MYRTLE BEACH — Alleged high-pressure sales tactics and misrepresentations used by developers and banks during this area’s real estate boom are coming under attack in a pair of lawsuits filed by buyers who say their investments in Myrtle Beach area properties were ruined by false statements and unkept promises.
Clover couple John and Angie Haskell are counter-suing Bank of America and several of its executives and board members, claiming the bank committed fraud and violated state securities laws when bank officials convinced the couple in 2007 to accept a five-year, interest-only loan for Lot 319 in the Waterbridge subdivision at Carolina Forest. Bank officials allegedly guaranteed that the Haskells could flip the property for a profit before the interest-only period expired, but the real estate crash happened before they could sell and the lot now is worth a fraction of their purchase price.
Bank of America, which filed a foreclosure lawsuit against the Haskells in March, denies any wrongdoing.
In a separate federal court case, Tarek El Hadidi of Bridgewater, N.J., is suing Intracoastal Land Sales Inc. of Myrtle Beach, claiming the sales company in 2005 pressured him into a three-year, interest-only loan for two lots at the Waterway Palms subdivision near Myrtle Beach and then failed to live up to a deadline to build a sewer system at the development. Intracoastal Land Sales denies the allegations and has asked a federal judge to dismiss the case, saying the three-year statute of limitations has run out on Hadidi.
Intracoastal Land Sales also was the broker for the Waterbridge subdivision, according to the Haskell’s lawsuit, but the sales company is not named as a defendant in that action.
The lawsuits, both of which are pending, have similarities to ongoing legal action at the Craven’s Grant subdivision in Georgetown, where prospective buyers attended all-expenses-paid sales presentations and dinners at expensive hotels and were flown to this area on chartered jets to see firsthand what was being described to them as the real estate opportunity of a lifetime.
At the center of the failed real estate deals is William G. “Gary” Allen, a Charlotte, N.C., developer who allegedly created dozens of corporations to market lot sales at Carolinas developments to individuals nationwide. Allen and some of his family members are among the defendants in a pending racketeering lawsuit filed in federal court in North Carolina.
Allen and other defendants “fraudulently induced the [buyers] to purchase property at artificially inflated prices, using high pressure, clearly false sales tactics, rigged appraisals and false promises of early return on investment,” according to the racketeering complaint filed by David Binkley, a Michigan lawyer who represents Craven’s Grant buyers.
Binkley – who also named Bank of America as a defendant in the lawsuit – said the scheme was fueled by a commission arrangement that rewarded bank employees for the number of loans they originated, not for the quality of the loans.
Allen, Bank of America and the other defendants deny any wrongdoing in the racketeering case.
Bank of America lawyer Robert Muckenfuss said in Craven’s Grant court documents that greedy buyers are to blame for their own poor investment decisions. Those buyers wanted “to make hefty profits by flipping properties without making a single mortgage payment,” Muckenfuss said. “Now that their speculative investment decision has not paid out, [they] seek to blame Bank of America for their alleged losses.”
In the Haskell’s lawsuit, the couple says they were invited to the Omni William Penn hotel in Pittsburgh to hear a sales pitch for the Waterbridge subdivision, during which they were told that the project was similar to others in the Myrtle Beach area where investors had been able to flip their properties for large profits within one year. The Haskells and others were invited to Myrtle Beach, where the developers put them up in a hotel, gave them complementary dinners and tours of the property, including an aerial tour by helicopter.
Once the Haskells decided to purchase a lot, the lawsuit states, they were taken to a pair of Bank of America representatives who had set up an on-site loan originating center. According to the lawsuit, the bank employees told the Haskells: “Do not worry about the interest or buying this lot, because within a year’s time, you will be able to sell the lot for a profit that would more than recoup the interest payable prior to the sale.”
However, two years after the sale had taken place the developers still had not finished the promised amenities, including landscaping, bridges shown on the site plan and a clubhouse, making it impossible for the Haskells to recoup their investment. The Haskells – who paid $139,880 for their lot – have tried to market the property, but $19,000 is the best offer they have received.
The Haskells say the bank knew the developers would not be able to complete the project within the specified time and that the lot they purchased had been appraised at far more than the true market value. They are asking a judge to dismiss the bank’s foreclosure lawsuit and award them unspecified actual and punitive damages.
