abatemarco et al v. legasus of north carolina, llc et al

1

IN THE UNITED STATES DISTRICT COURT

FOR THE WESTERN DISTRICT OF NORTH CAROLINA

Asheville Division

GERALD ABATEMARCO, BEN )

ATKINSON, ANTHONY BARBIERI, )

CHRISTIAN BARSANTI, SUSAN )

BARSANTI, THOMAS BERITELLI, )

SHARON BERITELLI, EDGAR BOWLIN, )

PEGGY BOWLIN, EDGAR BOWLIN, )

PAUL BOYDELL, TIFFANY BOYDELL, )

BORIS BRAND, MARC BROWNER, )

ROBERT BURT, DIANE CARROLL, )

GREGORY CARTER, JOANNE CARTER, )

JANAKI CHANDRAMOULI, )

SRINIVASAN CHANDRAMOULI, )

JEFFREY CHAUS, JO ANN CHAUS, )

FREDERIC CLARK, CHRIS CRUZ, )

CYNTHIA CRUZ, CONSTANCE FONG, )

DAVID FONG, ANNA GIABOURANI, )

DAVID GRASSE, SHELBY GRASSE, )

CATHY GRUSSER, JOSEPH GRUSSER, )

EDITH HANSEN, JACK HERZBERG, )

KRISTINE HERZBERG, DONALD HILL, )

TRICIA HILL, DANIEL HINKSON, )

JULIAN HUTCHINS, LANE HUTCHINS, )

MARK IPPOLITO, MELISSA JADICK, )

RICHARD JADICK, ALISON JURGENS, )

DAN JURGENS, JAMES KARP, )

VIVIEN KARP, DENISE KEARY, )

GREGORY KEARY, ALAN KESSLER, )

SANDA KESSLER, SUSAN )

KORNFELD, KENNETH KOSCO, )

MICHELE KOSCO, CINDY LAMIR, )

JOSEPH LAMIR, STEVE LANIER, ERIC )

LAWRENCE, LENORA LAWRENCE, )

COLE MACKELPRANG, TRENT )

MACKIE, EUGENE MARKHAM )

JOHANNA MARKHAM, DAVE MARKS )

TERESA MARKS, CHRIS )

MATTAROLLO, TINA MATTAROLLO )

JOSEPH MCELROY, ANNE )

MELLENTHIN, MICHAEL )

Case 1:11-cv-00023-MR -DLH Document 1 Filed 02/04/11 of 107

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MELLENTHIN, BETH MOSES, STEVEN )

MOSES, DONNA PANARELLO, )

JOHN PARK, PENELOPE PARK, )

SUSAN PAYNE, JENNIFER PINKHAM, )

ROGER PINKHAM, KATHLEEN )

POWELL, RICHARD POWELL, )

RANDAL PRICE, MEKO L. PRICE, )

PAMELA RATCLIFFE, BOYKIN )

ROBINSON, JENNIFER P. ROBINSON, )

DAVID SANDERS, KIM SANDERS, )

JUDY SCHUNN, ROBERT SCHUNN, )

CONNIE JOHNSON-SCOTT, ROBERT )

SCOTT, G. DANIEL SIEGEL, GERRY )

SMITH, JAMIE SMITH, JEFFREY )

SNYDER, BRIDGET STEEN, JOSEPH )

STEEN, PAUL TAFFE, TONYA TAFFE, )

LYNN TAMN, MARK TAMN, )

KATHRYN L. TRACY, KEVIN TRACY, )

PATRICIA TRACY, AUDREY TROIANO, )

MICHAEL TROIANO, CHRIS TURNER, )

PAMELA R. TURNER, JENNIFER )

ULLMAN, NEAL ULLMAN, EDWARD )

VARON, BARRON WALL, PETE )

WASILEWSKI, MICHAEL )

WHITEHOUSE, SYLVIA WHITEHOUSE, )

KATHERINE WILLIAMS, DARREN )

WISHNER, JILL WISHNER, BEVERLY )

WISHNER, EDWARD WISHNER, )

RUSSELL WISHNER, CASEY WOOD, )

JASON WOOD, DAVID WRIGHT, )

STACEY WISHNER, WILLIAM )

WRIGHT, AMANDA ZUMBRUN )

)

Plaintiffs ) Civil Action No.: ______________

v. )

)

LEGASUS OF NORTH CAROLINA, LLC,)

SYNOVUS BANK, MICHAEL WOLF, )

THEODORE C. MORLOK, )

STEPHEN R. KLORFEIN, )

AS PERSONAL REPRESENTATIVE OF )

THE ESTATE OF ROBERT A. CORLISS, )

JAMES R. PITTS, )

MARILYN MCCOY WOODS )

)

Defendants. )


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COMPLAINT

Plaintiffs, by counsel, state as follows for their Complaint against Defendants, Legasus of

North Carolina, LLC (“Legasus”), Synovus Bank (the “Bank”), Michael Wolf, Theodore C.

Morlok, Stephen R. Klorfein as Personal Representative of the Estate of Robert A. Corliss,

James R. Pitts, and Marilyn McCoy Woods.

NATURE OF THE CASE

1. This case involves a real estate development marketed and sold to the Plaintiffs

by the Defendants through an elaborate scheme designed to artificially inflate the value of lots in

the River Rock subdivision. The Defendants accomplished this scheme through various

negligent and/or intentional misrepresentations made directly and through instrumentalities of

interstate commerce, including direct mailings, telephone calls, electronic mail, and internet

advertisements.

2. Among other claims, this action asserts claims arising from the Defendants'

breach of duty, neglect, error, misstatement, misleading statements, omissions, or acts by

Defendants in their capacities as directors, officers, or employees of the entities identified herein

and their affiliated entities. It also asserts negligence resulting in Plaintiffs' loss of use of

tangible property that has not been physically injured.

PRELIMINARY STATEMENT

3. Legasus, through its agents, represented to Plaintiffs that the River Rock

subdivision in Jackson County, North Carolina ("River Rock") would be a luxury resort

community with numerous amenities, as well as roads and utilities to serve the lots in the

subdivision.


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4. James R. Pitts, Theodore C. Morlok, and Robert A. Corliss, directly or indirectly

through one or more intermediaries, controlled Legasus. Legagus, James R. Pitts, Theodore C.

Morlok, and Robert A. Corliss with Stephen R. Klorfein as Personal Representative of the Estate

of Robert A. Corliss, are collectively referred to hereinafter as the “Legasus Defendants.”

5. For the reasons set forth below, Defendants, James R. Pitts, Theodore C. Morlok

and Robert A. Corliss are liable for the actions of Legasus, as well as their own actions.

6. At the same time that the Legasus Defendants were making representations

concerning the numerous amenities that would be built in the community, as well as the timing

of those amenities, they knew or should have known that developing the community was

impossible because, among other reasons, they were negligently or intentionally permitting or

causing the distribution of funds needed to construct the required infrastructure to themselves

and to other entities, without consideration, thus rendering Legasus insolvent and unable to meet

its financial obligations.

7. The Legasus Defendants, through their agents, offered significant concessions to

induce Plaintiffs to purchase lots in the River Rock subdivision that were in fact extraordinary,

including one hundred percent financing for raw land, ten percent down at closing that was

transferred to the National Bank of South Carolina for payment on each Plaintiff‟s loan, no

payments for almost two years, two thousand dollars ($2,000) in closing costs and a free Club

Membership that was represented to the Plaintiffs to be worth between thirty thousand dollars

($30,000) and fifty thousand dollars ($50,000).

8. As part of its scheme to induce Plaintiffs to purchase raw land in the River Rock

subdivision, Legasus teamed with several lending institutions, including the National Bank of


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South Carolina, to offer Plaintiffs extraordinary financing options on the purchase of raw land in

the River Rock subdivision that benefited both Legasus and those lending institutions.

9. The Legasus Defendants worked with the National Bank of South Carolina

(“NBSC” or the “National Bank of South Carolina”) to develop a loan program for the River

Rock subdivision that would allow each purchaser of a lot in River Rock to receive a loan for

ninety percent of the total purchase price of the lot in River Rock with no payments on that loan

for approximately eighteen (18) months with interest only payments for the term of the loan.

10. Legasus and NBSC agreed that at the closing on each lot purchase financed by

NBSC, Legasus would transfer the ten percent down payment made by each lot purchaser into an

account at NBSC to be used for the payment of the interest payments on NBSC‟s loan to

purchasers of lots in River Rock.

11. The Legasus Defendants developed this scheme to induce the Plaintiffs and other

buyers to purchase lots in the River Rock subdivision. They travelled across the country to find

unwitting buyers who largely came from New Jersey, California, and other states where buyers

had no knowledge of real estate values in Western North Carolina. As part of this scheme,

Legasus employees travelled to conventions across the country, including to a convention in

California, to sell the opportunity for these out of state buyers to purchase lots in River Rock.

12. Upon information and belief, the Legasus Defendants used straw purchasers,

including their own employees, friends and family members to purchase the first group of lots in

the River Rock subdivision at artificially inflated prices as part of their scheme to sell lots to

subsequent purchasers, including the Plaintiffs, at artificially inflated prices.

13. Upon information and belief, the Legasus Defendants utilized the services of

James S. Price & Associates, P.A. to conduct closings and prepare settlement statements on lots


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in the River Rock subdivision in part because James S. Price, Esq. was selling lots in River Rock

and encouraging individuals who worked at James S. Price & Associates, P.A. to purchase lots in

River Rock at inflated prices.

14. Upon information and belief, the Legasus Defendants hand-selected an appraiser,

Marilyn McCoy Woods, to conduct appraisals of lots at River Rock and informed her that she

had an opportunity to do a large number of appraisals in River Rock. Upon information and

belief, the Legasus Defendants and NBSC hand-selected Marilyn McCoy Woods to appraise lots

in River Rock because they knew that they could persuade Marilyn McCoy Woods to provide

inflated values in her appraisals to reach pre-determined values of lots based on each buyer‟s

contract purchase price.

