Kidder Matthews, the top commercial real-estate firm on the West Coast, is being sued by a former employee who alleges its brokers engaged in a scheme to defraud property owners and that higher ups knew about it and did nothing.
Kidder Matthews CEO and chairman Jeff Lyon strongly denied the allegations in the lawsuit, filed by former senior vice president and managing broker Vanessa Herzog, who was fired in July.
“We are in a dispute with a former broker,” Lyon said Monday. “We have every right to protect our reputation.”
The lawsuit was filed Friday in Pierce County Superior Court on behalf of Vanessa Herzog, a 17-year managing broker at the firm. It contends she was fired after revealing the machinations of the complex deals that the lawsuit claims lifted potentially millions of dollars over a decade from industrial and commercial property owners.
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Kidder Matthews last week filed its own lawsuit in King County, asking that Herzog stop telling Kidder clients about her complaint.
Herzog’s lawsuit says two Kidder senior vice presidents and managing partners, Matt Wood and Todd Clarke, violated listing agreements and state law to collect tens of thousands of dollars in unearned commissions on leasing agreements. The lawsuit also lists Wood and Clarke’s boss, Brian Hatcher, as well as Lyon.
At issue in Herzog’s filing is how commercial real-estate commissions are split.
Herzog and Clarke represented property owners, the lawsuit states. When those brokers lure a tenant to a property, they split a commission equal to 5 percent of the lease value, which is paid by the property owner.
However, if another broker brings a tenant to the property, the tenant’s broker receives a 5-percent commission, while the property owner’s brokers split 2.5 percent. The property owner then would pay a total commission of 7.5 percent.
The lawsuit alleges Clarke fraudulently added Wood to the listing agreement as the tenant’s representative, which triggered the higher commission rate, and also lowered the amount Herzog was entitled to receive.
Herzog’s lawsuit also cites examples, including several transactions on the lease of the Meridian Campus Corporate Park in Lacey and other agreements involving Simpson Landing on the Tacoma Tideflats. She says the inflated-commission scheme was a regular practice for Clarke and others and could have resulted in millions of dollars of improperly charged commissions.
“It did not happen,” Lyon said. “We have not received any complaints by customers of the services we have provided or the compensation we have received.”
Kidder Matthews’ lawsuit
The real estate company’s lawsuit says Herzog defamed the company after her firing by telling some of the largest commercial real-estate companies in the region the brokerage was under investigation by the state.
In fact, Herzog had filed a complaint with the state Department of Licensing. That agency so far has declined to investigate pending the outcome of the lawsuits.
Kidder’s lawsuit also said Herzog felt Clarke was a “competitive threat” because both brokers covered the same geographic region.
Victoria Vreeland, Herzog’s attorney, said Kidder’s lawsuit against her client is an attempt to divert attention from Kidder’s conduct.
“This is not about competitiveness between brokers — it is about the wrongful taking of money from clients through a fictitious and fraudulent scheme,” Vreeland wrote in a statement. “This is a typical ploy against one who exposes internal company misconduct — one who is a whistleblower — as is Ms. Herzog.”
Kidder’s website shows Clarke, a senior vice president and managing partner who works out of the company’s Tacoma office, has completed commercial real estate transactions of more than 27 million square feet. He also was listed as the firm’s No. 1 producer for the firm 11 times since 2001. Lyon said the No. 1 producer title is based on the revenue to the firm.
Wood, also a senior vice president and managing partner, has been involved in leasing more than 15 million square feet of industrial space, according to Kidder’s website.
Herzog seeks an amount that would be determined by a jury.