Toothworks’ proprietor sues former owner

The new owner of Toothworks and Open Choice dental clinic sued the former owner yesterday over the sale of the company.

Alan Stuart Markoff accused Todd Keith Johnson of misrepresenting the company’s financial information that made the former decide to purchase the dental practice for $525,000.

In a civil action at the U.S. District Court, Markoff’s attorney, Eric S. Smith, said Johnson had shown his client documents that falsely represented the history of deposits made by the clinic’s patients and customers when they were negotiating the sale.

“Since [Markoff] took over the dental practice, [he] has learned that the statements made by [Johnson] were false and the documents provided did not accurately reflect the deposits made by patients and customers. The amount stated in the consolidated deposits was overstated by approximately 25 percent,” Smith said.

“As a result of the overstatement, the true revenue deposits was at least 25 percent less than represented and the value of the business was at least equally reduced,” the attorney added.

This happened even if Johnson warranted that the financial information he was giving Markoff was correct and that it was properly prepared in accordance with generally accepted accounting principles, Smith said.

The complaint showed that Markoff and Johnson reached the purchase and sale agreement on Sept. 16, 2004, during which Markoff paid Johnson $400,000 and two promissory notes in the amounts of $50,000 and $75,000.

On Dec. 15, 2004, Markoff and Johnson entered into an agreement that called for Johnson to act as Toothworks’ consultant in exchange for a fee of $1,450 monthly for 60 months. Smith said Markoff has already made three monthly payments to Johnson.

“Through an examination of [Johnson’s] records by an accountant, [Markoff] has learned that accepted accounting principles were not followed and that the contents of the financial information did not correctly reflect the financial affairs of the business,” Smith said.

Smith said Johnson breached the sale contract wherein he guaranteed the accuracy of the financial information he had provided Markoff. The lawyer said Markoff was damaged by at least $117,500.

Smith asked the court to award Markoff that amount plus other damages. Markoff asked for a trial by jury.