15. Upon information and belief, Marilyn McCoy Woods intentionally or negligently

provided materially false appraisals in order to facilitate the sale of lots at artificially inflated

values in River Rock as part of the Defendants‟ scheme to defraud the Plaintiffs.

16. As a result of the actions of the Defendants, the sale prices of raw lots in River

Rock were artificially inflated thereby harming the Plaintiffs.

17. From August of 2005 through December of 2005, the Jackson County, North

Carolina average raw land sales price for lots between zero and four acres was one hundred and

thirty six thousand eight hundred and thirty seven dollars ($136,837), with most of these lots

being in established communities with amenities.

18. From August of 2005 through December of 2005, the average sale price for raw

lots in River Rock with no amenities was three hundred and thirteen thousand two hundred and

seventy-six dollars ($313,276).


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19. When comparing the average sale price of raw lots in the River Rock community

from August of 2005 through December of 2005 to the average sale price for raw lots in Jackson

County, North Carolina during that same time period, the River Rock raw lots sold for nearly

2.27 times the sale price of the raw land in Jackson County, North Carolina, even though that

land was largely in established communities with amenities.

20. Legasus and its agents sold raw lots at inflated prices to the Plaintiffs, including,

but not limited to, the sale of the 3.008 acre raw lot in the Bear Pen Section of River Rock on

June 5, 2006 to Plaintiff, Steven Moses, for four hundred and ninety-nine thousand nine hundred

dollars ($499,900) on June 5, 2006. This lot was originally appraised on May 22, 2006 by

Marilyn McCoy Woods and valued at five hundred thousand dollars ($500,000).


but not limited to, the sale of the raw 2.060 acre Lot 90 in the Bear Pen Section of the River

Rock subdivision to Edward Varon and Rochelle Varon for four hundred and nineteen thousand

and nine hundred dollars ($419,900) on June 5, 2006. Marilyn McCoy Woods appraised Lot 90

in the Bear Pen Section on May 10, 2006 for four hundred and twenty thousand dollars

($420,000).


but not limited to, the sale of the raw .63 acre Lot 15 in the Trout Creek Section of the River

Rock subdivision to Thomas Payne and Susan Payne for four hundred and ninety-five thousand

dollars ($495,000) on March 6, 2007.

23. From 2005 through 2007, the Defendants participated in a scheme that resulted in

the sale of over fifty-five (55) lots to the Plaintiffs that generated sales proceeds in excess of

eighteen million dollars ($18,000,000) for Legasus. As a result of the Legasus Defendants’ acts


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or omissions described herein and their actions in disbursing Legasus’ assets in the face of

millions of dollars of development obligations, the infrastructure and amenities were not

constructed.

24. Upon information and belief, Legasus and its agents sold over fifty-four million

dollars ($54,000,000) worth of real estate in River Rock at the Grand Opening weekend at River

Rock.

25. Upon information and belief, Legasus collected over seventy-five million dollars

($75,000,000) in proceeds from lot sales in the River Rock subdivision from January 1, 2005

through December 31, 2007. As a result of Defendants, James R. Pitts, Theodore C. Morlok and

Robert A. Corliss‟ negligent or intentional acts or omissions described herein and their actions in

disbursing Legasus’ assets in the face of millions of dollars of development obligations, the

infrastructure and amenities were not constructed.

26. Upon information and belief, Legasus‟ business model was to sell lots first and

build infrastructure later, or not at all.

27. During the period from 2004 to 2008, while simultaneously and actively

promoting the sale of lots at River Rock and despite massive contractual liabilities to construct

roads, utilities, and amenities for the community, Defendants, James R. Pitts, Theodore C.

Morlok and Robert A. Corliss negligently or intentionally caused Legasus to disburse millions of

dollars from the limited liability company, leaving it without sufficient funds to construct the

promised infrastructure and amenities.

28. During this same time period, upon information and belief, Defendants, James R.

Pitts, Theodore C. Morlok and Robert A. Corliss were paid millions of dollars from Legasus,

resulting in the transfer of Legasus’ assets to its members without consideration.


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29. Upon information and belief, the sales of lots in River Rock was the source of a

substantial amount of the funds that the Defendants, James R. Pitts, Theodore C. Morlok and

Robert A. Corliss, received or permitted others to receive.

30. Upon information and belief, Legasus was operated as a sham entity and as an

alter ego of the Defendants, James R. Pitts, Theodore C. Morlok and Robert A. Corliss, who

profited or allowed others to profit from these payments and distributions, while failing to insure

that sufficient funds were left in Legasus‟ possession to fulfill its contractual obligations.

31. None of the Defendants, James R. Pitts, Theodore C. Morlok and Robert A.

Corliss, is being sued solely because they participated in the management, control, or ownership

of Legasus. Instead, they are being sued for personally profiting or allowing others to profit

from the acts and conduct set forth in this Complaint, in circumstances that left Legasus as a

shell with no assets to perform its development obligations.

32. Upon information and belief, some of these disbursements occurred during a

period when Legasus was insolvent or was becoming insolvent, thereby giving rise to a fiduciary

duty to creditors such as the Plaintiffs, to whom the entity owed millions of dollars in

development obligations or, alternatively, the refund of their purchase money if the entity did not

intend to perform or could not perform those obligations. During the time period from at least

2005, and perhaps earlier, through the present, Legasus was not prosecuting its business in good

faith and it had no reasonable prospect or expectation of doing so given the continuing

defalcations and other obstacles to development described herein.

33. Further, Defendants, James R. Pitts, Theodore C. Morlok and Robert A. Corliss,

controlled and exercised complete domination over Legasus’ policies, finances, and business

practices such that piercing the corporate veil as to the claims stated herein is appropriate.


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34. The scheme to sell lots at inflated prices to the Plaintiffs not only enriched

Legasus and its members, but also enriched each of the Defendants in this action.

35. NBSC was enriched by this scheme to sell lots at inflated prices to the Plaintiffs

because a portion of the proceeds of lots sales to the Plaintiffs went directly to NBSC to pay

down its development loans to Legasus.


because Legasus transferred the ten percent down payment that each lot purchaser made at

closing to an account at NBSC and such funds were applied to the interest due on its loans to the

Bank Plaintiffs and other Plaintiffs with loans from NBSC.


because it received loan origination fees that were a percentage of the total amount of each loan

that NBSC issued to individuals who purchased lots in River Rock.

38. Marilyn McCoy Woods was enriched by this scheme to sell lots at inflated prices

to the Plaintiffs because Marilyn McCoy Woods received a fee for each lot that she appraised in

River Rock.

39. Each of the Defendants aided and abetted the commission of the various acts

described herein as they acted in concert with each other, they acted pursuant to a common

design, or they each knew that the other's conduct constituted a breach of duty to the Plaintiffs

and they gave substantial assistance or encouragement to the others.

PARTIES

40. Plaintiffs are all purchasers of lots in the River Rock subdivision. Each Plaintiff

relied upon representations that the River Rock subdivision would have certain amenities,

including, among others, the roads and utilities necessary to serve the individual lots. These


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representations were made both orally and in writing, in promotional materials, Property

Reports, and sales contracts.

41. Plaintiffs, Christian Barsanti, Marc Browner, Joseph Grusser, Catherine V.

Grusser, Donald Hill, Tricia Hill, Kenneth Kosco, Joseph McElroy, Michael Troiano, Edward

Wishner and Beverly Wishner (collectively referred to as the “Bank Plaintiffs”) each received a

loan or loans from the National Bank of South Carolina to purchase lots in the River Rock

subdivision and each are maintaining individual claims against its successor in interest Synovus

Bank in this action.

42. Legasus of North Carolina, LLC ("Legasus"), is a North Carolina Limited

Liability Company, and it is a Developer, as that term is defined by the Interstate Land Sales Full

Disclosure Act ("ILSA"), 15 U.S.C. $ 1701, et, seq., of real property located in North Carolina.

Legasus may be served at its registered agent, Theodore C. Morlok, 705 W. Main Street, Sylva,

North Carolina, 28779.

43. Michael Wolf (“Wolf”), is a citizen and resident of South Carolina and may be

served at the following address: 4107 Liberty Highway, Anderson, South Carolina 29621. Wolf

was an Agent for the Developer, as those terms are defined by ILSA, for real property located in

North Carolina.

44. Stephen R. Klorfein, Personal Representative of the Estate of Robert A. Corliss

("Corliss"), is a citizen and resident of Georgia. He is being named in his representative capacity

only. He may be served at the following address: Chaiken Klorfein, LLC, 140 Hightower Trail,

Building 2, Atlanta, Georgia 30350. At all times relevant hereto, Corliss was the Developer

and/or an Agent of the Developer, as those terms are defined by ILSA, for real property located

in North Carolina, and one of the principals and/or members of Legasus.


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45. Theodore C. Morlok ("Morlok") is a citizen and resident of South Carolina, and

he may be served at this the following address: 100 Topaz Point, Anderson, South Carolina

29626. At all times relevant hereto, Morlok was the Developer and/or an Agent of the

Developer, as those terms are defined by ILSA, for real properly located in North Carolina, and

one of the principals and/or members of Legasus.

46. James R. Pitts (“Pitts”) was the President of Legasus and at all times relevant

hereto, Pitts was the Developer and/or an Agent of the Developer, as those terms are defined by

ILSA, for real properly located in North Carolina, and one of the principals and/or members of

Legasus. Jim Pitts is currently the General Manager of Reynolds Blue Ridge, which is a

mountain, destination residential community located in Blowing Rock, North Carolina. Jim Pitts

can be served at 26 Montview Drive, Apt. 3, Asheville, North Carolina 28801

47. Synovus Bank (the “Bank”) is a Georgia corporation with its main offices located

at 1148 Broadway, Columbus, Georgia 31901. Synovus Bank as successor in interest to NBSC

provided loans to the Bank Plaintiffs and to several other Plaintiffs in this case, including Ben

Atkinson, Anthony Barbieri, Daniel Hinkson, Joseph Lamir, Cindy Lamir, G. Daniel Siegel,

Patricia Tracy, Kevin Tracy, Barron Wall, and Katherine Williams. Each of these other

Plaintiffs is currently involved in litigation with Synovus Bank.

