Two prominent local developers will square off in court after exchanging accusations of deception, financial mismanagement and damaged community standing stemming from a soured investment deal at Tamarack Lodge in Traverse City.
Richard “R.C.” Hermann, owner and developer of the US-31 resort and fractional condo ownership complex, filed a lawsuit Friday in Grand Traverse County 13th Circuit Court against Bryan Punturo, owner of Parkshore Resort and a Tamarack investor. Hermann is accusing Punturo of defamation, false light invasion of privacy and tortious interference with a business relationship.
The lawsuit was prompted by Punturo's creation in August of a public website on which he accuses Hermann of being “financially insolvent” and lays out a detailed, unflattering investment history of Tamarack Lodge. That history depicts Hermann as deceiving backers, misrepresenting the company's fiscal health and failing to meet promised development benchmarks, among other claims.
Punturo, who invested $50,000 in the project in 2005, says he was promised repayment within 36 months at an interest rate of 25 percent, for a yield of $87,500 at maturity. After the repayment period came and went, he and other investors were informed sales at Tamarack were not up to projections and repayment wasn't feasible, Punturo alleges.
In the ensuing years, he continues, additional investors have been recruited to shore up losses in the development, while members of the original backing class saw their shares repeatedly diluted and are still awaiting repayment.
Hermann acknowledges “the recession significantly hurt the pace of sales at Tamarack and put us several years behind in the execution of our original business plan,” but calls the details presented on Punturo's website “masterful works of fiction.” He says the majority of his investors agreed to contribute more capital and voted for new financial terms to cover the project's recession setbacks, and that Punturo had his shares diluted under that vote since he declined to participate in the new terms.
“(Punturo) recently demanded that either I or the venture redeem or buy out his minority investment, which is in clear violation of the venture operating agreement,” Hermann says. “I declined...and he followed with a clear threat to kill the condominium sales program.”
Punturo's website is an attempt to make good on that threat, argues Hermann, as was his hiring of picketers over this past busy summer tourist season to stand outside Tamarack Lodge with a sign displaying the URL for the website. Hermann says Punturo's actions have caused him “substantial economic injury” and “loss of esteem and standing in the community.”
For his part, Punturo counters that his goal was simply to inform prospective buyers of the “underlying facts” regarding the venture, so they could make an “informed decision” on whether or not to invest in the development.
“I realize the liability I potentially face with my approach, (but) I have been advised by counsel that I cannot be held liable as long as I can prove that the information is indeed fact,” Punturo says. “My information is very accurate, or I would not take a chance in presenting it as I have.”
Hermann – who is represented by Traverse City-based Kuhn, Darling, Boyd & Quandt, PLC in the lawsuit – says he intends to “vigorously pursue...all legal options which are available, including claims for significant damages.” Once a copy of the complaint and summons has been delivered to Punturo, the investor will have 28 days to respond to the lawsuit in court.