Editor’s note: These articles first appeared in the St. Petersburg Times and are reprinted with permission of the writer.
Lawyers for 13 people who bought land in a controversial Big Ridge subdivision in Cashiers say federal prosecutors in Miami and Pittsburgh, Pa., have opened a criminal investigation into loans obtained from SunTrust Bank.
The 13 buyers have asked a federal judge in North Carolina to delay action in a civil fraud suit filed against them by SunTrust due to the federal probe.
“Defendants understand that they are more than material witnesses in the government’s investigation and have not been ruled out as targets of the criminal investigation and/or potential defendants,’’ lawyers have argued in documents filed in U.S. District Court in Bryson City.
The buyers, from Florida and Pennsylvania, bought lots in the development in 2006 and later obtained construction loan mortgages of more than $1 million a piece from SunTrust. The bank alleges that all of them falsified their income to obtain the money. SunTrust is seeking repayment of more than $19 million.
In an affidavit filed in federal court, Michael P. O’Day Sr., a Pittsburgh lawyer, says he represents one of the 13 defendants in the criminal investigation and has been in contact with federal prosecutors in Miami and Pittsburgh.
O’Day said the SunTrust transactions are part of a broader investigation of the development and “certain individuals’’ involved with it.
“I have been advised that the U.S. Government believes some and/or all of the individuals involved with the development potentially committed criminal acts,’’ O’Day said.
Most work in the development started by Domenic Rabuffo is at a standstill as SunTrust and other banks foreclose on lot after lot. Partially constructed houses sit abandoned on more than 15 lots.
Rabuffo, a native of New York and part time resident of Miami, was convicted of mortgage fraud in New York in the late 1980s.
His onetime business partner, the “fat man,’’ was killed in a 1987 mob hit as he dined at Bravo Sergio, an Italian restaurant in Manhattan.
Rabuffo and his partner were accused of masterminding a $49-million mortgage fraud. Rabuffo pleaded guilty, went into the witness protection program and served a brief prison sentence.
The only recent activity in the development, which was initially named Hampton Springs, occurred last week when workers moved a mobile home from one lot to another after a mortgage foreclosure suit was filed on the lot where the mobile home had been located. The name of the development has since been changed to Spring Ridge Vista.
Foreclosure suits have been brought against owners of most of the lots in the development as well as individual lots Rabuffo purchased in the name of his ex-wife, Mae.
Sylva lawyer Jay Pavey is fighting his own battle with SunTrust, asking a federal judge to quash the bank’s effort to subpoena his files on the land purchases and mortgages he handled for the 13 buyers.
Last month, Federal Magistrate Dennis L. Howell ordered Pavey to surrender some of the documents SunTrust has requested. Pavey said the subpoena is overly broad and would put an undue burden on his law firm.
Lawyers for SunTrust are opposing any effort to delay proceedings in the civil suit and want to question Pavey under oath.
Pavey prepared all of the deeds and mortgages for Rabuffo’s development over the last few years. He says he was not aware of anything improper.
Sims Valley sold in foreclosure
Sims Valley, a pastoral subdivision that was once part of a historic farm, was sold in a foreclosure auction Friday, Nov. 20 at the Jackson County Courthouse.
The Bank of Macon County, holder of a $6.9-million mortgage on the property, offered the only bid — $4.7-million for 225 acres left in the development.
Five houses, a clubhouse and swimming pool, hiking trails, paved roads, underground utilities and other facilities were built by Big Ridge Partners LLC during the past three years. The development is on a farm established in 1898 by pioneers Willis and Laura Sims. It lies at the end of Pilot Knob Road off of Big Ridge Road.
Dennis Ford, project manager for the original developer, has been retained by the bank to keep an eye on the project while attempts are made to find a buyer.
Ford said the development is a victim of current economic conditions.
“My guess is that someone will buy it for speculation and wait until the market improves,’’ Ford said.
Sims Valley has 80 lots, including 19 that sold for prices ranging from $125,000 to $500,000.
Big Ridge Land Partners is owned by Brett and Susan Turner of Richmond Hill, Ga.