SAN DIEGO COUNTY, Calif. — Collecting hundreds of thousands of dollars in unearned vacation pay, and tens of thousands in purchases on association credit cards which were then posted on eBay and deposited into a personal bank account; these are only a few accusations lobbed at the former CEO for the San Diego Association of Realtors, Mike Mercurio.
In a newly filed 110-page lawsuit, four former high-level executives at the San Diego Association of Realtors (SDAR) say they were fired after investigating what they claim was a long-running scheme by Mr. Mercurio to funnel SDAR funds into his personal account.
The San Diego Association of Realtors is a large and powerful lobbying group that is funded by annual dues from its 20,000 or so members.
However, more than a million dollars in those member dues were diverted from lobbying efforts into the pocket of former CEO Mercurio, says the lawsuit.
The plaintiffs, which include the association's former Chief Operating Officer, Director of Human Resources, Controller, and Marketing Chief, claim Mr. Mercurio, "engaged in massive embezzlement, stealing over $1 million from SDAR, and further directed, and participated in, the falsification of financial documents, extensive personal use of company credit cards, payroll fraud, and tax evasion."
To make matters worse, plaintiffs, Heather Pena, Laura Martella, Jon Schwartz, and Nicholas Hoffer, say instead of supporting them after discovering what they claim was a long-running embezzlement scheme, the association's board "shot the messengers" by launching investigations into their conduct and later firing them without cause.
The Allegations
According to the non-conformed court complaint, electronically filed on July 25, suspicions of misuse of SDAR funds were first raised as far back as 2013. It was then that the association's former chief financial officer grew suspicious that Mr. Mercurio was stealing from the association's coffers and misusing company assets. The unnamed staffer was allegedly chastised for reporting the missing funds, resulting in what the lawsuit says was an unspoken policy that, "questioning or reporting Mercurio's theft and inappropriate use of company funds and assets was a dangerous proposition."
Despite the warning, approximately seven years later in 2020, the Chief Financial Officer - unnamed in the lawsuit - once again discovered that Mr. Mercurio had stockpiled a substantial amount of vacation time, despite the fact that the CEO had gone on many vacations during the year.
The SDAR board, according to the lawsuit, quickly terminated the CFO after reporting the vacation time stockpile.
During a subsequent investigation, two of the four plaintiffs in the newly filed lawsuit discovered Mr. Mercurio then hired a new payroll director and directed them to "add 300 hours" of vacation pay to his reserve. They also discovered that Mr. Mercurio, according to the lawsuit, "stole hundreds of thousands of dollars from payroll using a fraudulent 'PTO cash-out scheme."
Falsely inflated vacation hours were not all that the plaintiffs found.
The four plaintiffs say they then became suspicious of reimbursement requests from the then-CEO.
According to the complaint, Mr. Mercurio allegedly purchased tens of thousands worth of expensive watches, handbags which he stated were gifts for volunteers on his personal credit card and was reimbursed from SDAR accounts. However, instead of going to volunteers, Mr. Mercurio reportedly had his executive assistant sell the items on eBay with instructions of depositing the money into his bank account.
Reads the lawsuit, "For her efforts and discretion, and in an attempt to bribe her silence, Mercurio offered [his assistant] ten percent of the sale of the items. [The assistant] was very stressed and uncomfortable with the entire scheme, rejected the offer of a 'commission,' and ultimately left her job.
SDAR items
The accusation that the CEO was paying for, getting reimbursed, and then selling the items for double the profit prompted upper management, the plaintiffs in the case, to launch a larger investigation into Mercurio's actions.
During that investigation, the lawsuit claims that Mercurio had a habit of losing receipts for large ticket items or purchasing times without any documentation.
One such example included several charges for "smart tuition" and "smart tech" items for $1,696 apiece. The amount, says the lawsuit, was the exact same amount as Mercurio's daughter's monthly tuition at Cathedral Catholic High School. Reads the lawsuit, "Cathedral Catholic High School uses Smart Tech as an online tuition payment system."
The plaintiffs then discovered that Mercurio spent tens of thousands of dollars in stays at lavish hotels throughout San Diego County.
In all, the lawsuit claims that Mercurio spent $200,000 in the span of a few months in 2020.
In addition to the hundreds of thousands of dollars in boosted vacation pay, Mr. Mercurio is accused of also receiving $24,000 a year in car allowance as well as $75,000 in personal travel allowance.
The Fallout
In October 2022, plaintiffs Pena, Martella, Schwartz, and Hoffer wrote a letter to the SDAR board informing them of their findings and warning them about the retaliation that has been inflicted.
"We believe that fraudulent activity, inappropriate and improper conduct of CEO, Mr. Mercurio has been going on for some time; the amount of company monies either used for personal expenses, or money taken over the years could be quite significant and incredibly substantial," reads the letter.
SDAR Letter
In late 2022, the association agreed to pay for an independent investigation. Yet, despite this, the plaintiffs in the lawsuit say Mr. Mercurio and others continued to retaliate against them.
By April 2023, the lawsuit claims that the board had learned that the investigation "had uncovered 'much, much more' regarding Mercurio's illegal activities and what Pena, Martella, Schwartz, and Hoffer [the plaintiffs in the case] had uncovered was essential, 'just the tip of the iceberg."
However, instead of being praised for their work, on April 21, 2023, the four plaintiffs were terminated.
Pena, Martella, Schwartz, and Hoffer issued this statement to CBS 8 through their attorney, Harvey Berger, about the investigation and the reason why they chose to file a lawsuit.
"Initially, reporting the corruption and blatant theft of the CEO was to protect the employees, the members, the board of directors, and volunteers of SDAR. As the investigation process continued, it became more and more evident that the inappropriate and unethical behavior of the CEO was not as concerning as one would have hoped to the Board of Directors and to those leading the investigation.
Stunningly, the four of us were not only treated worse than before bringing this to the attention of the Board, we were also terminated at the same time as the individual who was responsible for all of this corrupt and illegal behavior. The four of us loved our jobs and had no desire to leave the employment of the association.
This lawsuit was not needed. This could have been handled directly and professionally between 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.
We were inappropriately treated in a hostile and bullying manner, and we were retaliated against and wrongfully terminated for our commitment to do what was right and protect the organization. We are now put in a situation where our professional and personal lives are in duress (financially and professionally), as we have had to deal with this unexpected and undue stress and inappropriate action. Our hope is that this lawsuit will fairly compensate us for the unjustified termination and the impact this has had on our lives.
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 fraudulent behavior has been discussed for years and years, and yet no one did anything to stop it. The four of us did what should have been done, and what needed to be done. This lawsuit should put an end to this type of behavior, remove any and all corrupt individuals from the Board who knew about or were complicit in these activities, and compensate us for the unjust and unfair treatment we have now endured for months. Our careers have been impacted, our personal lives are under undue stress, and we now face a public case where our names will be in the public domain for the remainder of our careers.
We did not deserve the treatment we received for doing the right thing."
In a statement, a spokesperson for the San Diego Realtors Association told CBS 8, "Mr. Mercurio is no longer an employee of the Greater San Diego Association of Realtors and that the Association is under new leadership. Obviously, the Association takes these allegations seriously and is conducting its own investigation into the allegations and conduct of its former employees. Since this is new pending litigation, we are unable to make any further comment until the conclusion of our investigation and resolution of the pending litigation."
CBS 8's attempts to reach Mr. Mercurio were unsuccessful.
