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Bank suing Estridge Cos. for securities fraud

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Bank of Indiana is suing The Estridge Cos. for allegedly failing to repay a $1 million investment the Indianapolis-based bank provided to the Carmel-based home builder.

The lawsuit filed Sept. 9 in Marion Superior Court charges that Estridge, along with Indianapolis-based Indiana Securities LLC, committed securities fraud in connection with an offering the bank says was due to be paid off June 30.

The complaint further accuses Indianapolis-based law firm Krieg DeVault LLP of malpractice and breach of fiduciary duty by representing Bank of Indiana, as well as both Indiana Securities and Estridge, during the offering and without the knowledge of the bank.

Bank of Indiana is seeking to recoup its investment, as well as all damages available under the Indiana Securities Act, punitive damages and attorney fees.

Owner Paul Estridge said in an e-mail Wednesday that he has referred the lawsuit to his legal counsel, who advised him not to comment.

Estridge, however, went on to say that he expects the disagreement to be resolved in “very short order.”

“The claim is absurd,” he said. “We’re home builders, not securities dealers. As such, we’re focused, like all home builders in this nation, on strengthening our company and building great neighborhoods in the communities we live in and love.”

The bank asserts in its suit that, throughout 2009 and into 2010, the financial condition of Estridge was deteriorating, and the likelihood of a return on its investment was in decline.

In June, IBJ reported that the once-formidable home builder had received a $10 million investment to help it weather the severe housing downturn.

That infusion was unusual on two fronts. Few companies in the out-of-favor home-building industry are able to raise capital these days. And the source of the Estridge funds wasn’t a traditional investor—it was subcontractors with a long-standing relationship with the custom builder.

Then, owner Paul Estridge said the company was in no danger of becoming the latest casualty of the meltdown. Yet he acknowledged the difficulties of securing traditional bank financing at a time many have restricted lending.

About 25 investors agreed to chip in from $25,000 to $500,000 in exchange for ownership stakes. Collectively, the subcontractors own 35 percent of the company.

Estridge, the area’s largest custom builder based on homes constructed, expects to build 250 homes this year ranging in price from $300,000 to more than $1 million.

The launch of its most ambitious project, the proposed Symphony development in Westfield, hinged on the investment from the subcontractors, Estridge said.

The home builder, though, sought outside funding long before this year, according to Bank of Indiana’s suit.

On Dec. 29, 2006, Estridge filed paperwork with the U.S. Securities and Exchange Commission to raise funds through a private security offering. Indiana Securities served as the underwriter for the offering, the complaint said.

Less than two weeks later, the bank purchased $1 million worth of three-year subordinated notes paying 11 percent interest. Later in 2007, however, the bank charges that the defendants added several amendments to the offering without its knowledge.

Chief among them was a change to the due date of the notes, from June 30, 2010, to “a date several years later,” according to the suit.

“Upon maturity, the Estridge defendants have failed and/or refused to pay the $1 million due and owing to the plaintiffs, despite repeated demands to do so,” the complaint said.

Bank of Indiana also names in its suit Frank Neese, owner of Indiana Securities, who also served as board chairman of Bank of Indiana at the time it purchased the notes, and Dawn Barringer, an Indiana Securities partner. Calls to Indiana Securities were not returned.

Krieg DeVault partner Karen Woods is named, as well.

John C. Trimble, a lawyer at Indianapolis-based Lewis Wagner LLP, is representing Krieg DeVault.

He said in an e-mail that the firm believes the allegations are without merit, and it intends to vigorously defend the case. Because the matter is in litigation, he declined to further comment.

Bank of Indiana is represented by Mark Waterfill, a partner at the Indianapolis office of Cleveland-based Benesch Friedlander Coplan & Aronoff LLP.
 

