An attorney for a major investor in U.S. Rep. Robert Pittenger’s former real estate firm is raising questions about a vote on a proposed management change.
Pittenger Land Investments last month reached an agreement to transfer oversight to a subsidiary of South Street Partners, a Charlotte-based real estate investment firm. PLI’s investors initially were asked to send in their votes by Nov. 25, but that deadline has been extended to Monday, South Street confirmed.
PLI has been in the spotlight since August when Pittenger disclosed the company was the subject of an FBI investigation. The Charlotte Republican has repeatedly denied any wrongdoing.
In a sign of discontent with the South Street deal, Charlotte attorney Jim Cooney wrote a letter to the company last month calling the vote “improper” and asking for more information on the transaction. Cooney said he represents family trusts started by Mike Haley, a former McDonald’s restaurant franchisee with ties to Greensboro.
PLI has sent a summary of the transaction to investors but has not provided the complete agreement, the attorney wrote in the Nov. 18 letter obtained by the Observer.
“Without this basic disclosure, there is no transparency with respect to whether the proposed terms of the agreement are in the best interest of the investor members,” Cooney wrote.
Pittenger started PLI three decades ago, but shifted management to his wife, Suzanne, after he was elected to Congress in 2012 to comply with House Ethics rules.
Over the years, the company has gathered investors to buy raw land with the objective of later selling the property to developers. In recent months, some investors have complained about the slow pace of land sales, markups on the properties and what they call a lack of transparency around PLI’s operations.
Representatives of the Haley family trusts, which have stakes in 38 Pittenger properties, have previously raised questions about record keeping and accounting practices at PLI.
In the transaction announced last month, the South Street subsidiary would administer the 52 limited liability companies that hold the properties and work to sell them to buyers. PLI would transfer its ownership in the LLCs to South Street for undisclosed compensation.
Cooney’s letter says investors are entitled to know what PLI will receive in exchange for its interest in the LLCs. Separate votes should be held on the management change, the shift in the ownership stake and a provision that releases the South Street subsidiary of liability for past PLI actions, he wrote. The letter, however, shouldn’t be interpreted as a lack of confidence in South Street, he added.
In an interview, Cooney wouldn’t say when he was hired by the trusts or what actions they might take against the company. “We are exploring all potential avenues to protect the rights of these investors,” he told the Observer.
Suzanne Pittenger did not respond to a request for comment, and Patrick Melton, South Street’s managing partner, said he had not seen the letter.
In a previous memo to investors, Suzanne Pittenger has said the transfer of the company’s ownership stake to South Street was important because it would align management’s interests with those of investors. “Our efforts have been to attract the best management team in behalf of our partnerships going forward,” the company said in a memo sent to investors Monday.
The Observer reported last month that more than 40 investors, mostly Charlotte physicians, have come out against the South Street transaction. They argued it was too early to let PLI monetize the company’s stake in the properties while investigations of the company’s practices are ongoing. Other investors, including former N.C. Gov. Jim Martin, have backed the deal, saying it is in the best interest of investors.
A majority of investors is needed to approve the deal. Some opponents said this week they were not aware the vote deadline had been extended and were upset that the company did not notify them.
The Observer has reported that the FBI and IRS are looking into personal loans and contributions Robert Pittenger made to his 2012 congressional campaign and whether he improperly transferred the money from PLI. It’s not clear if any charges will result from the probe.
Pittenger’s attorney, Ken Bell, issued a statement last month saying he has not seen anything that “even suggests criminal activity” by his client and that he hopes authorities “act quickly and publicly to absolve” the congressman. Pittenger has also asked the House Ethics committee to investigate his activities, saying he was confident the review would confirm that he has been in compliance with all rules.