an equal vote in all issues.
On March 16, 2006, Simon Square submitted a TIF Plan to the TIF Commission which awarded Tax Increment Financing to Simon Square for the Development Project in the approximate amount of $23,000,000.00.
Soon after the TIF Plan went into effect, Atcheson informed Hammett that Simon Square needed to add a capital partner because Atcheson needed help funding the development project.
Larry Haas was added as a member of Simon Square and a restated operating agreement was executed dated June 29, 2006 by Hammett, Atcheson’s Trust and Larry Haas.
Atcheson and Larry Haas were partners in CEAH Realtors, a realtor services provider, dozens of other major real estate development projects, and many multi-million dollar business transactions.
Pursuant to the terms of the Restated Operating Agreement, Hammett, Atcheson’s Trust and Larry Haas were listed as equal members with 1/3 each ownership interest.
The Restated Operating Agreement provided that Atcheson be appointed as the first Manager and as such shall hold sole “authority, power and discretion to manage and control the business” of Simon Square.
The agreement provided that Haas was the “Tax Matters Member” of the Company so that he would be the person dealing with all tax matters with the IRS. Haas was formerly approved to be retained as the Company’s accountant and to prepare all tax returns.
Haas prepared all tax returns of the Company and the Form K-1s for the members of the Company. Haas was the Secretary and Treasurer of the Company.
Haas and HSMC Accounting Services prepared the tax returns for the Company which yielded tax losses to be made available to each of the members. The tax returns for the company wrongfully showed Hammett as a minority owner after the transfer by Haas to Atcheson’s Trust, although Haas knew that such transfer should have resulted in Hammett being a 50% member.
At the same time as the execution of the Restated Operating Agreement, Hammett, Atcheson’s Trust and Larry Haas executed a Buy-Sell Agreement. The Buy-Sell Agreement required a 30 day written notice to all members before any transfer could occur. Simon Square has the first right to acquire the shares sold by Haas per the Buy-Sell. The remaining members have the second right to acquire the shares.
On September 1, 2008, Larry Haas transferred his ownership interest in Simon Square to Atcheson’s Trust without legal notification required by the Buy-Sell Agreement.
Atcheson failed to follow various procedures required by the Restated Operating Agreement and Buy-Sell regarding notice, distributions, voting, manager duties, transfer of ownership interests, borrowing funds.
As a result of Haas’ transfer of his ownership interest in Simon Square to Atcheson’s Trust, Atcheson’s Trust became an owner of 2/3 interest in Simon Square with Hammett owning a 1/3 ownership interest. Further, this transfer caused Atcheson’s Trust to have voting control to allow its trustee, Atcheson to be the sole Manager
The petition further states that upon Atcheson’s Trust obtaining the majority interest in Simon Square, Atcheson caused Simon Square to perform the following wrongful acts:
As a result of these ‘wrongful acts’, the payments made for Atcheson’s personal needs were not related to the Development Project and thus are in violation of the TIF agreement with the TIF Commission for the City of Bolivar. The welfare of the agreement with the TIF Commission has and will continue to damage the relations with the TIF Commission resulting in large financial loss to Plaintiffs.
- Pay the personal legal fees of Atcheson
- Make contributions to the political campaigns of Atcheson’s fellow city employees and Councilmen for the City of Lee’s Summit.
- Utilize and pay Atcheson’s construction companies for construction services on the development project in excess of the fair market value of such services.
- Utilize and pay landscaping and land maintenance companies owned by Atcheson for services on the Development Project in excess of the fair market value of such services.
- Utilize and pay realtor companies owned by Atcheson for services. The amounts paid for such services far exceeded the fair market value of such services.
- Utilize a bank owned by Atcheson, and maintained excessive cash balances in such bank while Simon Square accumulated interest on its bank loan;
- Pay himself personally $500,000.00 non-pro-rata distribution against the written objections of Hammett and his attorneys.
- Demand Hammett to contribute additional capital and declare that his ownership percentage is reduced for failing to contribute such additional capital when Atcheson has either not contributed additional capital or is using the funds wrongfully taken from Simon Square to make his capital contributions.
The jury unanimously agreed with Plaintiff, Hammett, and found Atcheson guilty on all five counts including two counts of fraud.
Blackwell represented as legal counsel Atcheson, in his individual capacity, Atcheson’s Trust, and Simon Square regarding all of these transactions.
The actions taken by Atcheson and Simon Square were taken with the legal advice from Nancy Blackwell and the law firm Chinnery Evans & Nail, P.C. and pursuant to the instruction of Blackwell.
Blackwell represented Hammett personally as legal counsel regarding Simon Square prior to these transactions. She represented Atcheson personally as legal counsel on multiple occasions prior to, and during the transactions described herein, and continues to do so today. Blackwell never obtained a conflict of interest waiver from Hammett or Simon Square.
Accused of breach of fiduciary duty and negligence, Blackwell and the firm of Chinnery, Evans & Nail and their insurance companies settled with the plaintiff Hammett prior to the beginning of the jury trial on April 2. On April 23, the causes of action against Blackwell and Chinnery, Evans & Nail were dismissed with prejudice.
When asked for comment Hammett said, “It came out during the trial that Atcheson owns 61 companies. I was shocked, I had no idea. 32 of those companies were in partnership with Larry Haas. Simon Square was only one of the 32 companies where ownership transferred from Haas to Atcheson or the Atcheson Trust.
“I am glad this is over, it was a long time coming and it was gratifying that the jury unanimously felt the same way as I did.”
Mike Atcheson said, “There is a limited amount of information available in an actual trial. This was a case where an individual sued his own company, his partner, a former partner, his attorney and the law firm.
There is a lot more to this story. I really believe that the jury didn’t understand the complex legal documents that were a part of this trial."
Atcheson added, “We are going through the post-trial motions and they will be heard in the next few weeks. We will then file an appeal with appellate court. We are not finished with this yet.”
Hammett graduated from Missouri State University in 1991 with a business marketing degree. He went to work for Citigroup as a unit manager. In 1994 he started a small business called Major Saver Fundraising. In 2006 he sold the assets of the business continuing to work with them as a consultant until December 2007. Hammett then took a position with the newly formed Education Funding Group. Both of these companies managed fundraising campaigns for educational foundations, school district and parent teacher associations.
According to Deputy City Clerk, Trisha Whitehead, Atcheson has several businesses in Lee’s Summit licensed in his name. These include Atcheson Lawn & Landscape Inc, CEAH Realtors, Capital Construction Services LLC, Chapel Ridge Banquet Center, Major Saver Holdings Inc, and CCR Roofing Inc.
He currently serves on the Board of Adjustments, appointed in 2010 the term expires in 2016. and the Water Utilities Advisory Board having been appointed in March 2012 with a term expiration March of 2014. He was previously a member of the Planning Commission, and the Water Tap Fee which was the predecessor to the Water Utilities Citizens Advisory Group where he held a term from September 2010 through October 2011.
According to Shannan Cunniffe, Office Manager for the Lee’s Summit Economic Development Council, Atcheson has been actively involved with the Council since joining in 1999 with Chapel Ridge Development. From July 2002 through June 2003 he served on the Board of Directors then in July 2003 through June 2004 he served on the Executive Committee as Treasurer. From July 2004 through June 2005 he served as Vice Chair. He has served on the Advisory Board since 2005.