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My wife and I purchased a business 7 months ago. During the

I purchased a business late...

I purchased a business late last year. During the acquisition process, questions were asked face to face and via email, there were two face to face meetings with seller and business broker, bank reviewed data, and a business valuation company reviewed company information. After the closing documents were signed and we had been operating for a couple of weeks, we found many issues with the business that was not disclosed during the acquisition process. Hispanic employees were not properly documented nor legal (this was specifically asked during due diligence and owner’s wife stated she told the owner he needed to have the proper documentation completed), these same employees were driving vehicles without licenses, equipment and vehicles were not properly maintained (owner claimed he had an employee that performed all of the maintenance and everything was in good working order – owner did not disclose a truck and trailer were not operable even though it was asked – owner and broker gave us one chance to visit site but all equipment was out working at the time), a report was generated by the owner listing the commercial customers however 29 of the 66 customers stopped services prior to closing and in some cases as far back as 2011, we have found issues within the company software that inflated revenue numbers thus making the real 2013 numbers much lower, owner stated he had great working relationships with commercial clients when in reality a handful were ready to take him to court over issues and half of the commercial customers did not renew because of issues, owner owed credits of $20-30K because he billed customers and didn’t perform the service, the owner illegally operated the business without proper licenses and I now have a letter from the authorities stating this is true, company was about to go out of business prior to closing and that was not disclosed, owner owed money to several vendors because he did not pay his bills due to his financial positions which was not disclosed, and owner did not provide bank titles to three new trucks at closing as a result the trucks weren’t paid off for 5 months after closing and now IRS has a second lien on trucks. We tried within a few weeks to rescind the purchase agreement however our attorney stated we would spend more time and money in court and we should make a go of it. At this point we are going to sue for the Seller’s Note. Is there anything else we can do at this point? We are basically out of money as part of the business has stopped operations because of the licensing issue. We don’t believe the business is viable at this point due to all of the issues and money we lost. The bank has stated they have never seen anything like this as none of this was found during the due diligence phase. We believe there is plenty of responsibility to spread around however it seems the reality is it all falls on our shoulders. Can you provide any advice?

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Answered in 15 minutes by:
5/3/2013
LegalEagle1
LegalEagle1, Attorney
Category: Business Law
Satisfied Customers: 795
Experience: Practicing attorney licensed for over 23 years.
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Hello and welcome to JustAnswer, I would like to assist you today.

If you have asked presented all of your documentation to an experienced lawyer and he has advised you that it is not economical to pursue the claim, it is very difficult for someone in a forum to second guess that. My suggestion is that you consider having another lawyer review your documentation and advise you as to what he thinks your options are. Sometimes a different lawyer may be more willing to pursue such a claim.

One other thing you should consider, especially if you have the documents such as financial statements and emails which contain statements which are clearly false and fraudulent is report their conduct to the police or prosecutor office. While normally they are reluctant to charge crimes where a one might a complaint a business dispute. What you have described could be classified as criminal fraud. And if you have a strong case that is well documented they may decide to prosecute.

I hope that I have answered your question. Please let me know if you have more questions or need more information.

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LegalEagle1
LegalEagle1, Attorney
Category: Business Law
Satisfied Customers: 795
Experience: Practicing attorney licensed for over 23 years.
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