Raleigh – March 11, 2010 – (RealEstateRama) — Attorney General Roy Cooper got consent judgments this week against two of the defendants in the Village of Penland real estate scheme, Richard Amelung and J. Kevin Foster. This brings to four the total number of defendants who have entered into consent judgments with the Attorney General’s office in the case.
Cooper first went to court in June 2007 to stop the scheme from selling overpriced lots in the North Carolina mountains. The defendants’ complicated real estate venture used inflated appraisals to entice consumers into borrowing millions of dollars to purchase property in the Village of Penland development in Mitchell County.
“Real estate projects that promise great returns with no risk are often too good to be true,” Cooper said. “We’re glad to have stopped this scheme but consumers should be on the lookout for the next one.”
Under consent judgments signed on March 8, Richard Amelung and Foster are barred from the development, marketing and sale of real estate in North Carolina if the project includes any of the following:
- deceptive appraisals;
- insider sales to inflate values;
- second mortgages and promissory notes offered to purchasers;
- any subdivision not properly registered with the U.S. Department of Housing and Urban Development;
- inaccurate disclosures of down payments on HUD-1 forms;
- sales incentives of more than $100;
- options for the seller to lease or repurchase property; and
- down payments or mortgage payments made by the seller.
The judgments were approved by Wake County Superior Court Judge Paul Ridgeway.
Richard Amelung must also provide the proceeds of an insurance policy to the court-appointed receiver in the case, and the state and the receiver have the right to claim any assets he failed to disclose when he declared bankruptcy.
Foster will pay $100,000 to the receiver. If Foster is found to own any funds or property that he has not disclosed, the receiver can claim those assets as well.
Two other defendants, Anthony Porter and Neil O’Rourke, previously entered into similar consent judgments with the Attorney General’s Office. In February 2008, Porter agreed to the prohibitions explained above and paid $100,000 to the receiver. In January 2009, O’Rourke signed a similar judgment and paid nearly $125,000.
Several individuals involved in the scheme have also faced charges brought by the U.S. Attorney’s Office for the Western District of North Carolina. Defendants Frank Amelung, Foster, O’Rourke, Porter and Yeomans have pleaded guilty to federal criminal charges.
According to Cooper’s investigation, the Peerless Group began developing the Village of Penland project on 1,200 to 1,400 acres of Mitchell County land in 2002. The land was subdivided into more than 2,000 lots. Bogus sales to inside buyers helped artificially inflate the value of the lots, which sold for $125,000 a piece even though their tax values were $20,000 or less. Many of the lots could not realistically be used to build homes because of their size or topography, and none of the lots included water and sewer systems.
The Peerless Group promised consumers that they would profit from the venture without ever having to invest any of their own money. Consumers who agreed to invest in the project were told to fill out multiple loan applications, which the developers said they would shop around to different lenders. The developers promised consumers that it would then use the funds to develop the property. Instead, the defendants submitted all of the loan applications at the same time to take out multiple loans, and the money was rarely used for Village of Penland development.
When the scheme fell apart, consumers were left with mortgages on properties worth only a fraction of their purchase price, much of it unbuildable.
“Before investing in real estate, it’s always wise to do your own research and get an independent appraisal,” Cooper said. “And be very skeptical of any investment opportunity that promises you can earn big profits without putting in your own money.”
Developers involved in the Village of Penland project and named in Cooper’s original 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 were the following individuals connected with these companies: Frank Amelung, Richard Amelung and Michael Yeomans of Florida; Kevin Foster of Georgia; Anthony Porter and Neil O’Rourke of North Carolina; and A. Greg Anderson, a licensed appraiser in North Carolina.
The companies have been under the control of a receiver, Joseph W. Grier III of Grier, Furr & Crisp in Charlotte, since June 2007. The receiver was appointed by the court to wind down the business and, to the extent there is money available, pay out claims to creditors.
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