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  • CROOKS!
    In my opinion the estridge companies are crooks. They filed bankruptcy on their 'track housing' side of the business two weeks before they closed on one of my clients' homes. When my client first interviewed Estridge as a builder 6 months before, they specifically ASKED about the solvency of their business, knowing that some builders were struggling. Estridge truly misrepresented their financial situation at that time. I suppose I am more unhappy with the whole system than I am with the builder because what the heck==you can file bankruptcy on 'track homes' but still keep building and make money off of 'custom built' homes??? How ridiculous! They are all homes. How can a company be allowed to bilk thousands of dollars from their subcontractors but still be allowed to build houses?? they should have been made to pay back all their unpaid contractors before being allowed to profit from building any more houses! This alone makes them and the system crooks in my eyes. I would never build an estridge home and I would not recommend for my clients either. If they were truly 'bankrupt' how could they afford to keep building homes anyway??? The whole system needs fixed.
  • unbelievable!
    my father invested money with a securities company company that is involved with all this business... he passed away quite some time ago..the certificate that i recieved when all was said and done was collecting interest at that time ....which dwindled down to nothing .. then came letters saying ...default...million dollar loan payment..no monies to be recieved ........then sometime later lawsuit from bank saying ......we are suing all parties involved ......we owe u x amount of money..... but we dont want to pay you ..... my father worked 40 plus years to make that money at a dirty, hard , dangerous job , and you have the nerve to sue me for that money???????????????????? what is this world coming to when a bank sues you because they owe you money.... when did that get turned around backwards????????????
  • Estridge builders- House
    I would like to know if there is anyone out there that knows of a homeowner lawsuit against Estridge builders. I would like to add my name to the list. Please email me with any information on who to contact about this matter. Thanks
  • Re: Proud Vendor
    So, if you're such a proud vendor why didn't you disclose the name of your company? If you're gonna stand up, then stand up!
  • class action Estridge
    has there been any more discussion
    or thought of class action suit?
    Centennial?
  • Reply To Lisa
    I commiserate with your complaints. When the ceiling collapsed in our garage and the ceiling leaked in our living room (brand new construction). We got the exact same reply, "Ice Dam" and not their "problem". No other explanation and of course, our home is drafty, cold, like yours. I hope this company is investigated for all the misery they have caused their clients, vendors and community.
  • You got it correct
    Yep, tried unsuccessfully to make the books look good to secure more financing. It failed and now a matter of time.
  • Promise "superior product", deliver "inferior product"
    Built my house (ranch) summer of 2009 and moved in Sept of that year. House was so drafty and cold we actually incurred the cost ourselves of adding an additional furnace. One heats the basement, one heats the main floor. Still drafty. Also, huge water leak in front bedroom last winter caused by what they said was an "ice dam" melting. Surprise! Home warranty does not cover this. As I sit here writing this, water is coming in through the ceiling in various places in my family room, as well as that same front bedroom again. Could not go to work today because I've been emptying pans of water so that they don't overflow onto my hardwood floors. Again, I called Estridge. Again he said this is not their problem and he hung up on me. Bottom line-it is unacceptable to spend this much money on a brand new home and have to live with a roof that is not properly engineered for melting ice. Does this mean that every winter I will have to live with leaking ceilings, drywall repair, buckling hardwood flooring, etc. because they (Estridge) maintains that "these things just happen in Indiana weather". Nonsense! We lived in our previous home for 20 years (a "real" custom home) and never encountered this problem.
  • Class action lawsuit
    If you have or had as many problems with your Estridge home as I did, pls contact me for a class action lawsuit!
    • Stealing
      Stealing from your customers, vendors and banks to "create" and keep a business operating is not helping the community. You are obviously an Estridge employee, so therefore, your lack of integrity, regarding those issues are inherent.
    • IMO Estridge is a fraud
      We have lived in an Estridge built home, with a youngster, in our household, for 5 years. We paid cash for our newly constructed property, because we trusted the Estridge name. What a sham it has turned out to be! The heating is inadequate, we freeze during the winter months and are forced to live and take our meals on the second floor of our home, of course we could fix it, like many other neighbors were forced to (documented), for a cost of 3,000 dollars or more. Our garage ceiling collapsed the first winter we were here, the floor in our master closet, collapsed. The ceiling in the living room leaked. Our shelving in the kitchen collapsed (we weren't aware Estridge had installed the hinges on the shelving upside down). Never occurred to us to look for a defect, like that, during our final walk through. We believed in trust, ha! We lost our ANTIQUE china, as a result. Now we have MOLD growing in the walls, with NO evidence of a water leak from the interior. WE discover, 4 months after we bought the property, ESTRIDGE amended the covenants (they had control of the association at that time). supposedly, to meet the demands of an expanding community. They slipped in a clause that would exclude them or an association from any claims of exterior damage to a home (other than natural disaster) under any circumstance. This is an attached dwelling. No matter what happens an EXTERIOR problem is automatically and interior problem. MOLD, we are living with mold, due to an exterior problem. I might add we never received an updated copy of the covenants from ESTRIDGE. So it isn't surprising to read they slipped an amendment in, at a later date, for their promissory note to the bank. Estridge has addressed our concerns and issues with contempt and arrogant disregard. AS soon as they got their money they were done with customer service. A few cosmetic repairs were made,by Estridge, but we are living with the worst of it. In our opinion, Estridge Company are liars, a fraud and should be ashamed. Unbelievable and ironic, a church is the center piece for this community. I suppose it was a great marketing tool for attracting prospective buyers into THINKING it was a Christian community. It is really a shame, because Westfield is a great community and the people here are wonderful. The whole thing breaks our hearts.
    • Sad Song
      Wake up Westfield Town Council /Planning Commission! This thief wants to borrow millions of tax dollars with the help of his partner in crime Mayor Andy Crook to develop another no promises delivered neighborhood (Symphony)and you do not think this is a bad move? "Federal Investigation for securities fraud" should get your attention.
    • Unfortunate
      I think it is unfortunate that people give their opinions without correct information, unjustifiable criticisms, and selfish rants. Paul Estridge has given a lot to this community. He has provided jobs to many people directly or indirectly involved with his businesses, donated many thousands of dollars to this community, and has volunteered countless hours to making the people around him better. It is unfortunate that the Economy has made his business struggle, and in turn, made many people and businesses struggle. I am glad that there are people that are willing to stand up and fight for what they have worked so hard to get. I feel bad that some homeowners did not get their promised pool. I feel even worse that another community leader, job provider, and quality business has to be fighting for survival.
    • models for sale
      Any of the estridge apologists want to shed some light on why most of their model homes are listed for sale? Are things getting that bad?
    • If that's how it works
      Ok, you promise me a pool for my community but now can't afford to put it in. Instead of being angry that you lied to us I should try to help out your lying butt? If you ran the company the right way - the honest way - you wouldn't have these problems.

