Traverse City Record-Eagle

October 6, 2013

Local developer sues business partners


---- — TRAVERSE CITY — A Traverse City developer accused a local attorney and a school board member of bullying him out of his interest in a long-planned Pine Street development that could include a downtown parking deck, according to a lawsuit.

Gerald Snowden's complaint recently filed in 13th Circuit Court seeks to wrest control of two limited liability companies -- Pine Street Development One and 2JS Development -- from business partners Joseph Sarafa, an attorney, and Erik Falconer, a financial adviser who serves as treasurer for Traverse City Area Public Schools board of education.

It claims they conspired to "wrongfully takeover as managers of Pine Street and 2JS," fraudulently induced Snowden into giving up portions of his membership interests to Sarafa, bullied him into accepting a below-market buy-out and cut off his pay from both companies.

2JS developed a Division Street property with a Family Dollar and a Social Security Administration office with a $3.3 million, 10-year lease. Pine Street Development One plans a mixed-use development and potential public parking deck on the brownfield Pine Street property near Riverview Terrace, but the project languishes.

Snowden termed the suit a "sensitive matter."

"All I’m really comfortable saying is it's a business dispute that won’t affect use of the property," he said.

Falconer said he wasn't aware of the lawsuit until contacted by a Record-Eagle reporter. He said he would have to speak with his attorney.

"We're surprised and disappointed, but until we understand what we're facing it wouldn't be wise to comment beyond that," Falconer said.

Sarafa could not be reached for comment.

Jean Derenzy, deputy director of the county’s Planning & Development Department, said she was not aware of the lawsuit and didn't know what affect it could have on the Pine Street property. It has $7.2 million in tax credits and incentives.

The complaint claims Sarafa and Falconer "effectively pushed Snowden out as operating manager" of both companies in March by tricking him or intimidating him to engage in a series of financial transactions that diluted his ownership interests.

In the case of Pine Street, the complaint claims after Snowden's share was diluted and Sarafa and Falconer offered to buy his interest for half its value, or $362,000, and refused to get an appraisal on the property. The complaint also claims a $3.2 million offer in June to buy the property stalled because Sarafa and Falconer intentionally delayed their response.

Sarafa also initiated an "unwarranted" action against Snowden's real estate license with the Michigan Department of Licensing and Regulatory Affairs in order to put his "livelihood at risk," the complaint states.

The 11-count complaint asks the court to appoint a receiver during litigation and order Sarafa and Falconer to cease their business operations of both companies.