In The News
- Brunswick County developer sued for fraud
Disgruntled property owners are accusing a major local developer of orchestrating a fraud scheme that netted him hundreds of millions of dollars and left them paying mortgages on unbuildable land.
More than 30 property owners who bought lots in Ocean Ridge Plantation in southwestern Brunswick County filed a lawsuit in Brunswick County Superior Court earlier this month, accusing The Coastal Companies president Mark Saunders of everything from misrepresentation to racketeering and obtaining property by false pretenses.
This is not the first lawsuit filed on behalf of property owners who bought in one of The Coastal Companies' developments. But the suits have been amended to also go after Branch Banking and Trust Company and James Powell Appraisals as well as Saunders' companies, The Mortgage Company and MAS Properties, saying they were all in a plot together to create a false sense of demand and inflate the value of property sold in developments that are now stalled. Some phases lack streets, water and sewer, leaving the buyers with land they cannot build on.
The theme of the property owners' argument is that the depressed economy has nothing to do with the lack of infrastructure and amenities in all of The Coastal Companies' developments.
Wilmington attorney Wes Hodges is representing more than 200 property owners from Ocean Ridge, Seawatch at Sunset Harbor, River's Edge and Ocean Isle Palms who have either already filed a lawsuit or plan to. They are trying to get out of their contracts and to be reimbursed with interest.
The Coastal Companies argues the claims are "baseless" and the "truth will ultimately prevail."
"In the interim, we simply request that the legal process be allowed to work its course, so the many happy property owners in our communities and the families of our several hundred employees, contractors and vendors, all working in Brunswick County, are not harmed by counterproductive rumors and erroneous information," The Coastal Companies spokeswoman Nita Hill said in an emailed statement.
The Consumer Protection Division of the Attorney General's Office is also reviewing some consumer complaints against Saunders, Attorney General spokeswoman Noelle Talley said.
Hill said she could not speak to those complaints, but "the company has complied and done everything it could to stay within the law and nothing less than that."
The property owners' success in the courtroom could hinge on their ability to peel back the layers of corporate protection that shield most development companies.
In most cases, developers set up limited liability corporations for their various developments. Sometimes the different companies have various investors and other people involved. Sometimes they don't The lawsuit states Saunders owns more than 40 LLC's in North Carolina.
This fragmentation can make it difficult to go after the main developer and the source of the money.
North Carolina is also a buyer-beware state, meaning most contracts with developers have a clause that states the developer is not obligated to build any of the promised amenities. But, the lawsuit argues The Coastal Companies misrepresented the project and committed fraud. It states the buyers would not have purchased lots had they known what they were getting into.
The lawsuits states that BB&T, James Powell Appraisals and all of The Coastal Companies' entities worked together to dupe people into buying pricey lots.
It states that Saunders purchased property in Brunswick County under the company MAS Properties and other companies, then divided the land into lots and subdivisions and resold them at overinflated prices.
The suit also alleges that employees would pretend to be sales agents and buyers to create a false sense of urgent demand for the property in phases of Ocean Ridge like Haddington Place. It states they would go out to where prospective buyers were looking at lots and pretend they were interested in buying property. Employees would be given bonuses if they succeeded in one of these "push" sales, the suit alleges.
The suit also says BB&T issued more than $400 million in loans even though the applications lacked important financial information.
"We don't believe there's any merit to the claims," said BB&T spokeswoman Cynthia Williams.
Messages left for James Powell Appraisals were not returned. The lawsuit alleges that the appraisal company worked under the direction of Saunders to inflate the values over the fair market price.
Shelby Sebens: 343-2076
On Twitter.com: @ShelbySebens
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Copyright (c) 2009, Star-News, Wilmington, N.C.
- Date Posted: 12/22/2009