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Latest Ginn Lawsuit Includes Charges against Fifth Third , Wachovia, and SunTrust Banks

The proposed class action lawsuit is broad reaching. It includes parties to the entire transaction; sales, appraisal, loan origination, lending, and closing.

By Toby Tobin
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Palm Coast, Florida – May 22, 2009 – The most broad reaching lawsuit against the Ginn Company to date was filed in the U.S, District Court for the Middle District of Florida on Tuesday. The proposed class action suit charges the Ginn Company (and subsidiaries), its financial partner, Lubert-Adler, as well as Fifth Third Bank, SunTrust Mortgage, and Wachovia Bank. ESI Living, LLC which orchestrated sales for Ginn communities was also charged.
This document has been modified to reflect the following:
  • Barry McDermott is employed by The Cliffs at High Carolina, not ESI Living.
  • To clarify that the Barry McDermott and the principals of ESI Living are not defendants in the lawsuit.
GoToby.com apologizes for any confusion this error has caused.
In a prophetic article posted to GoToby.com last June, 'My Horse, My Horse, My GINNdom for a Horse,' I wrote the following of the Ginn Company, "Over the past few months, it's become harder to be a fan and easier to empathize with those Ginn property owners who feel they were deceived. I no longer believe that "let the buyer beware" is the only appropriate comment to those who experienced losses due to declining property values. It is becoming more apparent to me that from sales and marketing tactics through the appraisal and mortgage process, some individuals may have stepped over the line." This week's lawsuit shines light on such activities.
The 60-page suit charges complicity between the defendants through the entire transaction, from marketing and sales, to appraisal, loan origination, lending, and closing. It cites "the silent and secret relationships between the Defendants and their officers, agents, employees and associates; the true affiliations between the co-conspirator entities that were contrary to the appearance of independence they conveyed; and the kickbacks and private profits realized by Defendants, their officers, employees and agents."
The alleged scheme was widespread, involved sales at several Ginn properties:
  • Hammock Beach in Palm Coast, FL
  • Tesoro Preserve in Port St. Lucie, FL
  • Reunion Resort in Orlando, FL
  • Bella Collina in Montverde, FL
  • Yacht Harbor Village at Hammock Beach in Palm Coast, FL
  • Conservatory at Hammock Beach in Palm Coast, FL
  • Quail West in Naples, FL
  • Cobblestone Park in Blythewood, SC
  • The BriarRose in Hancock County, GA
  • Laurelmor in Boone, NC
  • Burke Mountain in East Burke, VT
  • Ginn Sur Mer in the Bahamas
  • Mahogany Run in the Virgin Islands
The alleged co-conspirators are charged with activities including:
  • Falsifying appraisals to support higher loan values
  • Filing false sales prices on deeds
  • Kickbacks and/or priority purchasing or lending to employees and officers of co-conspirators
  • Use of straw transactions to artificially inflate appraised values
  • Use of inappropriate comparables
  • Falsifying closing documents
  • Targeting foreign nationals
  • Fostering frenzied demand and manipulating prices in Ginn developments
  • Non-disclosure of information pertinent to buyers' decision to buy
  • Staging launch sales events designed to artificially indicate scarcity and raise prices
  • Falsifying loan applications and sales contracts to include the value of furniture and/or builder lease-back values in the selling price to inflate comparable sales numbers
  • Knowingly approving loans for amounts that were not justified by the true value or the properties and knowingly failing to apply appropriate underwriting and property valuation standards
  • RICO allegations and a pattern of racketeering activity
  • Mail and wire fraud
  • Violations of the Florida Deceptive and Unfair Trade Practices Act
  • Negligent supervision
  • Unjust enrichment
The suit alleges that "Dean Adler of Lubert-Adler formed a partnership with Bobby Ginn called A&G Enterprises. Through this partnership, Bobby Ginn and Adler would purchase Ginn properties at discounted rates, then flip them for substantial profits to unsuspecting buyers – sometimes on the same day – based on fraudulent appraisals and mortgage loans by the Lender Defendants." For example, the filing cites that A&G Enterprises made the following transactions in Bella Collina:
A&G Enterprises Transactions in Bella Collina
Lot Number Purchase Price Date of Purchase Date of Sale Sale Price Profit