48. Marilyn McCoy Woods was a certified residential appraiser who appraised at

least twenty-six (26) of the lots purchased by Plaintiffs in this action. Marilyn McCoy Woods

may be served at 234 Bailey Circle, Townville, South Carolina 29689.

49. Marilyn McCoy Woods appraised lots owned by the following Plaintiffs in this

action: Thomas Beritelli, Anthony Barbieri, Christian Barsanti, Marc J. Browner, Robert S.

Burt, Diane Carroll, Jeff Chaus, Joseph Grusser, Cathy Grusser, Edith Hansen, Dan Hinkson,


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Benjamin Atkinson , Alan Kessler, Gregory Keary, Kenneth Kosco, Eric Lawrence, Lenora

Lawrence, Joe Lamir, Cindy Lamir, Joseph McElroy, Steven Moses, Judy Schunn, Mark Tamn,

Andra Lynn Tamn, Audrey Troiano, Donna Panarello, Michael Troiano, Neal Ullman, Eddie

Varon, Barron S. Wall, Michael Whitehouse, Katherine Williams, Edward Wishner, Beverly

Wishner, Jason Wood (collectively referred to hereinafter as the “Woods Appraisal Plaintiffs”).

JURISDICTION AND VENUE

50. Jurisdiction is based on 28 U.S.C. § 1331 as this action arises under the laws of

the United States. This Court has supplemental jurisdiction over Plaintiffs' state law claims

pursuant to 28 U.S.C. § 1367.

51. Venue is proper under 28 U.S.C. § 1391(b)(2) as a substantial part of the events or

omissions giving rise to the claim occurred, and the property that is the subject of the action is

situated, in this judicial district.

FACTS

52. River Rock is a subdivision located in Cashiers, North Carolina, originally

consisting of approximately 4000 acres of undeveloped land.

53. Defendants developed an elaborate and expansive marketing plan to sell

undeveloped lots to consumers, including the Plaintiffs.

54. Defendants each played an integral role in the implementation of the overall

scheme to fraudulently induce the Plaintiffs to purchase undeveloped lots in the River Rock

subdivision.

55. Synovus Bank is legally responsible for all of the actions of the National Bank of

South Carolina as alleged in the Complaint as the successor in interest to the assets and liabilities

of the National Bank of South Carolina.


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56. Upon information and belief, the National Bank of South Carolina loaned Legasus

the money to purchase the approximately 4000 acres of undeveloped land.

57. The National Bank of South Carolina loaned Legasus money for the development

of the River Rock subdivision.

58. Upon information and belief, the National Bank of South Carolina loaned

$3,000,000 to Legasus or an entity related to Legasus in June of 2007.

59. Upon information and belief, the National Bank of South Carolina loaned

$9,500,000 to Legasus or an entity related to Legasus in October of 2007.

60. Pursuant to its loan agreement with Legasus, the National Bank of South Carolina

had a second deed of trust on the property referred to as Tuckaseegee II and III at the River Rock

subdivision.

61. Pursuant to its loan agreement with Legasus, the National Bank of South Carolina

would not release any lots from the second deed of trust on the property referred to as

Tuckaseegee II and III at the River Rock subdivision until the payment of $1.00 per lot at closing

as represented on the HUD 1 settlement statement.

62. By letter dated October 26, 2006, the National Bank of South Carolina stated to

James S. Price, Esq. of James S. Price & Associates, P.A. that once it became in the first deed of

trust position, it would release lots in the River Rock subdivision at closing upon the payment of

forty three percent of the gross selling price of each lot or one hundred thousand dollars

($100,000), whichever is greater, as represented on the HUD 1 settlement statement.

63. Michael Wolf, who was an employee and agent of the National Bank of South

Carolina, participated in off-site sales presentations to sell lots in the River Rock subdivision,


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including by participating in the Summer Sail event at Lake Glenville on June 10, 2006 and the

Grand Opening sales event in July of 2006 at the Mansion at Lake Glenville.

64. The Defendants acted together in various combinations to fraudulently induce

Plaintiffs to purchase lots in River Rock by engaging in high pressure, clearly false sales tactics,

rigged appraisals, and promises of instant equity in violation of a host of laws designed to protect

consumers like the Plaintiffs.

65. The Legasus Defendants engaged in a scheme to target individuals from New

Jersey, California and other states that were not near North Carolina in an effort to convince

unwitting buyers to purchase lots where the values of those lots were inflated through, upon

information and belief, the use of straw purchasers and rigged appraisals.

66. From 2005 through 2007, several of the Plaintiffs from New Jersey, including, but

not limited to Barron S. Wall, Anthony J. Barbieri, and Christian Barsanti purchased lots in the

River Rock subdivision that were appraised for amounts between two hundred thousand dollars

($200,000) and five hundred thousand dollars ($500,000), even though these lots were

undeveloped lots without the roads, sewer, electric, and other necessary utilities and

infrastructure to serve these lots.

67. During 2005 and 2006, Jackson County, North Carolina MLS statistics on

unimproved lots similar to those purchased at the River Rock subdivision show the values of

such lots to be between seventy-five thousand dollars ($75,000) and one hundred thousand

dollars ($100,000), even though the appraisals on lots in the River Rock subdivision were several

times higher than those figures and often equal to the lot sales price.

68. Upon information and belief, the Legasus Defendants, the National Bank of South

Carolina and Michael Wolf solicited appraisals from Marilyn McCoy Woods that were clearly


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false, as these appraisals were based on pre-determined values necessary to sell lots in the River

Rock subdivision, rather than an objective analysis of the value of lots based on comparable sales

of lots from outside of the River Rock subdivision.

69. Legasus worked in conjunction with the National Bank of South Carolina to offer

concessions to buyers of the lots in the River Rock subdivision designed to induce those buyers

to purchase lots in River Rock, including offering potential buyers of lots in River Rock no

payments on their loan for eighteen (18) months with a ten percent down payment to Legasus, as

well as a free Country Club membership that Legasus represented to be worth between thirty

thousand dollars ($30,000) and fifty thousand dollars ($50,000).

70. The National Bank of South Carolina hand-selected Marilyn McCoy Woods to do

the appraisals on its loans to several of the Bank Plaintiffs and other Plaintiffs.

SPECIFIC FACTUAL ALLEGATIONS AGAINST MARILYN MCCOY WOODS

71. Marilyn McCoy Woods conducted the appraisals for at least twenty-seven of the

Plaintiffs‟ lots and was repeatedly used by NBSC and other lenders as the appraiser for lots in

River Rock.

72. Upon information and belief, Marilyn McCoy Woods conducted appraisals of the

several of the Plaintiffs‟ lots by using the contract prices of those lots, which were given to her

by the Legasus Defendants, as well as by NBSC and Michael Wolf, as the basis for the value that

she provided for each lot in her appraisals.

73. Marilyn McCoy Woods‟ appraisals of lots in the River Rock subdivision

disregarded the significant financial incentives that were offered by Legasus and the National

Bank of South Carolina to lot purchasers and used comparables that were not correct.


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74. Marilyn McCoy Woods repeatedly used the listed purchase price for lots in River

Rock as a comparable value in her appraisals, all the while knowing that Legasus was returning

ten percent of the purchase price to the buyer and/or transferring that ten percent down payment

to financial institutions at closing to be applied to the loans on those lots. Marilyn McCoy

Woods thus should have reduced the listed purchase price in her sales comparables by ten

percent for each lot purchase where Legasus transferred ten percent of the purchase price to

NSBC for application to its loans to Plaintiffs.

75. Marilyn McCoy Woods failed to address known market risks in her appraisals,

did not provide analysis of market area communities in Jackson County, North Carolina in her

appraisals and did not provide information regarding the development timeline or risks inherent

in projecting value based on unfunded future development obligations in her appraisals of the

Woods Appraisal Plaintiffs‟ lots.

76. Within a ninety (90) day time period in 2008, Marilyn McCoy Woods appraised

eight lots in River Rock using the same three lots as comparables on each of these appraisals.

Specifically, Marilyn McCoy Woods used Lot 48 Bear Pen at River Rock, Lot 185 Boulders at

River Rock and Lot 20 Bear Pen at River Rock as comparables on each of these appraisals.

77. Even though these appraisals were all conducted within a ninety (90) day time

period, Marilyn McCoy Woods provided different values of each of Lot 48 Bear Pen at River

Rock, Lot 185 Boulders at River Rock and Lot 20 Bear Pen at River Rock in several of these

appraisals.

78. For example, in the appraisal of Plaintiff, Gregory Keary‟s Lot 16 at River Rock

Bear Pen dated June 24, 2008, Marilyn McCoy Woods concluded that the value of the

“comparable” Lot 48 Bear Pen at River Rock was three hundred and sixty-seven thousand four


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hundred and fifty dollars ($367,450), even though she concluded that the value of this same lot in

the appraisal of Plaintiff, Andrew Sweeney‟s Lot 19 at Bear Pen at River Rock that was also

dated June 24, 2008 was three hundred and seventy-four thousand three hundred and sixty-five

dollars ($374,365). In Marilyn McCoy Woods‟ appraisal of Plaintiff, Kenneth Kosco‟s Lot 55

Bear Pen at River Rock, which was also dated June 24, 2008, Marilyn McCoy Woods concluded

that the value of the “comparable” Lot 48 Bear Pen was three hundred and eighty-seven

thousand four hundred and fifty dollars ($387,450).

79. Marilyn McCoy Woods changed the value of Lot 48 Bear Pen at River Rock in

three different appraisals on the very same day in order to reach the desired value on each lot that

she was appraising, as she applied the lowest value to this lot in Gregory Keary‟s appraisal and

valued Gregory Keary‟s Lot 16 at River Rock Bear Pen at three hundred and eight thousand

dollars ($308,000). Marilyn McCoy Woods provided the highest “comparable” value of Lot 48

Bear Pen at River Rock amongst these three appraisals in the appraisal of Andrew Sweeney‟s

Lot 19 at Bear Pen at River Rock and concluded that the value of Lot 19 was three hundred and

sixty-five thousand dollars ($365,000).

