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Judge Stops $100 Million Mountain Real Estate Scheme

By Mark Huffman
ConsumerAffairs.com

June 12, 2007

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Harking back to the go-go days of the red-hot real estate market, North Carolina, authorities have sued developers they say convinced dozens of consumers to invest in overvalued lots.

Attorney General Roy Cooper won a court order to stop the developers from promising investors they could make a profit on the mountain land without investing any of their own money.

Cooper says the complicated investment scheme used inflated appraisals and phony second mortgages as down payments to entice consumers to borrow millions of dollars to purchase property in the Village of Penland development in Mitchell County, North Carolina.

“These developers squandered more than $100 million in financing, leaving consumers stuck with property that isn’t worth what they owe on it,” said Cooper. “We’re putting a stop to this scheme before any more consumers get caught up in it.”

According to Cooper’s complaint, around 2002 the defendants purchased at least 1,200 acres of undeveloped mountain land and subdivided it into more than 2,000 lots to create the Village of Penland development.

The developers have since received more than $100 million in loan proceeds by marketing the lots to investors.

Cooper said the developers have failed to complete any part of the project and instead used the money to fund other failed projects in South Carolina and St. Thomas and to pay for trips such as a cruise of the Greek isles and a ski trip to Switzerland.

As alleged in the complaint, the defendants sold most lots in the development for $125,000 based on inflated appraisals by Anderson even though the lots had tax values of $20,000 or less. Many of the lots could not realistically be used to build homes because none of the lots included water and sewer systems, and many were too small to support a septic tank or a well.

Wake County Superior Court Judge Michael Morgan ordered a group of developers behind the Village of Penland project to stop using misrepresentations to encourage consumers to take out loans to purchase lots.

Cooper is also asking the court to permanently stop the developers’ allegedly deceptive practices and to order them to pay refunds to consumers to satisfy consumers’ loans on properties sold by the developers.

Developers involved in the Village of Penland project and named in Cooper’s complaint include Peerless Real Estate Services, Village of Penland, MFSL Landholdings, Communities of Penland, COP Land Holdings, PG Capital Holdings, and West Side Development, all of Spruce Pine.

Also named as defendants are the following individuals connected with these companies: Frank Amelung, Richard Amelung and Michael Yeomans of Florida; J. Kevin Foster of Georgia; and Anthony Porter and Neil O’Rourke of North Carolina. A. Greg Anderson, a licensed appraiser in North Carolina, is also named as a defendant.

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