      But since you are playing that card, since times are rough and you can't give us promised amenities that we are PAYING for in HOA dues, then I don't think I want to pay the full amount for the house anymore either. I mean, times are rough, you should be supporting the homeowner and your communities and help us out too. Give me back $50k and we'll call it even.
    • One more thing Dave
      There are pools and there are ponds.....a pond would be good for you.
    • Wow
      It's funny that people (Dave) are still worried about small things in this rough economy like a community pool. Ummm hey dave incase you didn't know thousands of businesses are hurting right now and they have to make smart decisions and using scarce capital to put in a community pool probably is not as important as surviving! Atleast they are trying to hold strong continue to provide jobs to people and survive through these times. We need more small businesses to stand up and fight and they need a little help from their communities, instead of sweating a small thing like a pool why don't you help them out by just shutting your mouth. If you want to be a "community" man than try to help out small business growth. Ignorant is no way to go through life.
      • Really Jim?
        "If the media would report accurate news and quit trying to make the big headlines maybe the housing industry could get back on track." If Paul Jr. wasn't such a crook, and ran this company like his father did, you wouldn't be in the headlines. Paul Jr. is a liar & cheat, and he's getting what he deserves. Jim, the sooner you realize all of this, the better off you will be. Also, the obvious outcome is staring you right in the face, so update your resume.
      • Waiting for Estridge to fulfill promises
        I live in an Estridge neighborhood and don't see how they got their good reputation. We and our neighbors have had problems with our houses. The guys in the field are nice but ineffective. They can't figure out solutions to problems and look for an easy way out. The guys at the main office duck calls. Also, I've been waiting 4 years now for that community pool.
        • Post Script
          Mr. Estridgeâ?¦

          "Wilt thou seal all avenues of ill, pay every debt as tho GOD wrote the bill."

          Ralph Waldo Emerson
        • Collusion
          Gee, let me see, the COB of the bank is a PRINCIPLE in the securities firm and all PARTIES are represented by the same by the same LAW FIRM. What did Shakespeare say about Denmark? If not COLLUSION then at least a CONFLICT OF INTEREST.
        • Re: Banking at its finest
          "Mr. Estridge, stand firm with these idiots. Media would do itself a service and expose banks and the dealings they make that are just poor investments on their part. It sounds like the bank did not fully understand what it was getting itself into."

          Wow are you supporting Estridge here? Another clueless Estridge employee posting nonsense on message boards. Blame the banks? Don't try to make them the boogeyman for your company's misdeeds. You are right about one thing - the sometimes make bad investments - Estridge is one of them!
        • Banking at it's finest
          Here we go again, banks crying foul. When will they wake up and stop ripping people off. They make tons of money and still want more. Bounce a check or overdraft your account and see what they charge you. They are loan sharks to say the least. Banks created tihs economic mess and they just don't get it. Mr. Estridge, stand firm with these idiots. Media would do itself a service and expose banks and the dealings they make that are just poor investments on their part. It sounds like the bank did not fully understand what it was getting itself into.
        • You know Estridge?
          Really? Ask several of their neighborhoods why they aren't receiving the promised amenities now. Or ask the real vendors getting jerked around on payment (like mentioned earlier). Sorry, but if this is you posting here Paul - you really need a better PR firm.
          • Banks
            This is all the banks fault. They didn't read their agreement well enough and are now upset about what they got themselves into. I know Estridge and they will pay back whatever loan they took out. They have been doing quality business year after year for the last 40 Years. Banks act so ridiculous these days we can't let them take down another terrific small business from our city. Estridge always does the right thing because it's the right thing. They believe in please all of their customers and vendors even if it means surrending some of their own share of the profit. I'm proud to have the Estridge companies working for us in this state and we should all support them.
            • Really?
              Do you think you are fooling us? We know you are an Estridge employee, using a canned line and false accusations against this news organization. In my opinion it is pretty obvious Estridge lacks integrity and isn't above bending rules to make a buck. They've screwed over their existing neighborhoods, vendors and investors. Keep trying to scoop water off that sinking ship brother.
            • Pots and kettles
              Sounds like the greedy pots are calling the selfish kettles black.
            • Correct Bank
              Rick, I don't think this particular publication would confude Bank of Indiana with another similarly named local bank.
            • correct bank?
              Bank of Indiana is based out of Terre Haute - used to be FNB Dana. Is BOI the correct bank or is it a similarly named?
            • Lawsuit
              Just to be clear, the lawsuit accuses the defendants of breach of a settlement agreement, securities fraud, malpractice, breach of fiduciary duty, and tortious interference with a contract.
            • Arguments
              Miles, your argument should be with the bank then, not with the reporters. All the journalists did was report the type and the grounds under which the suit had been filed.