80. Further, in the appraisal of Plaintiff, Gregory Keary‟s Lot 16 at River Rock Bear

Pen dated June 24, 2008, Marilyn McCoy Woods concluded that the value of “comparable” Lot

185 Boulders was three hundred and eighty-one thousand five hundred dollars ($381,500), while

she concluded that the value of this same “comparable” lot in the appraisal of Plaintiff, Andrew

Sweeney‟s Lot 19 at Bear Pen that was also dated June 24, 2008 was three hundred and eighty-

seven thousand four hundred and fifteen dollars ($387,415).

81. In the appraisal of Plaintiff, Gregory Keary‟s Lot 16 at River Rock at Bear Pen

dated June 24, 2008, Marilyn McCoy Woods concluded that the value of comparable Lot 20 at


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Bear Pen at River Rock was three hundred and seven thousand four hundred and eighty-five

dollars ($307,485), while she concluded that the value of this same lot in the appraisal of

Plaintiff, Andrew Sweeney‟s Lot 19 at Bear Pen that was also dated June 24, 2008 was three

hundred and fifty-three thousand four hundred dollars ($353,400).

82. In her appraisal of Plaintiff, Christian Barsanti‟s Lot 34 at Bear Pen at River Rock

dated April 23, 2008, Marilyn McCoy Woods valued differently the same “comparable” property

that she had used in her appraisals of Andrew Sweeney‟s Lot 19 at Bear Pen at River Rock and

Gregory Keary‟s Lot 16 at River Rock Bear Pen. For example, Marilyn McCoy Woods

appraised Lot 48 Bear Pen at River Rock at three hundred and forty thousand and fifty-four

dollars ($340,054), comparable Lot 185 at three hundred and eighty-nine thousand two hundred

dollars ($389,200) and comparable Lot 20 at three hundred and fifteen thousand two hundred

dollars ($315,200) in her appraisal of Christian Barsanti‟s Lot 34 at Bear Pen at River Rock. She

did so to conclude that the value of Christian Barsanti‟s lot was three hundred and twenty

thousand dollars ($320,000).

83. The Uniform Standards of Professional Appraisal Practice state that it is unethical

for an appraiser to accept an assignment that is contingent upon the reporting of a predetermined

result, the attainment of a specific amount of the value opinion or the attainment of a stipulated

result.

84. Upon information and belief, Marilyn McCoy Woods violated the ethical

standards as set forth in the Uniform Standards of Professional Appraisal Practice by appraising

several of the Plaintiffs‟ lots at the direction of one or more of the Defendants to obtain a

predetermined result, which was the attainment of a specific value for each lot as necessary to


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complete the purchase and loan transaction on each of the Plaintiffs‟ lots she appraised in the

River Rock subdivision.

85. Each Plaintiff entered into a Reservation and Convertible Contract for Sale of the

lot with Legasus when purchasing a lot in the River Rock subdivision.

LEGASUS DEFENDANTS‟ MISREPRESENTATIONS TO THE PLAINTIFFS IN THE

RESERVATION AND CONVERTIBLE CONTRACT FOR SALE

86. The Reservation and Convertible Contract for Sale promised to provide each

purchaser of a lot in the River Rock subdivision paved roads, electric service lines, telephone

line service, water line service and sewer service, among other things.

87. Paragraph 11(a) of the Reservation and Convertible Contract for Sale provided

that Legasus, as the Seller of a lot in the River Rock subdivision, would provide paved roads and

that those roads have been or will be extended to each lot and would be maintained by the

Homeowners Association.

88. Paragraph 11(b) of the Reservation and Convertible Contract for Sale provided

that Legasus, as the Seller of a lot in the River Rock subdivision, would provide as follows:

“[e]lectric service lines have been or will be extended to the above-described Lot and service is

to be provided and maintained by Duke Power Company.”

89. Paragraph 11(c) of the Reservation and Convertible Contract for Sale provided


“[t]elephone lines have been or will be extended to the above-described Lot and service is to be

provided and maintained by Verizon or some similar carrier.”

90. Paragraph 11(d) of the Reservation and Convertible Contract for Sale provided


“[w]ater service lines have been or will be extended to the Lot.”


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91. Paragraph 11(e) of the Reservation and Convertible Contract for Sale provided


“[s]ewage Service: Seller will deliver to Purchaser, within 365 days of closing on the lot, a

permit from the Jackson County Health Department for a sub-surface sewage disposal system on

the lot or seller will provide sewage disposal lines to the lot as provided below.”

92. Paragraph 11(e) also provided that, “[s]eller reserves the right, at the sole

discretion of seller, to install a common septic drain field and collection lines to the lot which

may serve one or more lots. In such event, Purchaser shall be responsible for all costs associated

with the installation and maintenance of the collection line on the lot and the on-lot collection

tank as may be required to connect to such common system.”

93. In Paragraph 11 (e) of the Reservation and Convertible Contract for Sale, Legasus

warranted that, “in the event Seller is unable to provide Purchaser with a permit for the

installation of an on lot sewage system or Seller is unable to provide Purchaser the ability to

connect to a „common drain field,‟ Seller will return to Purchaser the purchase price of the lot

hereunder and the Parties will be released of any further obligations or liabilities to

each other.”

94. Paragraph 11(f) of the Reservation and Convertible Contract for Sale stated that,

“proposed common recreational facilities to be installed by seller include walking trails and

walking trail facilities, swim facility, tennis courts, common park areas, library, overlook facility

and welcome station and outfitters cottage. These facilities will be owned and maintained by the

RiverRock Property Owners Association.”

95. Paragraph 11(g) of the Reservation and Convertible Contract for Sale stated that

the, “proposed private amenities and recreation facilities to be installed in Tuckaseegee at


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RiverRock include the Grand Lodge and Condominiums and Appalachian Spa and Spa

Condominiums. Both facilities will be built by the Developer and will be owned and operated

by private entities. These entities will be members of the RiverRock Property Owners

Association as provided in the The Declaration of Covenants, Conditions, and Restrictions for

RiverRock, Section 2.3. These amenities will be available for use by lot owners in RiverRock on

and individual fee basis and maintenance will not be paid by the RiverRock Property Owners

Association unless Covenants to Share Cost are entered into by the Private Amenity Owner and

The RiverRock Property Owners Association.”

96. Legasus did not provide the amenities, recreation facilities or the other

infrastructure that it promised to provide to the Plaintiffs in the Reservation and Convertible

Contract for Sale.

97. Legasus‟ failure to provide the amenities, recreation facilities, and infrastructure

that it promised to provide in the Reservation and Convertible Contract for Sale deprived the

Plaintiffs of the benefit of their bargain and effectively rendered the lots that each of the

Plaintiffs purchased to be nearly worthless.

MISREPRESENTTIONS MADE BY LEGASUS EMPLOYEE LEE BOYD

98. In April of 2006, Lee Boyd, acting as a sales agent on behalf of Legasus, sent the

owners of lots in the River Rock subdivision a letter stating that the Tuckasegee Lodge, which

was represented to be a residential lodge with common areas that would include The Erie

Restaurant and Bistro, a seminar and continuing education room and a theatre to seat between

fifteen and twenty-five people, as well as a reading room and game room, would be completed in

the River Rock subdivision.


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99. In May of 2006, Lee Boyd, acting in his capacity as a Legasus employee, stated to

Plaintiffs, Paul Taffe and Tonya Taffe, that a full service spa facility called the Orion Spa would

be completed at the River Rock subdivision. During that conversation, Lee Boyd also stated to

Paul and Tonya Taffe that the Trout Creek Meadow Pavilion, which was to be a recreation and

event facility located at the apex of the Trout Creek, would be completed in the River Rock

subdivision.

100. In May of 2006, Lee Boyd, acting in his capacity as an employee and agent of

Legasus, stated to Paul Taffe and Tonya Taffe that the Skillet Gap Village at Trout Creek, which

was to be the main street for the community and contain a General Store and Soda Fountain, as

well as the Copper John Restaurant, an adventure outfitter, a gaming building and a billiards

room, would be completed in the River Rock subdivision.


Legasus, stated to Paul Taffe and Tonya Taffe that the Bear Pen Club House, which was to have

an intimate pool area with a covered porch and adjacent lawn for outdoor activities, would be

completed in the River Rock subdivision.


Legasus, stated to Paul Taffe and Tonya Taffe that the Bear Pen Star Gazer Observatory would

be completed in the River Rock subdivision.


Legasus, stated to Paul Taffe and Tonya Taffe that the Webster Creek Golf Course, which was to

be a signature golf venue for all of the club members and would be Phil Mickelson golf course,

would be completed in the River Rock subdivision.


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Legasus, stated to Paul Taffe and Tonya Taffe that they had to purchase the Sports Membership

Certificate to use the Webster Creek Golf Course at a cost of fifty thousand dollars ($50,000),

but that Legasus would give them this membership as part of their purchase of a lot in the River

Rock subdivision because they were early buyers in the subdivision.


Legasus, stated to Paul Taffe and Tonya Taffe that the King‟s Grant club house, adjacent to the

King‟s Grant short course and tennis facility, with a common pool area with restrooms and a

changing area, would be completed in the River Rock subdivision.


Legasus, stated to Paul Taffe and Tonya Taffe that the Cullowhee Stables would be completed in


107. In May of 2006, Lee Boyd stated to Paul and Tonya Taffe that the Artesian Barn

lakeside clubhouse and the club house at Summer Sail would be completed in the River Rock

subdivision.

108. Paul and Tonya Taffe relied on the false statements of material fact made by Lee

Boyd, who made those statements while working in his capacity as an employee and agent of

Legasus, and other false statements in May of 2006 in deciding to purchase Tuckasegee at River

Rock, lot number 60 (the “Taffe Lot”), on December 5, 2006 in the amount of two hundred and

twenty-four thousand nine hundred dollars ($224,900).