329

$510,320

12/10/2004

12/10/2004

$840,900

$330,580

330

$520,320

10/29/2004

10/29/2004

$810,900

$290,580

331

$550,320

10/29/204

10/29/2004

$854,900

$304,580

332

$550,320

10/31/2004

11/20/2004

$854,900

$304,580

446

$600,900

6/24/2005

6/24/2005

$1,950,000

$1,349,100

        Total Profit

$2,579,420

 
Also named in the suit is ESI Living, LLC. ESI Principals Wilson Green, Jim Matoska, Craig Wheeler, John Pinter and Jennifer Kelly are named but are not defendants. Barry McDermott, an employee of The Cliffs at High Carolina is also named but not as a defendant. This is the same group mentioned in the recent GoToby.com commentary entitled 'Cliff's Sells $40 Million in Real Estate at Tiger Woods Course Venue,' describing launch sales marketing techniques. These same techniques are alleged to be a key component in the co-conspirators' scheme. Interestingly, the claimed $40 million in sales at the Cliffs at High Carolina launch resulted in only about $25 million in closed transactions.
The alleged collusion included bank approved appraisers and loan officers. The most central figure among Lender Defendants is Brady Koegel, Vice President of Residential Lending for R-G Crown Bank, son of John (Jack) Koegel, President of the bank. (Fifth Third is the successor to R-G Crown.) If the allegations are true, Brady Koegel had his hands in the scheme up to his elbows. In an email to an interested purchaser, Brady claimed, "I own 50% of 28 Ginn properties….I do not want to bite the hand that feeds me, regardless of how involved I am….I will not buy a lot at a Ginn launch moving forward when I can buy in their projects before the public can." Koegel also stated, "I consistently partner with Ginn execs and sales staff behind the scenes and without each of them knowing. I know A LOT of good information."
In another email he boasted, "buying before most of Ginn's biggest hitters can and below launch prices." Regarding kickbacks, Koegel emailed "I have made their families millions inside Ginn when other banks would not finance them, as well as partnered on no-brainers inside Ginn with them personally and they are now 'returning the favor.'" Ginn employees and associates allegedly often set up partnerships or limited liability companies to purchase Ginn properties with mortgages provided by the Lender Defendants so they could flip them at artificially high prices.
The court must approve the class action status of the suit. As with all lawsuits, the allegations are unproven. The judicial process will determine the outcome.
The suit, case number 3:09-cv-446, was filed by:
Salpeter Gitkin, LLP
And
Barroway Topaz Keswsler Meltzer & Check, LLP


Clarification:

When writing this article, GoToby.com relied heavily on content which appeared at one time on the website of Echelon Sales, Inc. (later ESI Living LLC) including the following statements:

Regarding RMA: "…. decided to outsource sales and marketing to ESI Living (known as RMA) in June 1998."

Regarding ESI Living's participation in Ginn sales activities: "While acting as the in-house sales and marketing arm of the Ginn Clubs and Resorts, Echelon directly managed 13 Ginn communities and over 300 sales, marketing and administrative personnel…."

And

"The company served as the in-house marketing arm of Orlando-based Ginn Clubs & Resorts for the last seven years, generating over 10,000 sales and $5.5 billion in sales revenues."

Upon recent inspection, most statements referencing involvement with Ginn sales successes had been removed from the ESI Living LLC website.

Attorneys representing ESI Living LLC in the class action lawsuit known as Lawrie, et al., V. Ginn, Case No. 3:09-CV-446, have since provided information from public records which support their contention that ESI Living LLC, the company named as a defendant in the lawsuit, could not have been involved in any Ginn sales activity prior to ESI's incorporation May 29, 2007. Further, the ESI Living LLC incorporation is independent of RMA. RMA's authorization to do business in Florida was revoked for failing to file its annual report. This revocation occurred on Sept. 15, 2006.

