Family Of MidCity Chairman Sues, Claiming $1.4M In Fraudulent Bonuses, Inappropriate Relationship
The simmering behind-the-scenes battle among the children of late developer Eugene Ford Sr., founder of prominent local development firm MidCity and sister company Edgewood Management, has burst into public, with allegations of financial and personal misconduct against his son, Eugene Ford Jr., the chairman of both companies.
In a complaint filed this week in Montgomery County Circuit Court, Eugene Ford Jr.'s two living siblings, Mary and Michael, as well as the sons of his late sister Louise, filed suit against him, alleging several counts of fraud and breach of fiduciary duty in his role overseeing the family businesses. The siblings also accused him of having a romantic relationship with Edgewood's CEO, overpaying her and buying her extravagant gifts with company funds.
Bethesda-based MidCity was founded by Ford Sr. in the 1960s, and the company has developed more than 15,000 apartments. Its most prominent project is its 1,700-unit redevelopment of the Brookland Manor housing community, which has faced numerous court challenges from residents over the years claiming MidCity neglected the property and worked to displace them.
In the complaint, the members of the Ford family that claim to own the majority of MidCity and Edgewood allege Ford Jr. misappropriated funds and misreported profits, improperly paying himself $1.4M in bonuses, all while maneuvering behind the scenes to redraft the family trusts' rules to give him complete voting control, despite his role as the trustees' fiduciary.
Ford Jr.'s family members wrote in the complaint that he "generally operat[ed] Mid-City and Edgewood as his own personal fiefdoms — extracting money, extravagant gifts for friends, and other personal benefits to which he was not entitled, all at the expense of the company and the company's shareholders."
The lawsuit claims Ford Jr. subjected his family members to abuse when they raised concerns about the company's recordkeeping, including his daughter, Madi Ford, who served as MidCity's vice president and general counsel before leaving earlier this year to form a new firm with Michael Meers, MidCity's longtime executive vice president. The lawsuit claims Eugene Ford Jr. "went on a rampage, berating and deriding her within and outside of the company," eventually forcing Madi Ford to resign.
Those events led to the resignation of MidCity's chief operating officer and chief financial officer, the suit states, claiming the former received a seven-figure severance package. Meers and Madi Ford declined to comment.
"The forced departure of these executives was not in the best interest of the companies," the lawsuit states.
A few months after Madi Ford and Meers' departure, MidCity hired Stacy Spann, then head of the quasi-governmental Housing Opportunities Commission, as its CEO. The hire sparked ethics concerns; in Spann's tenure, the vast majority of property management contracts the HOC handed out were to Edgewood, Bisnow previously reported.
The plaintiffs also claimed they recently discovered Edgewood CEO Cindy Sanquist was Ford Jr.'s girlfriend, alleging he had directed the company to pay her salary "significantly above market for her experience and performance." Ford Jr. used company funds to throw Sanquist lavish parties, buy her $10K designer handbags and cover other personal expenses, the lawsuit alleges.
"MidCity is deeply disappointed by this baseless and meritless lawsuit. As this is a legal matter, we have no comment at this time," a company spokesperson said in a statement Friday morning, after this article's publication.
Despite the fact that Ford Sr. gave each of his four children 22.5% control of his estate, making the plaintiffs the majority owners of the Ford Family Cos., they claim in the suit they have no recourse to remove Ford Jr. or compel him to repay the money he allegedly owes them. The lawsuit asks the court to revoke the voting trusts they allege were illegally set up and award unspecified damages
Hogan Lovells is representing the members of the Ford family in the suit.
"The Ford family very much regrets the need to take this step, but hopes and trusts it will lead to an efficient and positive resolution for all parties," a Hogan Lovells spokesperson said.
An Edgewood Management spokesperson sent Bisnow a statement after this article's publication.
“Our team is in the process of reviewing the lawsuit with legal counsel so we cannot provide details at this stage," the spokesperson said. "However, this appears to be frivolous and without merit, using baseless claims to discredit our company’s CEO and its board for their own gain. Our legal team is well-equipped to challenge these claims and this will not distract us from our focus of serving our clients and fulfilling our mission.”
UPDATE, OCT. 8, 11:25 A.M. ET: This story has been updated to include statements from MidCity and Edgewood Management.
CORRECTION, OCT. 7, 4:50 P.M. ET: A previous version of this story misidentified two of the plaintiffs as Louise Ford's grandsons. Her sons, Bryan and Jason Pauley, are plaintiffs in the suit. This story has been updated.
