The former Keller Williams CEO expanded on previous allegations of financial misconduct in new court filings while adding new claims of alleged sexual misconduct by Gary Keller’s son, John Keller.
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An ongoing legal battle between Keller Williams Realty and its former CEO John Davis has escalated with new claims that Davis has made against the real estate company’s leadership.
In the lawsuit first filed by Davis and former Arizona franchise owner Jesse Herfel in August 2023, the plaintiffs have accused executive vice chairman John Keller, who is also the son of founder Gary Keller, of sexual misconduct.
In a court papers filed Jan. 27 in U.S. District Court for the Northern District of Texas, Davis claims Keller’s accuser was fired after reporting the misconduct.
Davis’ own legal battle against the real estate franchise first began because sexual misconduct allegations came to light against him in 2022, years after he left the firm in 2019, and he was fighting to clear his name.
The Jan. 27 filing claims John Keller was accused of the misconduct by a Keller Mortgage employee. The allegations were then allegedly covered up by general counsel Stacie Herron. The filing claims that Gary Keller paid off the accuser with $1 million of his own money while he gave Herron a $1 million bonus and a promotion to interim COO for her work in the cover-up.
Davis and Herfel also accuse Keller Williams of creating a scheme to defraud franchisees and reduce their value, then purchase their businesses while they were below-market value.
“This is yet another attempt by Mr. Davis, through unfounded and sensational allegations under the guise of a legal filing, to continue his public smear campaign against Keller Williams and its leadership,” Keller Williams spokesman Darryl Frost wrote in an email to Inman. “These untrue personal attacks represent an ongoing effort to generate attention for his baseless and false claims. While we continue to address this matter through the proper legal channels, our focus remains on running our business.”
In the 84-page filing, first reported by The Real Deal, the former executives call out an allegation previously made in the lawsuit that Gary Keller’s own playbook dictates “why buy what we can steal,” a phrase Davis and Herfel claim became a company wide motto to guide franchise acquisitions.
The filing also expands on and adds to allegations the duo previously made of financial misconduct against the company and its leaders. Davis and Herfel claim Gary Keller, John Keller, Stacie Herron, Josh Team and Mark Willis “misappropriated, diverted and embezzled” millions in fees through KWx while adding that Team specifically received $10 million in kickbacks.
Representatives for Josh Team at SERHANT. did not immediately respond to Inman’s request for comment.
Also mentioned in the filing is a scheme surrounding Gary Keller’s wife, Mary Pfluger, and a supposed off-the-books check she gave to southwest regional director Jonathan Dupree to compensate him for going along with a cap-cutting directive handed down by Keller, which hurt his region.
The new allegations were included in a demand for arbitration by Davis and Herfel, which says that parties involved in the case have not been able to agree upon an arbitrator.
In a reply filed by counsel for the defendants, attorneys from Akin Gump Strauss Hauer & Feld said that Davis and Herfel’s Jan. 27 filling was just another attempt to drag their feet on arbitration through “sensational, defamatory allegations” with the hope that they may be publicized by the press.
“Plaintiffs’ use of the Court and public filings to pursue their personal vendetta and disparaging campaign against Defendants must end,” M. Scott Barnard of Akin Gump Strauss Hauer & Feld wrote. “The court has ordered arbitration two times, and Plaintiffs have circumvented those arbitration orders and continue to refuse to resolve their disputes in private, confidential arbitration despite representing to the Court that they would do so.”
Keller Williams’ legal team asked the court to withdraw the filing and strike it from public court record. Davis and Herfel’s attorneys have agreed to do so once an arbitrator has been chosen, in order to save the court time. Attorneys representing Keller Williams have also filed a motion asking the court to hold Davis in contempt because of what they see as efforts to mislead the court.
The Jan. 27 filing is part of the second lawsuit that Davis has filed against Keller Williams — he filed the first in October 2022. In that lawsuit, Inga Dow, CEO of various KW offices, had made the sexual misconduct allegations against him, which she ultimately dismissed and the lawsuit went to arbitration in March 2023.
Read the full Jan. 27, 2025 filing below:
