Lawsuit Claims Adviser Diverted Millions From a Vermont Family Foundation | Off Message

Lawsuit Claims Adviser Diverted Millions From a Vermont Family Foundation

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FILE: THOMAS JAMES
  • File: Thomas James
A prominent Vermont family's foundation has accused its longtime financial adviser of secretly funneling its funds into a failing business, according to a lawsuit filed in federal court last week.

The Hoehl Family Foundation, a giving arm of the family of IDX Systems co-founder Robert Hoehl, filed the suit in Burlington. It claims that Ronald L. Roberts siphoned more than $20 million in secret loans and investments from the Hoehl family’s business empire to help prop up a struggling sports equipment company, G-Form, to which he was financially connected. The payments included a $1 million investment from the Hoehl Family Foundation, which filed the lawsuit in U.S. District Court of Vermont.

“Mr. Roberts invested the Foundation’s money in G-Form because he had already loaned or invested tens of millions of dollars of his personal assets and his other clients’ assets into G-Form, which was having significant cash flow shortfalls,” the complaint says.



Roberts, who was the foundation’s treasurer, allegedly hid the financial moves for years, running the foundation afoul of federal tax laws and exposing it to potentially hefty penalties, according to the suit. The family says it cut ties with Roberts and his New Hampshire firm, Eideard Group, after the dealings came to light earlier this year.

The foundation’s interest in G-Form, meanwhile, has since been valued at zero dollars, making the investment a “total loss,” the complaint says.

The foundation is now seeking more than $2 million in damages, including a reimbursement of the investment and the $660,000 that it has paid to Eideard Group since Roberts made the purchase.

Tom Moody, an attorney representing Eideard Group, said the firm disputes the allegations. He declined further comment, and Roberts did not return a voicemail left at his office.

The Hoehl Family Foundation was established by Robert and Cynthia Hoehl in 1993 and has donated millions to Vermont organizations since; the nonprofit's tax filings show $3.3 million in donations in 2017 alone.

The family’s patriarch, who died in 2010, is best known for cofounding IDX Systems, the South Burlington tech company sold to GE Healthcare in 2005 for a whopping $1.2 billion. Cynthia Hoehl, who died six years after her husband, made headlines in 2014 when she summoned executives from five Burlington nonprofits and awarded each of their organizations $1 million from her personal estate.

Roberts and his firm had managed the family's wealth for roughly 20 years, working with both the elder Hoehls and their children. They considered him a “trusted adviser” on financial issues, the lawsuit says, affording him access to the assets of their three companies and their namesake nonprofit.

The problems trace back to 2012, when Roberts began directing two of the family’s companies — BDP Holdings and R&A Venture Capital III — to invest in G-Form, the suit says.

Over the next five years, Roberts allegedly facilitated more than $21.5 million to the Rhode Island-based sports company — through both investments and loans later converted into equity — without ever disclosing the moves to the Hoehl siblings, the lawsuit contends.

G-Form remained on the brink of collapse despite the aid, posting three straight years of operating losses in excess of $10 million by 2017, the complaint says. But while the company’s accountants warned that the business might not be viable, Roberts invested another $1 million — this time dipping into the family’s philanthropic arm. That investment occurred in March 2017, the same month that Roberts was named to G-Form’s board of directors, the suit says.

Roberts had been given full discretion over the foundation’s investment strategy under a 2012 agreement that said he should refrain from recommending “specific industry sectors or individual securities.” The lawsuit accuses him of violating that contract, the Vermont Consumer Protection Act and his fiduciary duty to the foundation.

Roberts did not disclose the foundation’s investment until a board meeting in early 2019, when he distributed a financial report showing that it owned stock in G-Form, the suit says.

Federal laws restrict how much the leaders of foundations can own in private companies — a decades-old rule put in place to prevent wealthy people from using foundations as tax shelters. When foundations exceed these amounts, they must pay what are known as excise taxes.

Such taxes can reach as high as 200 percent if not remedied in a timely manner, according to the Internal Revenue Service.

The Hoehl siblings consulted a tax attorney who concluded that the investment violated the tax code, bringing with it a range of potential penalties, the first of which — a $300,000 tax — the foundation paid last month, the suit says.

The siblings now expect the IRS to audit its recent tax returns and fear the foundation may face additional taxes “exceeding $2 million” if they are unable to get rid off its remaining G-Form interests, the suit says.

The foundation now plans to sell the shares to all G-Form members at an auction scheduled for Monday, court records show.

Read the suit here:

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