Second Amended Complaint Filed in Ginn Class Action Lawsuit

Down from 135 to 68 pages, Lawrie v. Ginn now shines more light on banks, bankers, loan originators, and sales representatives.

The Fraudulent Scheme

"Beginning in or around 1998, Ginn and Lubert-Adler partnered and purchased land for the purpose of developing and creating luxury communities and selling the properties therein, Hammock Beach being the first such community. During the development of the Hammock Beach Resort, Ginn and Lubert-Adler conceived of this scheme to exploit the hot real estate market by marketing related upscale resort community properties at inflated prices through a common fraudulent marketing and sales scheme. The scheme involved (1) developing extravagant plans and promises for a series of communities; (2) developing the communities just far enough to give credence to the promises of future amenities and values; (3) aggressively pursuing purchasers with lies and misrepresentations; (4) selling the properties at fraudulently inflated values supported by falsely recorded sales information; (5) obtaining and relying on fraudulent appraisals with the intent to deceive; and (6) enlisting the participation of complicit lenders willing to knowingly provide and finance property sales for fraudulent inflated amounts. Ginn and Lubert-Adler implemented this scheme with the knowledge, participation and agreement of ESI Living, Ginn Title, Fifth Third, SunTrust, Wachovia, and other unnamed coconspirators incuding (sic) their preferred and complicit appraisers and builders…."

"… In furtherance of Lubert-Adler’s pre-selling and phasing strategy, RMA developed and instituted marketing and sales techniques that conveyed the impression of high demand and a false sense of limited availability beginning with launch parties, which they named “Priority Reservation Selection Events.” Participants were invited through the mails and wires to attend these launch events and completed a “priority reservationform” which was mailed, emailed or faxed to them indicating which lots they wanted. Reservations were also solicited by email which included specific references to Lubert-Adler, such as one sent by Ginn salesman, Josh Estes, to Plaintiff Myganka and others on September 28, 2005 with a link to www.Lubert-Adler.com. To create the appearance of limited availability, Ginn and RMA invited far more buyers to these extravaganzas than could possibly purchase properties (for example, having 1,000 people present but offering only 300). Fifth Third, SunTrust and Wachovia, banks identified as “preferred lenders” by Ginn, also participated in the execution of the launch strategy by sending emails and faxes to prospective borrowers inviting them to attend the launch parties. At these parties, Ginn and RMA conducted sham lotteries to select those “winners” who would be able to purchase lots."

 

" More specifically, the invited prospective purchasers were led to believe by Ginn and RMA that Ginn would be conducting a legitimate lottery whereby lot winners would be selected at random at a drawing conducted during the launch party when, in reality, the lotteries were rigged. The so called “lottery” was anything but. “Winners” were not randomly selected but rather were selected by Ginn and the complicit banks including Fifth Third, SunTrust and Wachovia. The complicit banks informed Ginn and RMA who should “win” at the launches, identifying those potential purchasers who had been approved for financing. Cash purchasers were guaranteed to ‘win’….."

 

"April 2005, Bradley Douglas Smedburg, a Ginn salesperson told potential purchaser Roy Bridges that he had sold a lot for substantially more than it had in fact been purchased for. In an email sent at 6:46 PM on April 27, 2005: “fyi… homesite 109 sold that same afternoon for $1.3 million.” This representation was false, as Bradley Douglas Smedburg was in a position to know. The site actually sold for $467,900 – more than $800,000 less than the price Smedburg quoted…."

 

"Ginn Title caused Lot 194, Bella Collina West, to be recorded as having been sold to Godkin Developments by Ginn-LA Pine Island on May 27, 2005 for $650,900. However, the sale did not actually take place until almost a month later. Nevertheless, before the sale even took place, Lot 194 was used as a comparable as follows:

 

(a) On or about May 19, 2005, appraiser Bradley S. Long prepared an appraisal for Fifth Third Bank for Lot 147, Bella Collina West and used Lot 194 as a comparable;

 

(b) On or about May 31, 2005, appraiser Bradley S. Long prepared an appraisal for Fifth Third Mortgage for Lot 10, Bella Collina West, and used Lot 194 as a comparable; and

 

(c) On or about June 5, 2005, appraiser Bradley S. Long prepared an appraisal for Fifth Third Bank for Lot 110, Bella Collina West and used Lot 194 as a comparable."

 

"In June 2006, Brady Koegel, of R-G Crown Bank, in an outlandish email dated June 22, 2006, on which appraiser David Tremblay was copied, stated to Plaintiff Stephen Frieze, that Frieze could simply let him know what numbers needed to appear on the appraisal and he would make it happen. Specifically, Brady Koegel stated:

 

Stephen, email me (as well as the appraiser above) the physical addresses of both properties to appraise, your cell number or best contact number, the value of each property you would like to see on the appraisal… we should be in great shape (emphasis added)."

 

"….improperly incorporating the value of leasebacks and furniture packages in the value of property in order to improperly pump up lot value for purposes of appraisals, sales and financing. For example, when Plaintiffs Lawrie and McKinlay purchased Lot 390, Bella Collina, the total purchase price under the contract was $5,349 million, including a $500,000 furniture package and a two-year leaseback from the builder. Jack Koegel, President of R-G Crown Bank, to whom the cooperating builder had referred Plaintiffs, arranged for the property to be appraised at $5.4 million and provided a mortgage loan dated May 20, 2005 and recorded on July 27, 2005, in the principal amount of $4,814,100. The value of the two-year leaseback – approximately $23,000 per month for 24 months – and the $500,000 furniture package were improperly and fraudulently

included in the appraisal, as standard appraisal practices do not permit the

inclusion of these items in the value of real property."

 

"Similarly, Brady Koegel, President of R-G Crown Bank and active promoter of sales and financing in the Ginn Communities at inflated prices, stated in a July 4, 2005 e-mail, ‘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’ (emphasis in original). Later, in an email dated June 28, 2005, Koegel excitedly bragged that he was ‘buying before most of Ginn’s biggest hitters can and below launch prices!’ Also, in an email dated June 28, 2005, R-G Crown Bank’s Brady Koegel boasted to an interested purchaser regarding such kickbacks: ‘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.’ In yet another email to Christopher Godkin, Brady Koegel described kickbacks he received from Ginn, ‘just lining up a buyer to take them off my hands or a joint venture with a backside kicker.’"

 

"Ginn and the banks also provided kickbacks to Ginn employees and bank employees participating in the scheme through special purchase opportunities and/or sweetheart deals…"

"Nicole Costello, who served as Ginn’s closing coordinator/notary, purchased Lot 147, Bella Collina for $242,910.00 on or about December 23, 2004 and, that same day, flipped the property to a buyer named JHM Investments, LLC, for $456,500 yielding a one-day profit of approximately $213,590. Financing and the appraisal for JHM Investments, LLC, were arranged by R-G Crown Bank."

 

"SunTrust employee Bradley Robert King—who arranged financing for a significant number Ginn properties—purchased Lot 20, Tesoro Preserve for $640,900 through a partnership with Greg Ulmer, who was a Ginn salesman at Tesoro on or about March 2, 2004. Approximately one year later, on or about June 9, 2005, King flipped the lot for $1.3 million realizing nearly 100% on the sale of the property at inflated levels."

 

"R-G Crown Bank officers/employees purchased at least 28 Ginn properties. KDHC, LLC was a company in the name of Rebecca Martel, wife of R-G Crown Bank’s Brady Koegel. Through this company, she had four loans from R-G Brown Bank to purchase four lots in Reunion. Through flipping properties, Martel earned $541,400 in three months. Two of the resales were also financed by R-G Crown Bank."