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reader comments
Reply to John
Posted by Toby
Nov 16, 2013, 3:23 pm
Two were funded by First National Bank of Florida which was acquired by Fifth Third. One was by R-G Crown, also acquired by Fifth Third. The fourth was funded by SunTrust. The fifth transaction was cash ($1,950,000)
BG
Posted by Jon
Mar 01, 2012, 2:23 pm
Seems like everyone commenting on BG, saying he is a criminal. Bobby is a very smart man and if u were as smart as him you would have done the same thing. I mean buying a lot for 300,000 then selling it for twice the price. Sounds like he just trying to make a profit. If people didn’t like the price they shouldn’t have bought the lot. At the time the market was going up Bobby bought a lot of property to turn a profit. He sold around ¼ of the property he bought, before the market crashed. Bobby didn’t know the market was going to crash. So why is it his fault that people made bad investments? So when the market crashed people started losing there lots to foreclosure or the price of the lot value was dropped to a third of what they bought it for. So they couldn’t make a quick profit on the property. Keep in mind Bobby lost a lot of money and property’s to when the market crashed. So why is everyone pointing the blame at Bobby when the real issue is why did the market crash. The reason for that are corrupt officials in the white house. We should be pointing fingers at them and not Bobby. Wake up people!
BRETT CAMPBELL
Posted by Mary Kimbrue
Jul 13, 2011, 9:15 am
Was Brett Campbell a rep for this Ginn guy. He is now my SLUMLORD in Traverse City MI, owns a place called Sunset Water Sports, claims to be Australian and is the WORST NIGHTMARE of a landlord you can possibly imagine. I have been trying to find out if anyone has complained about him and all pages lead to sites about these properties. I would appreciate if anyone has had dealings with him to let me know of your experience. Thanking you in advance.
Will the suit prevail?
Posted by Richard Evans
Jun 25, 2009, 8:46 pm
Seems like there are major and credible allegations here. Also, a major law firm taking this on contingency. When will the suit be settled, and will the banks have to forgive the loans and pay back mortgage payments?
Lawauit Cobblestone
Posted by Casey
Jun 23, 2009, 1:29 pm
Is their a lawsuit for the Cobblestone investment?
To John from John
Posted by John
Jun 11, 2009, 9:09 am
John,
There may be some federal investigation for this whole mess but rest assured this is just one of many similar cases going on in the US. It's near and dear to our hearts because it is in our backyard but there are many similar situations all over the Country right now.

A couple of things to note from the filing which I found interesting after reading the entire complaint. First off, it seemed like many of the claims were hearsay (unverified information), who knows if there is any supporting documentation at this point but stating that "someone told me the property could sell for this" or "someone told me that I could finance the property because of this" type of stuff won't hold up in any court. Emails are good but not gossip.

Additionally, some of the allegations against the lenders is just not illegal. I built my current home by counting the equity that I had in my property as part of my down payment. I also build shopping centers and that is how banks always look at construction loans, otherwise it would cost an arm and a leg to finance any new construction, regardless of property type.

Finally, and I know this from experience, jury's won't feel too bad for the plaintiffs (at least the ones listed). If you can afford to buy literally millions of dollars worth of property including a $6M house then you are at a level that most "average" people will never, ever know. Jury's are made up of average people and someone worth Millions that was "duped" is a tough pill to swallow. It's not like the Madoff scam, those people were sent false documents, paid returns, etc. This was basically a bunch of greedy millionaires who most likely profited in the past from similar activities who finally got caught with their hand in the cookie jar. Don't get me wrong, there are plenty of "normal" folks that got caught up in this but they are named in the filing.

I also couldn't help but think that if the plaintiffs weren't actually the millionaires that they claimed to be in the filing then they may have just put the cross hairs straight on their heads. If their bank applications were "fudged" then they are in the soup and that is easy to prove.

Get some popcorn and a pop, it will be interesting to say the least.
Further Action
Posted by John
Jun 08, 2009, 6:53 pm
What federal agency should be looking into these charges as a criminal action?
Would the FBI investigate at a Federal Attorney's request? If this pattern of behavior could be proved at each of these developments, it would be the Mother of ALL real estate scams.
Lawyers benifit only
Posted by Bigley
Jun 04, 2009, 12:47 pm
Hopefully this class action will punish Ginn, et al but realistically only the lawyers will make out. How can a "cheated" owner really get justice?
Bahamas Newspaper Carries gotoby.com Article
Posted by A Friend of Toby
May 29, 2009, 10:48 pm
Toby:

Your story made it into the Freeport News in Grand Bahama.

Here are the links to the pages with the story. They did a nice job reporting the facts. You may have to register to retrieve the page but it is worth it.