109. Paul and Tonya Taffe would not have purchased the Taffe Lot if they had known

that the statements made by Lee Boyd, who made those statements while acting as an agent for

Legasus in May of 2006, were materially false.


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110. Legasus employees showed Plaintiff, Michael Troiano, maps of where the roads

were going to be in River Rock on each of his six (6) trips to the River Rock subdivision

between 2006 through 2008, even though these roads were never built in the River Rock

subdivision. Upon information and belief, these Legasus employees knew that these roads

would never be built and paved in the River Rock subdivision when they were showing Michael

Troiano maps of the road network, but were showing Michael Troiano this road network as part

of the scheme to defraud Michael Troiano.

LEGASUS AND JAMES R. PITTS‟ MISREPRESENTATIONS TO PLAINTIFFFS IN THE

2007 LEGASUS PROPERTY REPORT

111. By letter dated January 13, 2007 (the “2007 Legasus Report”), James R. Pitts

stated to the Plaintiffs who were then property owners of lots in the River Rock subdivision that

the construction of the roads in the River Rock subdivision began on October 30, 2006.

112. Legasus, through its President James R. Pitts, sent the 2007 Legasus Report to

each of the Plaintiffs who owned lots in River Rock and to other lot owners in the River Rock

subdivision.

113. In the 2007 Legasus Report, James R. Pitts wrote to the Plaintiffs who owned lots

in the River Rock subdivision that several homeowners expressed a desire to proceed

immediately with the design and construction of their homes, so “Legasus will work closely with

any homeowners to provide temporary power, sewer and water, as needed, to construct their

homes.” Upon information and belief, Legasus had no intention or ability to provide

homeowners with temporary power, sewer and water.

114. Upon information and belief, the 2007 Legasus Report, contained several

misstatements of material fact, including, but not limited to that, “Legasus has inked a deal with one

of the world's finest golfers to be the signature architect for the River Rock Webster Creek Golf Course.”


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115. In the 2007 Legasus Report, Legasus stated that, the “sheer size of the River Rock

project necessitates a comprehensive approach to utilities design. While Envision Engineers is

commissioned to prepare a utilities master plan, Legasus is also working directly with Duke

Power (electric provider), Aqua America (water and waste water provider), Balsam West (fiber

optic provider) and other utility agencies to determine the best ways to consistently and

efficiently service this project.”

116. Upon information and belief, Legasus and Jim Pitts both knew in 2007 that

Legasus would not be able to provide sufficient utilities to service the lots in the River Rock

subdivision and that it would not be able to provide utilities through Duke Power, Acqua

America and Balsam West.

117. In the 2007 Legasus Report, Legasus made several misstatements of material fact

relating to the roadways and dry utilities in the River Rock subdivision, including, but not

limited to the statement that in Bear Pen Village, “new roadway construction will begin in the

summer of 2007.” Legasus also stated that Envision Engineers is preparing the detail utility

design for Bear Pen and this “package will also be available for construction early in 2007,” even

though, upon information and belief, Legasus knew that utility construction would not

commence in early 2007 in the Bear Pen section.

118. Upon information and belief, Legasus made several misstatements of material fact

in the 2007 Legasus Report relating to the roadways and dry utilities in the River Rock

subdivision, including, but not limited to the statement that in Tuckasegee Village roadway

“construction is already underway. The Phase II construction documents are being finalized and

construction will continue without delay.”


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119. In the 2007 Legasus Report, Legasus made several misstatements of material fact

relating to the community water system for the River Rock subdivision, including, but not

limited to that, “Legasus will begin construction on the Tuckasegee and Bear Pen systems during

the second and third quarters of 2007.”


in the 2007 Legasus Report relating to the status of the infrastructure work to be completed at the

Tuckasegee section of the River Rock subdivision, including, but not limited to that, the

amenities and trails master plan for Tuckasegee village was complete. Further, Legasus stated

that Design Workshop and Moss Creek Designs had finalized the site plans and architectural

plans for several components, including, Hunter Jim Creek Park, Hunter Jim Pavilion, River Top

Pavilion, and the Highway 107 gateway entrance.


in the 2007 Legasus Report relating to the status of the infrastructure work to be completed at the

Tuckasegee section of the River Rock subdivision, including, but not limited to that Design

Workshop and Moss Creek Designs were finalizing the site plans and architectural designs for

several park and structural components in the Bear Pen Section, including the main entry

gateway, the wildlife and bird watching pavilion, the Stargazer Pavilion, the Wolf Knob Pavilion

and the Bear Pen Clubhouse and Pool Complex.

122. Upon information and belief, Legasus made the misstatements of material fact in

the 2007 Legasus Property Report with the intent to mislead the Plaintiffs both prior to and after

their purchases of lots in the River Rock subdivision as part of their scheme to defraud the

Plaintiffs. Upon information and belief, these misstatements were part of a scheme devised by


28

the Legasus Defendants and NBSC to mislead Plaintiffs into obtaining loans from NBSC and re-

financing or modifying existing loans with NBSC.

LEGASUS DEFENDANTS‟ MISREPRESENTATIONS TO PLAINTIFFS IN THE AUGUST

2008 PROGRESS SUMMARY

123. By letter dated August 5, 2008, Legasus provided a River Rock progress summary

(the “August 2008 Progress Summary”) that, upon information and belief, contained numerous

misstatements of material facts designed to mislead the Plaintiffs and other purchasers of lots in


124. The August 2008 Progress Summary stated, among other things, that, “[i]n 2008

and early 2009 Legasus‟ intention is to move to the finish line with the implementation of

community infrastructure at both the Bear Pen and Tuckasegee/The Glades neighborhoods and to

make significant progress towards establishing inventory at Webster Creek and Summer Sail,”

even though Legasus in fact had no intention of accomplishing any of these things.

125. The August 2008 Progress Summary stated, among other things, that,

“Legasus is working with the Corp of Engineers on agency approval for both golf courses at

Webster Creek and are excited to launch the construction of the River Rock Golf Course,

designed by Phil Mickelson and the King's Grant Golf Course, designed by Rick Smith, as soon

as the permitting process is complete. The tee boxes, greens and fairways have been surveyed

and the centerline clearing for the River Rock golf course has been completed.” Upon

information and belief, Legasus had neither completed the activities set forth above, nor had any

intention to complete the activities set forth above.

126. The August 2008 Progress Summary stated, among other things, that, “[w]hile

sales revenue contributes to the funding for the project, it is important to note that sufficient

construction funding is available for roads and infrastructure within existing neighborhoods.”


29

Upon information and belief, Legasus knew that it was not using the sales revenue to construct

the promised infrastructure and amenities at the River Rock subdivision and that it did not have

sufficient construction funding for roads and infrastructure within the existing neighborhoods.

127. In the August 2008 Progress Summary, Legasus stated that, “[a]s of this update,

River Rock now has approximately 18 miles of road constructed in our Bear Pen, Glades and

Tuckasegee neighborhoods. All of the roads throughout The Glades are completed and ready for

paving.” Upon information and belief, Legasus made this statement even though the roads were

not complete in an effort to deceive the Plaintiffs and to further their scheme to defraud the

Plaintiffs.

128. In the August 2008 Progress Summary Report, Legasus stated that, “[a]s

mentioned previously, stayed [sic] tuned for the announcement of the start of the Webster Creek

Parkway to the Phil Mickelson Golf Course in the next few weeks!” Upon information and

belief, Legasus made this statement even though it had no intention to construct the Webster

Creek Parkway, nor did it have a deal in place with Phil Mickelson for a golf course.

129. Upon information and belief, Legasus made certain representations in the August

2008 Progress Summary Report relating to the development and status of the water system for

the River Rock subdivision that it knew to be false, including, but not limited to that, “the first

phase of the community system is already well under construction and will be operational in the

next 60 days!”


2008 Progress Summary Report relating to the sewer system for the River Rock subdivision that

it knew to be false, including, but not limited to that, “[c]onstruction of the collection system will


30

begin in synchronization with the water line installations while construction of the treatment

facility will begin in early fall.”


2008 Progress Summary Report relating to the sewer system for the River Rock subdivision that

it knew to be false, including, but not limited to that, “Duke Energy is in the process of

completing the design for the second phase of underground power. The Glades and Tuckasegee

neighborhoods will be the first to receive power and Legasus is awaiting final plans from Duke

to begin construction. Legasus will begin and construction within 30 days of receiving final

plans.”


2008 Progress Summary Report relating to telecommunications systems for the River Rock

subdivision that it knew to be false, including, but not limited to that, “suffice it to say that we

are confident River Rock will be able to receive fiber service and very high level connectivity

that is not necessarily available to other communities on the plateau.”


2008 Progress Summary Report relating to planned infrastructure that it was to complete by

August of 2009 that it knew to be false, including, but not limited to that it planned to complete

the infrastructure for the Bear Pen section of the River Rock subdivision, including the

community water, electric and septic permitting, as well as the road paving, stargazing pavilion

and the primary entrance by August of 2009.





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the infrastructure for the Tuckasegee section of the River Rock subdivision, including the

community water, sewer collection and treatment, electric and telecommunications by August of

2009. Legasus also represented that it planned to complete the road rough-in for the Tuckasegee

section at River Rock, as well as do road paving in this section and the highway 107 entrance

and gatehouse by August of 2009.




the Webster Creek preliminary infrastructure engineering for water, sewer and electric, as well as

the neighborhood master plan, the Phase 1 neighborhood roads, the Phase 1 platting and the

Phase 1 golf construction.




the Summer Sail neighborhood master plan, preliminary infrastructure engineering for water,

sewer and electric and Phase 1 Lake Club construction by August of 2009.

137. Upon information and belief, Legasus made misrepresentations in the August

2008 Progress Summary Report as part of its scheme to defraud the Plaintiffs and as part of its

scheme with NBSC to induce Plaintiffs with loans from NBSC to modify or extend those loans.

