Judgments filed against two in N.C. real estate scheme‏

Nick Rees Mar. 12, 2010, 2:15pm

Roy Cooper (D)

RALEIGH, N.C. (Legal Newsline) - Consent judgments have been secured by North Carolina Attorney General Roy Cooper against two of the defendants in the alleged Village of Penland real estate scheme.

The consent judgments against Richard Amelung and J. Kevin Foster brings the total number of defendants entering consent judgments in the case to four.

Cooper went to court in June 2007 in an attempt to stop the real estate scheme, which saw the defendants selling overpriced lots in the North Carolina mountains. The real estate venture was complicated by the defendants' use of inflated appraisals to entice customers 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."

The Peerless Group, to which Amelung and and Foster were connected, began developing the Village of Penland project in 2002, subdividing 1,200 to 1,400 acres of land into more than 2,000 lots. Sales to inside buyers aided in artificially inflating the value of the lots, which sold for $125,000 each despite carrying tax values of $20,000 or less. Many lots could not be used to build homes because of their size or topography and none included water and sewer systems.

Consumers were promised by the Peerless Group that they would profit from the venture without investing any of their own money. Consumers were then told to fill out multiple loan applications, which the developers said they would shop to different lenders. Consumers were told that the Peerless Group would use the funds to develop the property.

The defendants instead submitted all of the loan applications to take out multiple loans, which were rarely used for Village of Penland development. Consumers were left with property mortgages worth only a fraction of their purchase price when the scheme fell apart.

Amelung and Foster, under terms of the consent judgments, are barred from developing, marketing or selling real estate in North Carolina if the project includes deceptive appraisals, insider sales to inflate values, second mortgages and promissory notes offered to purchasers, or down payments or mortgage payments made by the sellers. Other stipulations to the defendants involvement include projects with any subdivision not registered properly with the U.S. Department of Housing and Urban Development, inaccurate disclosures of down payments on HUD-1 forms and sales incentives of more than $100.

Amelung is also required to provide the proceeds of an insurance policy to the court-appointed receiver in the case. The right to claim any asses Amelung failed to disclose when declaring bankruptcy are also held by the state and the receiver.

Foster is required to pay the receiver $100,000 and the receiver may claim any assets, funds or property that Foster has not disclosed.

Anthony Porter and Neil O'Rourke, two other defendants, have previously entered into similar consent judgments with Cooper's office. Porter agreed in February 2008 to the same prohibitions as Amelung and Foster and paid $100,000 to the receiver. O'Rourke signed a similar judgment in January 2009 and paid nearly $125,000.

Amelung, Foster, Porter, O'Rourke and Michael Yeomans, another defendant, have also pleaded guilty to federal criminal charges brought by the U.S. Attorney's Office for the Western District of North Carolina.

More News