              I used to work for one of the firsst builders to go under, and believe me, there is plenty of blame to go around. We had banks and private investors contacting us wanting to get involved in the next project. We had mortgage brokers courting us so that we would bring home buyers to them when units were sold. I personally attended a closing on a seven figure home where the buyer, after putting up $25k earnest money, walked out with a check for $10k. He put $15k down on a seven figure home.

              Nobody ever inteded to stiff anybody. But nobody ever stopped to ask, "Do we really need this many houses?"

              Now everybody is paying the price. Folks like me have had to move on in their careers, banks are having to deal with huge REO inventories and the related loan losses, and vendors are having to write off receivable from now defunct builders.

              It's nobody's fault, but at the same time, it's everybody's fault. How each of us reacts will tell alot about our character.
            • Yellow Journalism
              Failure to pay on time is not securities fraud.

              Securities fraud means they intentionally misrepresented the investment. A serious crime.

              This is a false but sensational headline to attract attention. In the internet age, a false accusation like this will live in Google searches forever.
              • Time & Support
                As a past service provider to the Estridge Companies, we have known them to be totally true to their word and exceptional people, from top to bottom. With the recession and it's effect on home buying, are we really supprised they are hurting? I know that there is no way Estridge ever intended not to pay the loan or make good with their vendors. They are, like many businesses at the current time, trying to make the most with what they have to re-build. This simply takes time and support from the stakeholders (including the bank that made the gamble), not a court of law. We want to let Paul and all of his employees and faithful vendors know that there are MANY who look forward to the day Estridge is at the height of their game again! Then, you can just tell the bank to shove it.
                • choice
                  Esta...you ask what kind of choice we had...I can answer that question for you. None. We were harrassed to sign a document that stated we would "wait" for payment for everything we were owed from 2009 and the first half of 2010 and in "exchange" we would be "partners" and receive a percentage of profits after we were paid back in full...at a time which was not disclosed! And the best part, if we decided NOT to participate, we would just go to the bottom of the list and wait for payment, which we wouldn't get until all the participating partners were repaid. So, either way, we get the shaft! It's a big CROCK.
                • Twisted?
                  Jim, we would be glad to know if we got something wrong in this story. I'm not sure why you think we twisted something. I'm also unclear why you think a million-dollar lawsuit against a big local home builder isn't news?
                  • screwed vendor
                    As a vendor company who has worked with ESTRIDGE for over 10 years, I have to say they do poor business. As a very small business, we have been put in the red by Estridge and they are not living up to their bargains! We continue to do work for them and they are paying partial current. Their system of payment to the vendors is FAULTY to say the least. If they would just pay us the $45,000 they owe us, I would just wash my hands and say see ya later. Unfortunately, they have you right where they want you! I have a VERY bad feeling that we are going to lose out either way you look at it....
                  • Home Builders
                    I think Estridge is a great company.
                  • Gotta Love the Media
                    Seriously, the media needs to stop twisting stories and focus on real news. The housing industry continues to take a hit and most of it is the media making things worse for buyer confidence. THE ESTRIDGE COMPANIES IS A COMPANY THAT CARES ABOUT THEIR CUSTOMERS AND THEIR VENDOR PARTNERS. They conduct business with integrity and with dignity. If the media would report accurate news and quit trying to make the big headlines maybe the housing industry could get back on track.
                    • Short Term Fix
                      I sounds to me like Estridge swapped short term debt to his vendors for equity in his company to bolster his balance sheet. Those vendors knew they would get nothing anyway, so what choice did they have?

                      As for the bank, they made a bad loan, live with it. If they want to put him out of business with this suit, go ahead, but I have a feeling they are trying to get blood from a turnip at this point.

                      Just my opinions, no inside knowledge.
                      • Integrity?
                        Didn't Paul Estridge stand in front of Westfield and talk non-stop about the integrity of his company and people? Why, he even brought in a bunch of stooges to vouch for his integrity. What a crock (in my opinion!)

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