LEGASUS AND TONY CORLISS‟ MISREPRESENTATIONS TO PLAINTIFFS IN THE

RIVER ROCK SNEAK PEEK

138. Legasus, through its founder Tony Corliss, prepared and disseminated numerous

advertising brochures to the Plaintiffs, including, but not limited to, the River Rock Sneak Peek,

designed to induce the Plaintiffs and others to purchase lots in the River Rock subdivision.


32

139. Upon information and belief, the Sneak Peek advertising brochure contained

numerous false statements designed to mislead the Plaintiffs and others to purchase lots in the

River Rock subdivision, including, but not limited to, the statement that, “Pioneering Mountain

Golf lives at Webster Creek on a signature 18-hole golf course by Phil Mickelson Design. . . ,”

even though, upon information and belief, Tony Corliss and others at Legasus knew that there

would not be a Phil Mickelson Golf Course at Webster Creek or at any other location in the

River Rock subdivision.

140. The Sneak Peek advertising brochure contained numerous false statements, that,

upon information and belief, were designed to mislead the Plaintiffs and others to purchase lots

at the River Rock subdivision, including, but not limited to, the statement that, “fine dining is

savored at any of the community‟s six culinary experiences,” even though there were no

restaurants at the River Rock subdivision.

141. The Sneak Peek advertising brochure contained numerous false statements that,

upon information and belief, were designed to mislead the Plaintiffs and others to purchase lots

at the River Rock subdivision, including, but not limited to, Legasus‟ statements regarding

amenities in the River Rock subdivision. The Sneak Peak advertising brochure represented that

Tucksasegee at River Rock would have the Orion Spa, which was advertised as a full service spa

for the exclusive use of River Rock members, as well as the Grand Tuckasegee Lodge, which

was to have an infinity pool, fusion restaurant, culinary school, wine cellar, cinema, games room,

terrace, lounge and library. Upon information and belief, Legasus and Tony Corliss made these

statements regarding amenities, even though they knew that these amenities would never be

provided in the River Rock subdivision.


33

142. Legasus, through Tony Corliss, represented to the Plaintiffs and others through

the Sneak Peek advertising brochure that Trout Creek at River Rock would have amenities

including the Sunset Pavilion, the Trout Creek Lodge, as well as the Trout Creek Village, which

would feature the Stirling Café, General Store, the Grizzly Poodle Pet Groomer, River Rock Post

Office, Ampitheater and much more. Upon information and belief, Legasus and Tony Corliss

made these statements regarding amenities, even though they knew that these amenities would

never be provided in the River Rock subdivision.

143. Legasus, through Tony Corliss, represented through the Sneak Peek advertising

brochure that Bear Pen at River Rock would have amenities including the River Rock Stargazing

Pavilion, a bird and wildlife sanctuary, as well as three miles of nature trails with bird watching

pavilion even though, upon information and belief, they knew that these amenities would never

be provided in the River Rock subdivision.

144. The Sneak Peek advertising brochure contained numerous false statements

designed to mislead the Plaintiffs and others to purchase lots at the River Rock subdivision,

including, but not limited to, its statements regarding amenities at Webster Creek in the River

Rock subdivision. Legasus, through Tony Corliss, represented in the Sneak Peak advertising

brochure that Webster Creek at River Rock would be home to the River Rock Golf Club, which

was advertised to be an 18 hole golf course designed by Phil Mickelson Designs, as well as the

King‟s Grant nine hole executive golf course designed by Rick Smith. In addition, Legasus

represented that Webster Creek would be the site of a professional indoor-outdoor tennis facility,

the Pisgah Stables Equestrian Center, Phil‟s Grill and the Bear & Bridle Gourmet Pub. Upon

information and belief, Legasus, through Tony Corliss, made these statements regarding


34

amenities, even though they knew that these amenities would never be provided in the River

Rock subdivision.

LEGAGUS DEFENDANTS‟ ADDITIONAL MISREPRESENTATIONS REGARDING

AMENITIES TO PLAINITFFS

145. Legasus, through Tony Corliss, expressly recognized the significance of the

amenities as inducements to the Plaintiffs and others to buy lots in the River Rock subdivision by

stating in the Sneak Peek advertising brochure that, “[y]ou will choose your River Rock home

based on the nature you wish to find in your backyard, the amenities you want to be closest to . .

. .”

146. Legasus informed Plaintiffs, including, but not limited to, Michael Troiano and

Audrey Troiano, that forty thousand dollars ($40,000) from the sale of each lot in the River Rock

subdivision would be put in escrow to build roads and utilities in the River Rock subdivision.

147. Upon information and belief, Legasus did not put forty thousand dollars ($40,000)

from the sale of each lot in the River Rock subdivision in escrow to build roads and utilities in


148. Upon information and belief, Legasus did not put any amount of money from

each lot sale in the River Rock subdivision into escrow to build roads and utilities in the River

Rock subdivision.

149. Legasus, through James R. Pitts, sent Michael Troiano and Audrey Troiano a

Sports Membership Certificate dated October 16, 2006 stating that this membership was worth

fifty thousand dollars ($50,000), but that charter members like the Troianos would be joining for

free. This Sports Membership Certificate purportedly entitled owners to use, “RiverRock's

equestrian complex, tennis center, nature trails, proposed Par 3 golf short course, chipping and


35

putting greens, organic gardens, fly fishing, coffeehouses, bowling, movie theaters, special

events, festivals and programs, and much more.”

150. Upon information and belief, Legasus, through James R. Pitts, offered the Sports

Membership Certificate to potential purchasers of lots in the River Rock subdivision as an

inducement to individuals to purchase lots, even though, upon information and belief, Legasus

and James R. Pitts knew that the amenities set forth in that Sports Membership Certificate would

not ever be built. The fact that Legasus used this Sports Membership Certificate as an

inducement to individuals to purchase lots in the River Rock subdivision is demonstrated by

Legasus and James R. Pitts‟ statement that, “we appreciate your joining us at this early stage of

the project and want to express our appreciation by sharing this special club membership offer.

Just sign and initial the attached contract and HUD forms where noted and send them back to our

office this week accompanied by a check for the noted amount, if applicable.”

151. Legasus and its agents, including sales agent Matthew Mull, made presentations

at trade shows to potential buyers in California and other locations, including making

presentations at a trade show in California to several Plaintiffs including, but not limited to,

Plaintiffs, Donald Hill and Tricia Hill.

152. Matthew Mull of Legasus made statements to Donald Hill and Tricia Hill, as well

as other purchasers of lots in the River Rock subdivision promising electrical service, telephone

lines, water service lines, waste water disposal and that the Tuckasegee Lodge, and the Orion

Spa at Tuckasegee Lodge would be built in the River Rock subdivision at a presentation in

California.

153. During Donald Hill and Tricia Hill‟s visit to the River Rock subdivision in

November of 2006, Matthew Mull of Legasus made statements to Donald Hill and Tricia Hill


36

promising that certain amenities would be built in the River Rock subdivision including

electrical service, telephone lines, water service lines, waste water disposal, the Tuckasegee

Lodge, and the Orion Spa at Tuckasegee Lodge, Trout Creek Meadow Pavilion, Skillet Gap

Village at Trout Creek, and the Bear Pen Club House


November of 2006, Matthew Mull of Legasus made statements to Donald Hill and Tricia Hill

promising certain amenities would be built in the River Rock subdivision, including, but not

limited to amenities such as River Bend Park, West Fork Pavilion, Mother Jones Overlook

Pavilion, Hot Tub Hunter Jim Park, Great Lawn Pavilion, Wolf Knob Pavilion, Cherry Knob

Overlook, Park Horse Meadow Pavilion, Rock Chute Climb Park, Boulders Park and Bell Coney

Mountain Sunset Pavilion.


November of 2006, Matthew Mull of Legasus stated prior to the closing on their lot that it was

already worth three hundred and fifty thousand dollars ($350,000), which was in excess of the

amount that Donald Hill and Tricia Hill paid for their lot in the River Rock subdivision.

156. On September 22, 2006, Matthew Mull of Legasus sent Donald Hill and Tricia

Hill an interstate electronic mail communication stating that, “I think it's great that you guys

were able to get into the Phase One offering and I look forward to showing you guys the property

soon. We are taking Reservations daily for the next release and this is just the beginning. After

our official announcement of the PGA Pro that's designing the Golf Course it's going to get even

crazier around here.”

157. Legasus sales agent Lee Boyd made several statements to Plainitff, Joseph

McElroy, designed to induce Mr. McElroy into purchasing the McElroy Lot, including, but not


37

limited to that the McElroy Lot was a great investment and one of the best lots, as well as that it

was a great value and that he needed to commit immediately because of a sales event the

following weekend.

158. Legasus sales agent Jason Wallace stated to Plaintiff, Marc J. Browner, that

purchasing a lot in the River Rock subdivision was a great investment and that lots in other

communities that were being developed around the area were worth over one million dollars

($1,000,000). Jason Wallace and other River Rock salespersons also stated that if Mr. Browner

did the interest free financing loan for eighteen months, at the end of eighteen months he could

sell the Browner Lot and made good money on it.

LEGASUS AND JAMES R. PITTS‟ MISREPRESENTATIONS TO PLAINTIFFS IN THE

JULY 2009 LEGASUS UPDATE

159. On July 15, 2009 (the “July 2009 Legasus Update”), Legasus, through James R.

Pitts, sent an update to the Plaintiffs stating, among other things, that, “Legasus' primary goals

are to recapitalize River Rock and maintain the integrity of the project work completed to date.

While project construction is temporarily postponed our efforts in seeking new sources of

funding are nonstop.”

160. In the July 2009 Legasus Update, Legasus, through James R. Pitts, stated to the

Plaintiffs that they may have noticed, “an increase in banking and legal activity around the River

Rock project, namely a foreclosure sale of the Lacy tract in the Webster Creek neighborhood and

the sale of the Summer Sail neighborhood and Cherry Knob tract at Webster Creek. . . .

