Group Files $178M Suit Against Entrepreneur
May 2008 issue featured company found to be running alleged Ponzi scheme.
A group of investors has filed suit against Entrepreneur, alleging the magazine misled them about a company featured on its â€śHot 100â€ť list.
Entrepreneur says it was not their intent, and called the lawsuit "unwarranted."
The company, Agape, was ranked number 73 among Entrepreneurâ€™s â€śHot 100â€ť fast-growth businesses. The issue was published in May 2008.
In January 2009, Nicholas Cosmo, founder and owner of Agape World, was arrested and charged with a $370 million mail fraud. According to Time.com, it appeared Cosmo was running an alleged Ponzi scheme, similar to Bernie Madoff's.
According to the suit, filed in Nassau County (New York) earlier this month, Entrepreneur â€śdeliberately, willfully and recklessly failed to exercise due diligence in publishing informationâ€ť about Agape. (The lawyer in the case, Eliot Bloom, is representing an Agape investor in a separate lawsuit against Dunn & Bradstreet, which provided data to Entrepreneur to help rank the companies.)
â€śEntrepreneur did not attempt to verify the information it received from Agape, at no time did Entrepreneur visit Agape headquarters,â€ť the suit alleges, or â€śmeet with its principals. â€¦ Had Entrepreneur conducted itself with a minimum of due diligence â€¦ it would have found much of the information provided by Agape as false.â€ť
In a statement provided to FOLIO:, Entrepreneur CEO Peter Shea said: â€śGiven the limited information provided about each company, it was certainly not Entrepreneurâ€™s intention to evaluate or predict a specific companyâ€™s investment potential nor expectation that anyone would rely on such information to make investment decisions â€¦ Placing blame for these unfortunate events on Entrepreneur is unwarranted.â€ť
Each of the 87 investors named in the suit relied on Entrepreneurâ€™s â€śconclusions regarding Agapeâ€™s financial statureâ€ť and decided to invest.
Click here for a PDF of the lawsuit.