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Gary Keller accused of embezzlement in updated racketeering lawsuit complaint

John Davis files first amended complaint in his RICO suit against Keller and his brokerage

Nearly three months after filing an initial complaint accusing Gary Keller and Keller Williams of inflating key profitability metrics including company sales and profits to convince individuals to purchase Keller Williams Regions and Market Centers, John Davis has made tweaks to his lawsuit.

In his initial filing, in addition to Keller and Keller Williams, Davis also names former KW president Josh Team, Business MAPS Ltd. and Business MAPS Management LLC as defendants. The new complaint greatly expands that list, adding Gary Keller’s son John Keller, as well as 72Sold, Johnathan Dupree, Marc King, Jason Abrams, Matt Green William Soteroff, KWx, Livian and KW Southwest Region as defendants. The new filing also adds Jesse Herfel, a former Keller Williams Market Center owner and regional director of the Southwest Region of Keller Williams Realty International.

Davis’ original complaint stated that after the franchisees signed a contract, the defendants then required franchisees to adopt KWRI’s present market cap, which is the fee agents pay their market centers. Davis alleges that these fees went to increasing technology fees and the purchase of “unneeded goods and services” from KWRI-owned and affiliated companies, such as MAPS training and coaching.

The amended complaint goes further, accusing Gary Keller of allegedly operating “under a practice and pattern of improperly using fees collected from franchisees for purposed outside the accepted and defined use of fees, for both personal gain and to fund additional Keller-owned entities.” According to the filing, Keller pockets some of these funds for himself and his son, John Keller, but also uses the funds to create other businesses, which he then forces franchisees to buy into. The example of this cited in the complaint is 72Sold, which is a “leads company.” Keller is part of a joint venture with 72Sold and owns 49% of the company.

“This cyclical pattern results in a snowball effect for franchisees, where their money is put towards other companies, which will in turn cost them even more in order to remain in ‘compliance’ at KWRI,” the filing reads.

In an emailed statement, Darryl Frost, a Keller Williams spokesperson, wrote that the firm will continue to “aggressively defend” Davis’ “baseless claims.”

“John Davis has filed new baseless allegations against new parties to get more press coverage,” Frost wrote.

The complaint cites KW’s technology as a prime example of this alleged improper use of funds, noting that over the past six months the mandated monthly technology fee has more than doubled, rising from $25 per agent to $65 per agent.

“On information and belief, Gary Keller has done nothing but pocket the increase technology fee for quite some time,” the complaint states.

According to the complaint, agents must pay the technology fee to be compliant and to be compensated upon closing of their transactions. However, it notes that Herfel and his Market Center agents found it “impossible” to run the day-to-day operations of his firm with the technology provided by Gary Keller.

The filing also alleges that Keller allows Livian, a top real estate team, to use outside technology, including Follow Up Boss. The complaint goes as far to suggest that Keller has purchased outside technology to implement for Livian.

The amended complaint adds an embezzlement claim to the previously disclosed Racketeer Influenced and Corrupt Organizations (RICO) claims, and the Sherman Act claim.

Davis and Herfel are still demanding a jury trial.

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