Investor Wins $2 Million And Auto Dealership in Fraud Suit

Highland Park investor Chuck Brahos walked out of the Lake County Courthouse on Friday looking jubilant, and half-seriously raised his hands in the air in victory.

“I feel vindicated,” he said.

Brahos had just heard the final verdict on a case he filed nearly three years ago, against Carl Ritz of Northbrook and Carey Chickerneo and Steven Goodman of Highland Park, principals of Highland Park’s . After Brahos invested $750,000 in the company and signed on as a non-managing member in 2006, Ritz, Chickerneo and Goodman created a phony operating agreement behind his back and attempted to expel him as a shareholder, according to Judge Margaret Mullen.

Because of the complexity of the issues involved, Brahos’ suit was decided in two parts. In February, a jury ruled that Chickerneo, Ritz and Goodman were guilty of fraud and .

Final judgment was entered on Brahos’ lawsuit Friday, when Judge Mullen ruled in a bench trial that Chickerneo, Ritz and Goodman were also guilty of breach of fiduciary duty. According to Mullen, the three managing partners created a false operating agreement, which they submitted to the bank at closing of the loan the partners took out to buy North Shore Auto Group. That agreement did not contain the provisions Brahos believed were necessary to protect his investment—and the provisions he believed he had signed on to.

“I find that Mr. Brahos would not have made his capital contributions without these provisions,” Mullen said.

Because Brahos was a shareholder and Ritz, Chickerneo and Goodman were managing members of North Shore Auto, they owed Brahos a fiduciary duty—“care in the conduct of the company’s business,” Mullen explained. Furthermore, because Chickerneo acted as the auto group’s lawyer, he owed Brahos an additional duty as overseer of the group’s dealership and loan transactions. But Chickerneo did not ensure that the operating agreement was legal, and all three members did not abide by the operating agreement Brahos believed he had signed on to, according to Mullen. For example, the three voted to maintain their salaries from 2007 to 2010 without repaying any of Brahos’ investment, despite the fact that the contract Brahos signed stipulated that salaries should be reduced with time if his investment was not returned.

“They disregarded the plaintiff’s interests, lied to him, acted in contravention to the agreement that they made and then they expelled him without cause,” Mullen said.  

In October 2008, Ritz, Chickerneo and Goodman scheduled a meeting, and despite Brahos’ requests, refused to provide an agenda. Then they held a vote to expel him from the company. But, Mullen said, “Mr. Brahos did nothing that could be construed as wrongful conduct”—and the operating agreement he signed prohibited expulsion without cause.

In her judgment, Mullen cited Brahos’ believability as a witness as a key factor behind her decision in his favor.

In contrast, she said, Chickerneo, Ritz and Goodman were “remarkably incredible witnesses, at best evasive and at worst, impeachable.”

Ritz, Goodman and Chickerneo were not present for Friday’s verdict. According to their lawyer, Elizabeth Dillon of O’Hagan Spencer, they are considering filing an appeal.

Meanwhile, Brahos said he was relieved that the “rollercoaster ride” of an ordeal was over. 

“It feels good to be a company member again,” he said.

According to the operating agreement Brahos signed—which Mullen affirmed as the correct, legal version on Friday—he was to become managing partner of the company within 24 months if 85 percent of his investments had not been repaid, along with fellow investor and non-managing member Nicholas Gouletas. That makes Brahos a managing member now, according to his lawyer, Robert T. O’Donnell.

Brahos declined to comment on what will happen with North Shore Auto Group in the future.