The Mutual Fund Store, based in Overland Park, has sued to displace one of its franchise operators whom it described as a prolific gambler late in paying bills.
By MARK DAVIS
The Kansas City Star
Three lawsuits filed Oct. 31 target Jeffrey L. Roper, a St. Louis area lawyer who owns a Mutual Fund Store in Wichita, another in Fresno, Calif., and two in the Seattle area. Each lawsuit seeks a court order requiring Roper to sell his stores to the parent company.
Roper is causing irreparable harm to the Mutual Fund Stores brand, said a lawsuit filed in U.S. District Court in Kansas City, Kan., echoing allegations in federal court in California and in Johnson County District Court.
Roper, in an interview Tuesday, called the gambler claim mudslinging and said he was fine with selling the four stores. The parent company, he complained, sued him the same day it mailed him the formal purchase agreement.
John Bunch, the fund companys chief executive officer, said the firm sued because Roper has refused to cure his repeated breaches of the franchise agreement. Buying him out, even with a public court fight, would head off possible brand damage, Bunch said.
Its a valuable brand to protect.
The Mutual Fund Store chain has grown to 130 locations nationwide from the original store in Leawood founded by Adam Bold in 1996. Its mostly small investor customers have $8.4 billion invested in mutual funds chosen by store advisers.
In 2011, Bold sold a majority stake in the business to the New York-based private equity firm Warburg Pincus. He remains chairman and continues to be active in a weekly radio show that has been a hallmark of the Mutual Fund Store business.
Bold said Roper had been difficult for us to deal with, though he allowed that Roper might have issues with the parent company.
This is the first time we have ever bought one (franchise) back when the franchisee really didnt want to sell, Bold said.
The lawsuit filed in federal court in Kansas said Roper had sold partial interests in his stores without notice to the parent company or its consent. It said he and his stores had been late paying bills, citing as examples fees for copiers from Toshiba, rent on the Seattle area stores and a CenturyLink phone bill.
I cant stress enough how much weve tried to bring this to resolution without taking it into the court system, Bunch said. But after months of negotiations, we didnt have a choice.
Both sides agree that the franchise agreement allows the parent company to buy franchise stores after a few years and at a price set by a formula in the agreement.
The lawsuits said the parent company would pay $5.5 million for Ropers four stores, based on the formula. They said Roper asked for three times that amount.
Roper denied that, though he said the price should be $5.7 million. Money, he insisted, isnt his complaint. He wanted to be sure the sale would comply with all the terms spelled out in the franchise agreement.
He wanted his lawyer to review the sale documents but complained that they didnt arrive until after the lawsuits were filed. Roper said that after the review he objected to some of the nonfinancial terms of the sale agreement.
The lawsuits acknowledge that the parent company mailed the formal notice that it would exercise its buyback rights the same day the lawsuits were filed.
As for his gambling, Roper said he plays in two or three poker tournaments a year. Online reports say he collected more than $170,000 by winning a 2010 World Series of Poker event in St. Louis.
Im not really a gambler, he said. I definitely think that was a mudslinging attempt.
The lawsuits, however, connected Ropers poker playing to a Securities and Exchange Commission inspection of his stores. SEC inspections are a routine practice of the federal regulatory agency, and the lawsuit said all Mutual Fund Stores have had them.
Ropers poker habits are apparently significant enough that, on information and belief, they have also become an area of focus in the SECs inspection, each of the lawsuits said.
Roper denied the SEC has raised concerns about his gambling. He said the ordinary SEC inspections ended with a clean bill of health at his stores.
To reach Mark Davis, call 816-234-4372 or send email to firstname.lastname@example.org.