Eight months after Palm Beach developer Robert N. Kennedy suffered a massive stroke, the homebuilding company he founded is in the midst of a corporate civil war between his sons and the corporate executives that run it.
A reconstituted Kennedy Homes, led by interim president Brian Kennedy, is suing company CEO Stephen Gravett, CFO Michael Ehrlich, COO Kevin Swill and their companies Kennedy Development Partners and Kennedy Traditions in Palm Beach County circuit court.
The lawsuit alleges that Kennedy Development Partners wrongly leveraged and improperly used funds from Kennedy Homes to develop other projects and to form a new enterprise, Kennedy Traditions. This questionable transferring of funds, uncovered
during early 2019, put both Kennedy Homes and Kennedy Development Partners in a financial tailspin, the complaint alleges.
Brian Kennedy, one of Robert’s sons, said that the lawsuit is intended to take control of Kennedy Homes’ finances and is an attempt to protect nearly 50 homebuyers who have made deposits on houses that have not been built.
“When our father had his stroke, Stephen Gravett assured us the companies were running fine,” Kennedy said. “In the first part of this year, when we were pushing for financials, we came to find out that the real story is obviously different from what we were told.”
Gravett, Ehrlich and Swill did not immediately respond to messages left on their voicemails.
According to the complaint, the three executives used Kennedy Homes’ funds to pay for the home office overhead costs of non-Kennedy Homes projects. The co-mingling of funds resulted in Kennedy Homes having no funds to pay subcontractors on its own projects, the lawsuit alleges.
In addition, Gravett, Ehrlich and Swill used Kennedy Homes as the guarantor of payment and completion for projects benefiting Kennedy Development and Kennedy Traditions, entities controlled by the three executives. In doing so, the three executives reduced the profitability of Kennedy Homes while funds and profits were transferred to the two other firms, according to the suit. Kennedy Homes has a 15 percent stake in Kennedy Development, Gravett’s firm.
“On information and belief, this shifting of funds from Kennedy Homes and transferring liabilities to Kennedy Homes amounted to millions of dollars, and was a breach of fiduciary duty, duty of loyalty and fair dealings,” the lawsuit states. “In 2018…such misapplication and misappropriation of funds and obligations increased.”
Kennedy Homes’ financial crisis also includes several million dollars of home purchase deposits that have not been placed in escrow, placing the completion of houses under contract in jeopardy, the lawsuit states. Kennedy Homes alleges that the deposits have been “dissipated, misdirected or misappropriated.”
The lawsuit also accuses Gravett and Swill of creating false documents to make it appear that Robert N. Kennedy is part of their company Kennedy Traditions, for which he has no ownership interest. Gravett and Swill also allegedly made Kennedy Homes the guarantor on loans totaling more than $8 million.
“Robert N. Kennedy never approved such transaction nor was it fully disclosed to him the actions being taken by Gravett and Swill,” the complaint states. “It now appears that the loan has been drawn down and there are insufficient funds to progress the projects.”