Page 5
http://freeportclassifieds.nassauguardian.net/pdfEdition_show_pdf.php?file=29052009_A05.pdf

Page 6 http://freeportclassifieds.nassauguardian.net/pdfEdition_show_pdf.php?file=29052009_A06.pdf

Your friend in Grand Bahama Island
ESI Living heads for the hills (Cliffs)!
Posted by Pete
May 25, 2009, 8:16 pm
Well, it's about time the crew at ESI Living got their name/s in lights again, now that the latest lawsuit finally pulls them back into the Ginn spotlight. Wasn't this the group who orchestrated each and every Ginn sales launch? Wasn't this is the group who boasted on their website how they took Ginn to the top with their sales and marketing mastery? Of course, one might find it oddly interesting that in recent days the ESI website, which at one time looked like a virtual billboard for all they'd done Ginn, now makes NO mention anywhere of Ginn. Not even in the principals bios does it mention any of them even working for Ginn at one time. Hmmmm..... Now it just looks like a billboard for everything they're doing - Cliffs. Well folks, I guess the ESI crew headed for the hills (or should I say Cliffs). On guard, Jim Anthony!
What next??
Posted by John
May 25, 2009, 3:28 pm
Toby,

In your opinion what will happen with all of this? Will the crooks ever have to pay or will they drag it out in the courts forever?
Employee trouble as well
Posted by Lola
May 25, 2009, 3:27 pm
Ginn not only has lawsuits with his homeowners he also has complaints filed with the EEOC. Not only were they underhand in real estate dealing they were just as bad with employee The EEOC has filed several complaints just at Reunion. Ginn management tried to get the employees to sign their right to file away when they let them go. It is all so dirty.
A&G Enterprises.....
Posted by John
May 23, 2009, 5:57 pm
Toby,
Do you have any information on what banks financed all of the A&G same day flips? How on Earth did they get appraisals for that big of a jump in value on the same day?????
This Ginn Fiasco
Posted by Golf I
May 23, 2009, 11:27 am
Hey folks, this is no different than what went on in Wall Street - personal & corporate GREED GREED GREED!
See ya! Down the middle - Golf I
is he still in town
Posted by sam johnson
May 23, 2009, 11:27 am
he is at reunion sceming other deals three times a week, and yes lou you finally are realizing what a liar,theif and crook ginn is and his band of liars who are still running reunion. what i dont get toby is these newest heroes who rode into reunion on their white horses have no plan to turn it around.first they were managers,now they are consultants and they are telling us that poor adler is throwing their money into reunion to keep it going...maybe adler and the reynolds boys should take a look at the lawsuit,and look at the crazy profits they reaped and never put the money back in. another great bit of reporting toby thanks
lawyers dream
Posted by dan
May 23, 2009, 8:30 am
Bobby as defendant or plaintiff is a lawyers dream , LLc's and related corp's to lease back or sell and eventually go bankrupt , Ginn will not go away LULU untill bankers refuse to lend to him , illegal loan schemes are prosecuted and bankrutcy abuse laws are enforced . John Boy , Ginn is in and out of town he has hundreds of millions offshore in the Bahamas . dan
Bilking the Investors and Owners (Fraud)
Posted by Carl
May 23, 2009, 8:29 am
If you follow the transactions, insiders with a discount bought properties and turned them around on the same day or next and collected $100,000+ profit to known investors. The broker had to be in on the deal as an insider with his associates (take all their licenses for fraud) led by BG. The litigation is public information as they have given the transaction data to include the insiders to the courts as they fight their legal woes. Registrations of properties to entities outside of Florida have fallen lapse violating the interstate land sales act and HUD is next to follow in filing against GINNDOM and BG is back and on the payroll and they try to inflict another big bonus payout via investors in Credit Suisse. His place is up for sale at 10 mil+ that was paid for by those who lost their pants in this latest fiasco. The Sundancer is for sle, I'll make you a deal: pay me 200 mil and I'll give you a 10 mil boat.....
Leader of community?
Posted by LouM
May 23, 2009, 8:27 am
At one time Gin and Co. was considered leaders of our community.

Allegations in this lawsuit suggest otherwise.

We tend to put crooks on a pedestal and give them our money as long as we believe we will benefit from their action.

Will we ever learn?
Well What Do You know!
Posted by Lulu
May 22, 2009, 8:36 pm
At last............the bum and his cohorts are hopefully going to get their comeupins'. This is white collar crime at itsfinest other than Bernie M and such!

Hopefully this law suit will make BG go away forever.
Bobby's Vanishing Act
Posted by John Boy
May 22, 2009, 6:46 pm
Is he still in town?

 
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Don "Toby" Tobin is a licensed real estate professional affiliated with Watson Realty Corp. Toby is a member of the Flagler County Association of Realtors®, the Florida Association of Realtors, Enterprise Flagler, Flagler Home Builders Association, and the National Association of Realtors.

GoToby.com proivdes real estate news, commentary, and analysis for Palm Coast and Flagler Country Florida, as well as Realtor® referrals and consultation to buyers, sellers, and developers.