North Carolina Alleged Cash Back Mortgage Fraud Dupes The Educated & Well Heeled

(revised 8-12-07)
A recent story in The Wall Street Journal serves as another reminder that it isn't only the poor, uneducated and financially unsophisticated that can get sucked into a costly real estate scam.

In the fall of 2002, a real estate developer lured a financially well-to-do crowd to a tent party near an artists' colony tucked in North Carolina's Blue Ridge Mountains where he "talked up a plan he promised could bring big financial payoffs to the isolated community and anyone who invested in it."

For North Carolina real estate developer Tony Porter and his company, company, Peerless Real Estate Services Inc., to get his 2,000-lot residential and retail development project of the ground, the article reports:

• "[h]e needed investors to launch the project in time to catch the real-estate wave. To help them get in on the action, Mr. Porter promised to arrange loans of as much as $2 million ... [.] Even more enticing, Mr. Porter and documents promoting the project said investors would receive large cash payments -- as much as 10% of the proceeds -- when the loans closed. The investors also were promised they wouldn't have to make down payments with their own money and Mr. Porter or one of his companies would make their monthly mortgage payments for at least a year, according to the documents in a civil suit filed in June by the North Carolina Attorney General against Mr. Porter and more than a dozen associates and related companies. The suits alleges [sic] they used inflated appraisals and phony down payments and performed other misdeeds to cheat investors and mislead the banks."

According to investigators, nearly 200 investors -- mostly well-heeled professionals including real estate lawyers, doctors and Air Force officers -- borrowed more than $100 million from a handful of banks. No crimes have been charged; state and federal agents are reportedly investigating.

It's now been about five years since that tent party, and no houses have been built, loans are in default, and worst of all, "weeds are invading the lawn at the empty sales office."

For more, see 'I Feel Like an Idiot' (Land Project Gone Wrong Shows How Even Well-Off Lured By Go-Go Climate) (May require subscription - if no subscription, try here).

See also, North Carolina Attorney General Press Release - AG Cooper stops $100 million mountain real estate scheme (Developers convinced dozens of consumers to invest in overvalued lots in Mitchell County).

For later articles on this story, see:

Developer's dreams too good to be true (3 ambitious Carolinas projects failed; many say they're owed money). (8-12-07 -The Charlotte Observer) (no longer available online).

Developer Leaves Failed Projects in His Wake (8-12-07 - The Associated Press).