Richard Lovelace, the lawyer representing the Haskells, declined to comment on the case. Martin Page, a lawyer representing Bank of America, could not be reached for comment.
Hadidi’s lawsuit is similar, alleging that Intracoastal Land Sales flew him and other buyers from New Jersey to Myrtle Beach in March 2005 and then pressured him into purchasing two Waterway Palms lots, promising Hadidi a three-year, interest-only loan – even offering to escrow funds to make the first year of payments – if he signed up within about a month after viewing the property. Hadidi paid a builder a non-refundable fee to develop plans for houses on the lots, but those homes could never be built because the developer didn’t finish the project’s sewer system until mid-2007 – more than two years after a property report said it would be completed.
Hadidi said the developers’ inability to complete the sewer system and other amenities as promised diminished the value of his land and now it is worth much less than what he paid. He accuses Intracoastal Land Sales of consumer fraud, negligent misrepresentation, unjust enrichment and intentional infliction of mental distress. Hadidi is asking for unspecified monetary damages.
“After extended delays, lot owners were unable to build for immediate occupancy,” Hadidi said in court documents. “Yet people were still burdened with making payments on their lots.”
Hadidi said many people started selling their lots, creating a downward spiral of property values.
“As property values diminished, it became more and more difficult to obtain a construction loan because lot values fell beneath loan requirements,” he said, adding that he believes “this downward spiral was caused largely as the result of the delay and the material misrepresentations that were made by Intracoastal.”
Pointing fingers in AVX jury confusion
Who’s to blame for last week’s lack of a suitable jury pool that led to a six-month delay in a pollution trial involving Myrtle Beach manufacturer AVX Corp.?
Only 60 people were summoned to jury duty in the case, which was supposed to start on Sept. 10 in Conway and last for up two weeks. When it came time to pick a jury, however, only 22 of those people had shown up in court. More than half of those summoned have either moved away from this area without leaving a forwarding address or were statutorily exempt from duty because of their age or need to care for young children.
Without enough people to choose from, Circuit Court Judge Benjamin Culbertson, who is presiding over the case, was forced to delay the trial until March 11 – the next term of court in which he could schedule two weeks for the trial.
Culbertson initially hinted that the clerk of court’s office was at fault, saying he had asked for a qualified jury panel of at least 60 people and that a minimum of 200 individuals should have been summoned to meet that goal. Culbertson backed away from that statement a day later, saying that “for whatever reason” there were not enough potential jurors to proceed.
Melanie Huggins-Ward, the clerk of court for Horry County, said she was simply following the judge’s orders when she summoned 60 people for jury duty.
In a court order signed April 30, Culbertson told Huggins-Ward that “we need 60 potential jurors for this case.” Culbertson later stated in that order that his “only mandate is that I have a panel of at least 60 jurors for a two-week term of court commencing Sept. 10, 2012.”
So, Huggins-Ward said, she mailed a jury duty summons to 60 potential jurors.
Huggins-Ward said a much larger pool will be summoned when the case comes back to trial next year. Culbertson mentioned the need for 200 people, but Huggins-Ward said twice that many might be more appropriate considering the large number of people who either move away from this area each year or who once worked for AVX, which was among Horry County’s largest private employers during the 1990s.
Bahama Island’s Woods back in S.C.
Larry Duwayne Woods, the alleged mastermind behind the Bahama Island and Crystal Palace condominium scams in North Myrtle Beach, is back in South Carolina.
Woods is facing two counts of felony wire fraud charges related to the alleged theft of $3 million in condo investors’ deposits. Woods pleaded not guilty to the charges during an arraignment hearing Thursday in Florence. During the hearing, Woods waived the reading of a two-count indictment against him and waived his right to a detention hearing. However, it is not clear where Woods is being held. An online federal inmate locator states that he still is in transit to South Carolina.
Magistrate Judge Thomas Rogers appointed Florence lawyer Jim Hoffmeyer to be Woods’ public defender.
The 69-year-old Woods, who disappeared in 2007, was arrested in San Diego in July. San Diego police initially stopped Woods because he was loitering outside a public library. When police questioned him, they realized he was wanted in South Carolina. A warrant to move Woods to South Carolina was issued in August.
Woods is facing a maximum sentence of 30 years in prison and a $1 million fine.
Contact DAVID WREN at 626-0281.