Legasus‟ responses to these actions are structured to provide much needed short-term financial

relief. Specifically, the Summer Sail neighborhood and Cherry Knob tract were sold


38

to a cooperative investor as a land banking strategy.” Jim Pitts further wrote in the 2009 Legasus

Update that this sale was a way of “creating a future opportunity to repurchase the land holdings

once the recapitalization is in place.”

161. In the July 2009 Legasus Update, Jim Pitts wrote to the Plaintiffs that, “[a]nother

banking move that occurred on July 9, 2009 was the foreclosure and sale of the Lacy tract at

Webster Creek by Macon Bank. Legasus has been working closely with Macon Bank to find

another capital funding source but was unable to secure the necessary funds by the foreclosure

date. While we are disappointed that Macon Bank proceeded with the sale, we continue to stay

in contact with bank officers to arrange for a repurchase once the River Rock recapitalization is

in place.” Legasus and James R. Pitts made this statement, even though, upon information and

belief, they knew that Legasus would not be able to secure the funding necessary to purchase the

Lacy tract at Webster Creek.

162. In the July 2009 Legasus Update, James R. Pitts wrote to the Plaintiffs that,

“[w]hile the Lacy tract makes up part of the River Rock golf course there are alternate routing

plans that can be used if needed. We remain in contact with Phil Mickelson Design and his

management company and they continue to be very active partners.” Upon information and

belief, Legasus and James R. Pitts made this statement, even though they knew that Phil

Mickelson Design would not be designing a golf course in the River Rock subdivision.

163. In the July 2009 Legasus Update, James R. Pitts wrote to the Plaintiffs that,

“[s]ince the end of 2007 we have been looking for ways to right-size the company and the

project to respond to the economic conditions. Strategies have included selling land, reorganizing

staff, managing maintenance, reducing direct expenses, etc.” This statement clearly


39

demonstrates that Legasus recognized that it had serious financial problems in 2007 despite its

regular dissemination of information to the Plaintiffs making statements to the contrary.

164. In the July 2009 Legasus Update, Jim Pitts wrote to the Plaintiffs that, “as I have

previously reported, Legasus closed a significant construction loan with a private lender in April,

2008. With that loan Legasus was able to make considerable progress in the construction of the

dry and wet utility infrastructure in the Tuckasegee/Glades neighborhoods.” Jim Pitts and

Legasus made this statement despite the fact that it did not make considerable progress in these

sections of the River Rock subdivision or any other section of the River Rock subdivision.

165. In the July 2009 Legasus Update, Jim Pitts wrote to the Plaintiffs that progress in

the infrastructure in the Tuckasegee/Glades neighborhoods was robust, “up until December 2008

when the lender failed to make the required construction draw for several previous months of

work per the contract agreement. Without any communication, the lender ceased funding the

project under the contract obligations. Unknowingly, Legasus proceeded with construction

which resulted in a funding shortfall for some completed work.” Legasus and Jim Pitts made

this statement despite the fact that Legasus neither made robust progress on the infrastructure

after the alleged construction loan, nor did it make substantial progress in the development of

infrastructure prior to the time of this construction loan, even though it received millions of

dollars from the proceeds of Plaintiffs‟ purchases of lots in the River Rock subdivision.

166. In the July 2009 Legasus Update, Jim Pitts wrote to the Plaintiffs and other

owners of lots in the River Rock subdivision that, “[i]n closing I would like to let you know that

Legasus continues to be fully committed to satisfying our obligations to you, the owners.” Upon

information and belief, Jim Pitts and Legasus made this statement even though they knew that

Legasus had no intention of fulfilling its obligations to the Plaintiffs.


40

167. The Legasus Defendants sent the Plaintiffs, via interstate communication, the

2007 Legasus Report, August 2008 Progress Summary Report, the Sneak Peek, the 2009

Legasus Update, and other documents and advertising materials, upon information and belief, as

part of their scheme to defraud Plaintiffs into purchasing lots in the River Rock subdivision and

entering into loan agreements with lenders, including NBSC, with respect to these lots.

LEGASUS DEFENDANTS‟ MISREPRENTATIONS TO PLAINTIFFS

IN THE LEGASUS PROPERTY REPORT

168. In the Legasus Property Report dated August 26, 2006 (the “Legasus Property

Report”), Legasus made certain representations about utilities and infrastructure that were

materially false, including, but not limited to, that water service would be available to the

individual lots in the River Rock subdivision by March of 2008. Upon information and belief,

Legasus made these statements even though it knew that it could not provide such roads by

March of 2008.

169. In the Legasus Property Report, Legasus made certain representations about

utilities and infrastructure that were materially false, including that roads would be constructed

and paved in the Tuckasegee and Glades sections of the River Rock subdivision by April of

2008. Upon information and belief, Legasus made these statements even though it knew that it

could not provide such roads by April of 2008.

170. In the Legasus Property Report, Legasus stated, “[w]e will escrow $15,000 from

the sale of each lot to construct the central water system and central sewer collection system.”

Legasus made this statement, even though, upon information and belief, it did not intend to

escrow $15,000 from the sale of each lot to construct the central water system and the central

sewer collection system.


41

171. Upon information and belief, Legasus did not escrow any amount of money from

the sale of each lot to construct the central water system and central sewer collection system.

172. In the Legasus Property Report, Legasus stated, “[w]e will escrow $40,000 from

the sale of each lot to design and construct the roads, electrical and telecommunications utilities

and common area improvements.” Legasus made this statement, even though, upon information

and belief, it did not intend to escrow $40,000 from the sale of each lot to design and construct

the roads, electrical and telecommunications utilities and common area improvements

173. Upon information and belief, Legasus did not escrow any amount of money from

the sale of each lot to design and construct the roads, electrical and telecommunications utilities

and common area improvements.

174. In the Legasus Property Report, Legasus stated, “[t]he estimated starting date for

commencement of construction of the electrical service lines to serve all of The Glades Phase

lots is April 2007 and it is anticipated that service will be available to all lots subject to this

Property Report by March 2008.” Upon information and belief, Legasus knew that it would not

be able to provide electric service to all of the subject lots by March 2008.

175. In the Legasus Property Report, Legasus represented that all of the recreational

facilities in the River Rock subdivision would be completed by June of 2009. Upon information

and belief, Legasus knew that it would not complete these recreational facilities by the dates set

forth in the Legasus Property Report.

176. As for the August 31, 2006 draft date of the Legasus Property Report, Legasus

represented that no homes were occupied on a full or part time basis in the River Rock

subdivision.


42

177. Plaintiffs purchased the River Rock lots with a reasonable belief that such lots

could be built upon and with a reasonable belief that Legasus would install roads, wells, utilities,

and other infrastructure that was essential to allow the issuance of an occupancy permit.

178. Plaintiffs purchased the River Rock lots with a reasonable belief that the pools,

tennis center, equestrian center, clubhouses, golf courses, restaurants, and other amenities would

be constructed.

179. Upon information and belief, the Legasus Defendants developed their scheme to

defraud the Plaintiffs for the purpose of enriching themselves by utilizing the proceeds from lot

sales to enrich themselves, as they had no intention of ever building the utilities and

infrastructure that they promised Plaintiffs that they would build.

THE BANK‟S RELATIONSHIP WITH THE LEGASUS DEFENDANTS

180. Upon information and belief, Legasus had operating accounts related to the River

Rock subdivision at the National Bank of South Carolina.

181. Upon information and belief, James R. Pitts had a personal banking account at

NBSC.

182. Upon information and belief, Theodore Morlok had a personal banking account at

NBSC.

183. Upon information and belief, Robert A. Corliss had a personal banking account at

NBSC.

184. NBSC financed some or all of Legasus‟ acquisition of the property that became


185. NBSC financed some or all of the development of the River Rock subdivision.


43

186. Legasus‟ related entities, Legasus, LTD and T&T Properties, executed a Deed of

Trust to the National Bank of South Carolina dated January 7, 2005 that is recorded in Deed

Book 1465, Page 33, of the Jackson County Registry (the “NBSC Deed”), concerning property

within the River Rock subdivision.

187. Legasus and T&T Properties, Inc. had a Deed of Trust to the National Bank of

South Carolina dated November 30, 2005 recorded in Deed Book Page 1553, Page 581 of the

Jackson County Registry (the “NBSC Number 2 Deed”) on property within the River Rock

subdivision.

188. As stated in the Legasus Property Report for the River Rock subdivision, the

release provisions in the NBSC Deed allowed lots to be released upon the payment by Legasus to

the National Bank of South Carolina of an amount equal to either 35 percent (35%) or 50 percent

(50%) of the gross sales price of the individual lot to be released from the NBSC Deed,

depending on the lot being released, provided, such payment to NBSC shall not be in an amount

less than $83,350 or $100,000, depending on the lot being released.

189. As stated in the Legasus Property Report for the River Rock subdivision,

“[n]either the NBSC Number 2 Deed nor the Community South Deed contain any provisions for

the release of an individual lot when the full purchase price of the lot has been paid. Therefore,

if your lot is subject to either the NBSC Number 2 Deed or the Community South Deed, you

may not be able to obtain clear title to your lot until we have paid the NBSC Number 2 Deed or

the Community South Deed in full, even though you may have received a deed and paid the full

purchase price of the lot.”

190. Legasus and the National Bank of South Carolina were motivated to work

together to sell lots in the River Rock subdivision at the highest possible prices to pay off the


44

loans that the National Bank of South Carolina had provided Legasus as secured by the NBSC

Deed and the NBSC Number 2 Deed.

191. Upon information and belief, the Legasus Defendants and the National Bank of

South Carolina worked out a scheme to develop a lot sales program where Legasus and NBSC

would induce Plaintiffs to purchase lots in the River Rock subdivision by offering to apply each

of the Plaintiff‟s ten percent down payment to the first approximately eighteen months of interest

payments on loans made to the Plaintiffs from the National Bank of South Carolina.

