Dunes Country at Furnessville was supposed to exemplify the mixed-use,
eco-friendly, traditional neighborhood-feel of the New Urbanism.
It was supposed to be very green.
But the only green ever seen by investors was the color of the money they
claim to have lost to developers Gary Atkinson and Donna Harris: more than
$2.7 million.
So alleges a lawsuit filed in Porter Superior Court on Sept. 18 by a group
of 25 investors, some of whom purchased as much as $50,000 in stock from a
development company controlled by Atkinson and Harris, others of whom bought
promissory notes in values as high as $100,000 and $70,000 from another
company controlled by the pair.
Atkinson and Harris promoted Dunes Country as a planned unit
development—permitted as such by the Porter County Commissioners in
2000—with 330 single-family homes and a business district south of U.S.
Highway 20 and east of Brummitt Road. There were to have been clusters of
housing, neighborhood-type shops, and plenty of open space, plus innovative
stormwater management practices and a constructed wetland sewage treatment
facility.
Atkinson and Harris were talking up Dunes Country as late as November 2003,
when they held an invitation-only reception at least partly to rebut a
newspaper story intimating the project’s demise. In June 2007, however, the
182 acres were on the block and being marketed by a nationwide commercial
realtor.
As it happens, only two months earlier, in April 2007, Atkinson and Harris
had entered into a consent agreement with the Securities Division of the
Indiana Secretary of State under which they admitted to selling to investors
securities neither registered nor exempt from registration with the
Division, agreed to be permanently barred from the investment adviser and
securities industry, and stipulated—if they had failed by June 30, 2007, to
re-pay the principal amounts invested in their project—to the appointment of
a receiver with authority to locate and recover investors’ funds.
The investors’ attorney, Harold Harper, told the Chesterton Tribune
on Wednesday that few if any of the investors were aware at the time that
Atkinson and Harris had entered into that consent agreement. Only a few
months later, in the fall of 2007, did investors begin to get a whiff. “The
state started contacting investors, which gave rise to some concern on their
part,” Harper said. “As matters progressed, it precipitated the investors’
contacting our office.”
For Harper the issue isn’t simply the fact that Atkinson and Harris did not
register their companies’ securities with the Securities Division. “Had they
been registered, they may not have been permitted to sell the securities to
begin with,” he said.
Instead, Harper maintains that Atkinson and Harris made “misleading
statements” to potential investors who, “had they not been told these
things, probably wouldn’t have gotten involved in the project.”
“The investors were misled about the risk of these investments,” Harper
said. “In my opinion, it went way beyond being misled and they lost a lot of
money. And these were not investors who had a lot of money to lose. These
were small investors.”
The suit specifically alleges the following:
•That Atkinson and Harris sold to investors a total of 12,000 shares of
their company, AHA Development Corporation, at a price of $25 per share, for
an aggregate investment of $300,000.
•That Atkinson and Harris sold to investors a total of 39 promissory notes
from another of their companies, Dunes Country Mortgage Partners, for an
aggregate initial investment of $1,098,156.07. Those notes—which carried a
10 percent per annum rate of interest with one year dates of maturity— were
then annually reissued or renewed, according to the lawsuit.
•That losses to investors, including accrued interest but not attorney’s
fees, total $2,718,188.
•That Atkinson and Harris “employed a device, scheme, or artifice to
defraud” their investors; “made untrue statements of material facts and/or
omitted to state material facts”; and “engaged in an act . . . that operated
as a fraud or deceit” upon the investors.
•That Atkinson and Harris violated the Indiana Uniform Securities Act and
are therefore liable to the investors for damages.
The lawsuit is specifically seeking “consideration paid” for the securities;
interest on the securities at whichever is greater, 8 percent per annum or
the specific rate provided by the security on the date of purchase; and
costs and reasonable attorney’s fees.
Meanwhile, on Sept. 14, 2009, the Securities Division for its part filed a
petition requesting the Indiana Securities Commissioner to find Atkinson and
Harris in violation of the consent order; to impose a civil penalty of up to
$10,000 for each violation of the Indiana Uniform Securities Act; and to
order them to pay restitution to all investors who purchased promissory
notes.
Harper was unable to say who exactly owns the 182 acres at this point.
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