EX-CEO OF GROUP ACCUSED IN SUIT
Former employees of realtors trade group allege embezzlement
A lawsuit alleging years of fraud, embezzlement of more than $1 million and workplace retaliation was filed against the Greater San Diego Association of Realtors and its past CEO, Mike Mercurio.
Four former employees of the real estate trade organization filed a 110-page civil lawsuit on July 27.
The complaint — which was first reported by CBS 8 — alleges that Mercurio wrongfully spent money from the group’s membership dues and that his actions went unchecked by some of the organization’s board members. Furthermore, the plaintiffs contend that when they brought their concerns to the board’s attention, they said they experienced retaliation by Mercurio and allege their jobs were ultimately terminated as a result of speaking out.
Mercurio shared a statement with the Union-Tribune over text message that he attributed to his “advisers,” however, he declined to provide their names.
“The allegations of the suit are either false or gross exaggerations and were previously the subject of an independent investigation that found accounting errors but no wrongful intent, and largely found the other allegations to be unsubstantiated,” he texted on Tuesday. Mercurio added that he believes the allegations are solely to bolster the plaintiffs’ retaliation lawsuit.
The concerns were brought to the organization’s board of directors in an Oct. 19 letter signed by the four plaintiffs: Heather Pena, chief operating officer; Nick Hofer, chief marketing and sales officer; Jon Schwartz, controller; and Laura Martella, vice president of administrative services.
The plaintiffs allege through documents in the lawsuit that Mercurio — who had served as CEO since 2006 — engaged in financial fraud between 2021 and 2022. The complaint also states that a past chief financial officer — who is not party to this lawsuit — raised concerns to a board member about “Mercurio’s theft and misuse of company assets” in 2013.
In the letter, the plaintiffs said that they began to scrutinize Mercurio’s financial activity in July 2022 after he “submitted reimbursement requests with questionable transactions.” In lieu of receipts to document expenses, the organization’s controller eventually reviewed Mercurio’s personal American Express credit card statements and his reimbursement requests. The plaintiffs allege that Mercurio enriched himself by falsifying expense reports to pay for personal purchases such as stays at five-star hotels and luxury goods.
In one instance, the plaintiffs allege he misrepresented reimbursement requests for an AI software subscription in July 2022 and “Travelocity” in August 2022 — each costing $1,696 — to pay for his daughter's private school tuition at Cathedral Catholic High School.
The plaintiffs documented that Mercurio's credit card statement charged the school's monthly tuition cost to the payment platform used by Cathedral.
Additionally, the complaint says that Mercurio instructed his executive assistant to purchase expensive watches, laptops and a Louis Vuitton handbag, expense the cost to the organization as “gifts to volunteers,” sell the goods on eBay and direct the profits into his personal PayPal account. Allegedly, Mercurio offered his assistant a 10 percent cut of the profits, but the employee declined and ultimately left the job.
The complaint alleges that Mercurio's use of the company credit card for personal matters totaled $128,000 as of the end of September, with $69,000 worth of transactions that month alone.
The plaintiffs also accuse Mercurio of committing payroll fraud by failing to document vacation hours. The lawsuit alleges Mercurio took multiple vacations each year but did not reduce or document these hours. Instead of reducing his paid time off (PTO) bank, he allegedly kept his full hours, which amounted to 19 weeks annually.
The lawsuit also states that Mercurio regularly cashed out a fixed amount of PTO each pay period, which was a benefit offered by the
organization. By October, Mercurio allegedly collected more than $208,000 in PTO cash-out payments.
The board of directors responded to the letter by hiring a third-party law firm to investigate the allegations over six months.
During that time, Mercurio remained in his position
and the plaintiffs allege they experienced retaliation by him, including being excluded from executive meetings and being barred from previous duties. In April, shortly after the investigation concluded, the lawsuit says the plaintiff's claims were “substantiated in part” but the plaintiffs themselves had engaged in wrongdoing and were placed on administrative leave. A week later, the lawsuit says the plaintiffs were each let go from the organization.
The attorney representing the association, Alexis S. Gutierrez of Higgs Fletcher & Mack, said the board acknowledged the October complaint promptly, initiated a third-party investigation and after the results were distributed to the involved parties, including the plaintiffs and Mercurio, the organization took action. Gutierrez said Mercurio was subsequently separated from the organization.
Shortly after the investigation was finished and Mercurio was no longer with the association, Gutierrez said the plaintiffs were also separated from the organization.
The plaintiffs' attorney — Harvey Berger — emailed a statement on their behalf outlining why they chose to file a lawsuit and said “The ultimate goal is to put an end to behavior that never should be allowed in any organization, by the CEO, or by the Board.”
“This could have been handled directly and professionally with the four of us. When it became clear that WE were being treated like the wrongdoers and the individuals who were putting our members et al at risk, we had no other choice,” the statement read in part. “We did not deserve the treatment we received for doing the right thing.”
After the lawsuit was filed, the Greater San Diego Association of Realtors' new CEO, Cory Shepard, wrote a letter addressing the allegations and reiterating the organization's support for its roughly 20,000 members.
The civil lawsuit is scheduled for an initial court hearing on Jan. 19.