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Legal tussles continue between Carmel developer, siblings

November 27, 2017

Another intrafamily lawsuit involving Carmel developer Steve Pittman and his siblings is moving forward after an attempt earlier this fall to dismiss the proceeding.

The Pittman siblings—the five children of late heart surgeon and real estate developer John N. Pittman—have been squabbling for years over the family's considerable assets.

In the lawsuit, siblings Mark Pittman and Anne Kelton have accused brother Steve Pittman of wrongly taking funds from a family-owned entity to invest in one of his developments in Carmel and then mismanaging the investment.

The lawsuit, which Mark Pittman and Kelton filed in Marion County in April, accuses Steve Pittman of a breach of fiduciary duties, negligence and a violation of the Indiana Securities Act. It also seeks unspecified damages.

Steve Pittman's motion to dismiss the suit was denied by the court in September.

The development entangled in the lawsuit is The Seasons of Carmel, a $35 million multifamily housing development along Westfield Boulevard, north of 96th Street. Steve Pittman, principal of Pittman Partners, publicly introduced the project in late 2012, but it took several years to complete.

Mark Pittman, who is an attorney living in California, and Kelton, who lives in Oregon, argue that Steve Pittman invested money from a family-controlled entity known as Pittman Family Associates in The Seasons, but they have not received any return because of Steve Pittman’s actions.

Steve Pittman describes the allegations made in the lawsuit as “fabrications” and accuses Mark Pittman of failing to repay a $100,000 loan made from Pittman Family Associates.

The lawsuit involving The Seasons is the latest in several court battles for the Pittman family. The five siblings—Mark, Chad, Steve, Scott and Anne—have been fighting in court since September 2015 over how to handle their father’s estate. The estate is part of a larger web of family assets.

Mark Pittman has also filed a lawsuit that is still ongoing involving the family’s investment in The Bridges retail development in Carmel.

“Although the Pittman siblings are fighting over as much as $50 million in estate, trust and family business assets, and have already distributed approximately $20 million in cash and stock, the $2 million we have collectively already wasted on attorneys would appall our parents,” Mark Pittman said in an email to IBJ. “I pray that our family will resolve our disputes and Scott, Steve, Chad, Anne and I can move on with our lives.”

Family patriarch John Pittman and his wife, Euna, created Pittman Family Associates in 1997 and slowly shifted ownership to their five children until each had 19.6 percent control and were each considered a limited partner in 2006. Euna Pittman died in 2010, and John Pittman died in 2014.

Mark Pittman's lawsuit regarding The Seasons says Steve Pittman initially starting planning for the project in 2006. At that time, he described it as a townhouse development and told his siblings he wanted to invest funds from PFA to finance it.

Once the Great Recession hit, Steve Pittman decided that townhomes were not feasible and switched gears to build apartments instead, according to the lawsuit. He also ran into drainage problems on the property, which caused more delays.

In the midst of the issues, Steve Pittman lost bank financing for the project, and his dad, John Pittman, loaned him $600,000, which has since been repaid, according to court documents.

In the complaint, Mark Pittman and Kelton argue that because their brother did not develop the project as originally promised, it incurred additional costs that devalued PFA’s investment.

The other issue raised in the lawsuit involves a change in ownership structure that occurred when Steve Pittman partnered with Indianapolis-based Barrett & Stokely to develop the community and formed a new entity called The Seasons of Carmel LLC.

The change in the ownership structure of the project caused PFA to no longer be a direct investor. Instead, Barrett & Stokely, an entity called Pittman-The Seasons LLC and other unnamed investors became the direct investors in The Seasons of Carmel.

Until this point, according to court documents, the only investor in Pittman-The Seasons was Steve Pittman’s company Pittman Partners, but as part of the changes with The Seasons of Carmel, Steve Pittman made PFA an investor in Pittman-The Seasons.

Steve Pittman argues that PFA didn’t have the funds to be a primary investor in the new ownership structure, so that’s why he made it an investor in Pittman-The Seasons along with Pittman Partners.

But Mark Pittman and Kelton argue that they did not know the ownership and investment structure had changed until it was revealed in the midst of the ongoing battle over their father’s estate, which maintains a 2 percent interest and general partner status in PFA.

Steve Pittman told IBJ that all investors received a memorandum that described how the investment would work and that the minimum amount needed was $250,000.

According to court documents, PFA contributed $209,000 for the project, but Steve Pittman told IBJ that the entity invested less than $200,000.

“Our family entity did not have that much money to invest, so they were only able to invest in the project by forming a partnership with me and investing their nearly $200,000 along with my nearly $2,000,000,” Steve Pittman said in an email.

According to court documents, the value of PFA’s investment has decreased to $105,000, but Steve Pittman argues that The Seasons has been a “very successful” project.

“I am not aware of any of the investors in this project not being happy with this investment,” Steve Pittman said.

In an email sent to IBJ by Scott Pittman, brother of Steve, Mark and Kelton and a partner in PFA, he said he has been “very satisfied with Steve Pittman's leadership in developing this opportunity for our family business.”

“It has been very profitable for our family and better than we could have hoped,” Scott Pittman wrote. “... We are fortunate that Steve has been able to do a tremendous work for our family and I would jump at other opportunities like this to invest with him.”

Chad Pittman also sent an email to IBJ saying he was pleased with the investment and "would invest in Steve again given the opportunity."

Steve Pittman in June filed to dismiss the lawsuit involving The Seasons, arguing that Mark Pittman and Kelton shouldn’t be the ones filing the complaint, and instead it should be PFA, because the harm alleged is to the entity, not to the individuals.

“In conflict with Indiana law, Mark and Anne seek to keep any recovery for themselves. What makes this more outrageous is that Mark and Anne do not allege (nor could they) that they ever put a single penny of their own money into PFA,” Steve Pittman alleged in his motion to dismiss.

The motion was denied by the court on Sept. 5.

Steve Pittman also accuses Mark Pittman of receiving a $100,000 loan from PFA in 2006 that has not been repaid.

Mark Pittman says he has offered to repay it, including interest, but “Chad, Scott and Steve are insisting upon charging excessive interest which I refuse to pay.”

PFA hired Indianapolis law firm Doninger Tuohy & Bailey LLP in July to collect the debt, which totals $144,000, according to a collection notice shared with IBJ.

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