Silver Star REIT Files Suit Against Former CEO
Silver Star Properties REIT, a publicly registered non-traded real estate investment trust formerly known as Hartman Short Term Income Properties XX Inc., announced that it has initiated legal proceedings against the company’s founder and former CEO, Allen Hartman, both individually and in his capacity as trustee of the Hartman Family Protection Trust, and several related parties including: Hartman’s wife, Lisa Hartman, both individually and in her capacity as Trustee of the Hartman Family Protection Trust; their daughter, Margaret Hartman; Hartman vREIT XXI Inc.; and Hartman XX Holdings, Inc., of which Hartman is CEO and executive chairman.
Silver Star has accused Hartman and the related parties of several acts of mismanagement, alleging fraud, fraud in real estate and stock transactions, civil conspiracy to commit fraud, slander of title, tortious interference, fraud by nondisclosure, negligent misrepresentation, breach of fiduciary duty, civil conspiracy to breach fiduciary duty, and breach of contract.
Instead of devoting his resources to his company responsibilities, Silver Star claims that Hartman elevated his own personal interests – including faith-based endeavors, along with traveling to the Capitol for the January 6th riots and supporting Michael Flynn’s challenges to the 2020 Presidential election – above the interests of the company and its shareholders. Additionally, Silver Star claims that Hartman was responsible for routinely delinquent SEC filings, and that he took a detrimentally nepotistic approach to succession, focusing on inexperienced family members over long-term executives. Silver Star believes that these actions have caused the company to incur significant damages.
This petition comes on the heels of a recent video sent to Silver Star’s shareholders in which Gerald Haddock, current executive chairman and co-CEO, claims that when he began working at the company in 2020, he and others discovered immediate concerns, including “turnover at the executive level, lack of liquidity for shareholders, routine delinquent SEC filings of financial statements, and a noticeable pattern of evasive comments at the board level either by or concerning Allen Hartman’s lack of focus on company business.”
Hartman himself, along with Hartman vREIT XXI Inc., have previously initiated their own legal proceedings against Silver Star, along with Haddock and board members Jack Tompkins and James Still. Hartman alleges that Silver Star and its board have breached Maryland law by not holding an annual stockholder meeting and are attempting to block stockholders from having a say in the future of Silver Star. According to the recent release, Hartman owns 13.2% of the company’s common stock, making him its largest shareholder, while the remaining directors collectively own less than 0.25% of outstanding shares.
In his complaint Hartman alleges failure to hold a stockholder meeting, failure to comply with stockholder demand, and declares that purported bylaw amendment is void and unenforceable, along with a preliminary and permanent injunctive requiring the liquidation of Silver Star.
These lawsuits are just the latest in what has been a tumultuous year for Silver Star.
As previously reported by The DI Wire, the company filed a petition for Chapter 11 bankruptcy protection in September, citing approximately $217 million in outstanding debt. In August, Silver Star hired Steve Treadwell as CEO after their recently appointed CEO, Mark Torok, resigned. In March, Allen Hartman was removed as executive chairman of the company.
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