192. Upon information and belief, the National Bank of South Carolina‟s officers and

directors encouraged Michael Wolf and other employees to make as many loans as possible in

the River Rock subdivision because the National Bank of South Carolina was receiving ten

percent of the sale price of each lot at closing for each lot that it loaned money on to the

Plaintiffs and other buyers of lots in River Rock.

193. Upon information and belief, the National Bank of South Carolina engaged in a

scheme to defraud the Bank Plaintiffs and others into purchasing lots in the River Rock

subdivision.

CHRISTIAN BARSANTI‟S SPECIFIC FACTUAL ALLEGATIONS AGAINST THE BANK

194. Upon information and belief, the National Bank of South Carolina implemented a

plan to fraudulently induce Christian Barsanti (“Barsanti”) to purchase an undeveloped lot in the

River Rock subdivision and Barsanti did purchase Lot 34 in the Bear Pen section of the River

Rock subdivision in Cullowhee, North Carolina (the “Barsanti Lot”) on March 10, 2006 for two

hundred and twenty-nine thousand and nine hundred dollars ($229,900).

195. The National Bank induced Barsanti to purchase the Barsanti Lot by offering him

a two year interest only loan at a rate of 6.68% with the total finance charges over the two year


45

term of the loan to be in the amount of twenty-seven thousand six hundred and seventy-three

dollars and ninety cents ($27,673.90) on NBSC‟s two hundred and six thousand nine hundred

and ten dollar ($206,910) loan to Barsanti.

196. The National Bank of South Carolina induced Barsanti to sign a Deposit Account

Agreement that would open an account at the National Bank of South Carolina for the twenty

thousand dollars ($20,000) that was transferred by Legasus into this account to be used to pay for

interest payments on the National Bank of South Carolina‟s loan to Barsanti.

197. On February 22, 2006, Michael Wolf sent Barsanti an interstate electronic mail

communication from South Carolina to Barsanti in New Jersey requesting two years of personal

financial statements.

198. On or about March of 2006, Barsanti had an interstate telephone communication

from New Jersey with Michael Wolf in South Carolina and during that interstate telephone

communication Michael Wolf stated that the purchase of the Barsanti Lot was a great deal.

199. On March 16, 2006, Lauren Casey, Legal Assistant to James S. Price, Esq., sent

an interstate electronic mail to Christian Barsanti stating, “I wanted to check-in with you to see if

you had a chance to execute and send back the loan documents for the purchase of Lot 34

BearPen at RiverRock.”

200. On March 16, 2006, Lauren Casey, Legal Assistant to James S. Price, Esq., sent

an interstate electronic mail to Christian Barsanti stating, “[p]lease remember all documents need

to be dated for 3/10.”

201. On March 23, 2006, Michael Wolf sent Barsanti an interstate electronic mail

communication from South Carolina to Barsanti in New Jersey stating, “your rate went down to

6.25% did you send the package to James Price office?”


46

202. In March of 2006, Michael Wolf provided Barsanti with a copy of the appraisal of

the Barsanti Lot that showed the Barsanti Lot was worth two hundred and fifty thousand dollars

($250,000). During a March of 2006 interstate telephone communication between Michael Wolf

and Barsanti, Michael Wolf stated to Christian Barsanti that he had “already made money” on

the Barsanti Lot because he was paying less than the appraised value of the Barsanti Lot.

203. Christian Barsanti paid the Highlands Appraisal Service the amount of four

hundred and fifty dollars ($450) for the 2006 appraisal on the Barsanti Lot at the closing on the

Barsanti Lot.

204. Christian Barstanti paid James S. Price & Associates, P.A. the amount of five

hundred dollars ($500) in attorney‟s fees to represent him at the closing on the Barsanti Lot, as

well as sixty dollars ($60) in courier fees.

205. Christian Barsanti paid the National Bank of South Carolina a loan origination fee

of .5000% in the amount of one thousand and thirty-four dollars and fifty-five cents ($1034.55)

at the closing on the Barsanti Lot.

206. On or about March of 2008, Barsanti had an interstate telephone communication

from New Jersey with Michael Wolf in South Carolina and during that interstate telephone

communication Michael Wolf stated that the purchase of the Barsanti Lot was a great deal and

that Barsanti would be selling the Barsanti Lot within two years for a profit. Michael Wolf also

stated during that interstate telephone communication that Barsanti should do a two year loan

with the Bank because he would be selling the Barsanti Lot at a profit within two years.

207. When Christian Barstanti‟s loan with the NBSC became due in March of 2008,

the National Bank of South Carolina, through its employee Michael Wolf, offered to extend this

loan for two years. However, Michael Wolf informed Barsanti via interstate telephone


47

communication that the extension was delayed because he and the National Bank of South

Carolina did not like the first 2008 appraisal on the Barsanti Lot and that they would order a

second appraisal.

208. In 2008, the National Bank of South Carolina requested and received a second

appraisal (the “2008 Barsanti Lot Appraisal”) on the Barsanti Lot that came back with the

Barsanti Lot appraised at three hundred and twenty thousand dollars ($320,000), which was

ninety thousand dollars ($90,000) more than what Barsanti had originally paid for the Barsanti

Lot.

209. The 2008 Barsanti Lot Appraisal provided a value of the Barsanti Lot that

demonstrated an increase in value of nearly forty percent (40%) during a time period when real

estate values in Western North Carolina, including Jackson County, were in a rapid decline.

210. On May 2, 2008, Michael Wolf sent Barsanti the 2008 Barsanti Appraisal via

interstate electronic mail and Barsanti relied on the value of the Barsanti Lot in that appraisal, as

well as the other information contained in the 2008 Barsanti Lot Appraisal in deciding to execute

the Modification and Amendment of Note and Deed of Trust with NBSC dated May 12, 2008.

211. The Modification and Amendment of Note and Deed of Trust provided that

Barsanti would pay NBSC two hundred and six thousand nine hundred and ten dollars

($206,910) at a rate of 4.5% over a five year loan term. Barsanti would not have entered into this

agreement but for the fact that he relied upon information contained in the 2008 Barsanti Lot

Appraisal.

212. Marilyn McCoy Woods conducted the 2008 Barsanti Lot Appraisal and failed to

use lots outside of the River Rock subdivision as comparables to determine the value of the

Barsanti Lot and failed to account for the fact that there were not sufficient infrastructure and


48

utilities in the River Rock subdivision to support the value placed on the Lot in the 2008 Barsanti

Lot Appraisal.

213. The 2008 Barsanti Appraisal used Lot 48 and Lot 20 in the Bear Pen Section of

the River Rock subdivision and Lot 185 in the Boulders Section of the River Rock subdivision as

comparables to the Barsanti Lot to determine the value of the Barsanti Lot, even though those

lots were all within the River Rock subdivision and were all undeveloped lots.

214. The 2008 Barsanti Lot Appraisal stated that there were, “no known factors to the

appraiser that adversely affect value or marketability within the defined Highland Cashiers

mountain resort market area with excellent marketability and appeal,” even though Marilyn

McCoy Woods knew or should have known that the lack of infrastructure at the River Rock

subdivision adversely affected both the value and the marketability of the Lot.

215. The 2008 Barsanti Lot Appraisal indicated that the adequacy of utilities was

average in River Rock, even though there were no utilities that served the Barsanti Lot. In fact,

the 2008 Barsanti Appraisal stated that proposed amenities included underground utilities, paved

roads with curb and gutters, clubhouse, hiking trails, hot tub/spa, picnic area, wildlife education,

yoga and bouldering.

216. The 2008 Barsanti Appraisal did not indicate whether Marilyn McCoy Woods had

actually ever been to the Barsanti Lot, even though there are boxes on the 2008 Barsanti

Appraisal that the appraiser was to check to indicate whether she ever visited the Barsanti Lot.

217. The 2008 Barsanti Lot Appraisal valued the Barsanti Lot at three hundred and

twenty thousand dollars ($320,000), even though the Barsanti Lot was .94 acres of undeveloped

land in the River Rock subdivision and this subdivision contained no water, no sewer and no gas,

while not containing any roads to serve the Lot.


49

218. Upon information and belief, in April and May of 2008, the National Bank of

South Carolina knew that there were significant problems with the development of the

infrastructure in the River Rock subdivision and that this infrastructure had not been provided as

promised to the purchasers of lots in the River Rock subdivision.

219. In April and May of 2008, the National Bank of South Carolina knew that there

were significant problems with the funding of the infrastructure and utilities in the River Rock

subdivision.

220. Upon information and belief, in April and May of 2008, the National Bank of

South Carolina knew that the Barsanti Lot was not worth three hundred and twenty thousand

dollars ($320,000).

221. Marilyn McCoy Woods submitted an invoice for the Barsanti Lot Appraisal to the

National Bank of South Carolina dated June 1, 2008 and Michael Wolf signed that invoice, while

indicating that the National Bank of South Carolina should pay that invoice. This demonstrates

Michael Wolf‟s role in ordering the Barsanti Lot Appraisal and approving the payment to

Marilyn McCoy Woods for this appraisal.

222. In April of 2008, Christian Barsanti asked Michael Wolf if there was a thirty year

fixed loan option for the loan on the Barsanti Lot and Michael Wolf said that he should not

pursue such a long term loan because the lot would sell within two years.

223. Upon information and belief, the National Bank of South Carolina knew that the

Barsanti Lot was not worth three hundred and twenty thousand dollars ($320,000) in April of

2008, but it extended this loan to continue to show short term income and move known loan

losses into a date uncertain in the future.


50

MICHAEL TROIANO AND AUDREY TROIANO‟S

SPECIFIC FACTUAL ALLEGATIONS AGAINST THE BANK


plan to fraudulently induce Michael Troiano and Audrey Troiano to purchase an undeveloped lot

in the River Rock subdivision and Michael and Audrey Troiano did purchase Lot 113 in the

Tuckasegee section of the River Rock subdivision in Cullowhee, North Carolina (the “Troiano

Lot”) on November 20, 2006 for two hundred and sixty-nine thousand nine hundred and ten

dollars ($269,910).

225. On July 15, 2006, at the Grand Opening Sales event at the River Rock

subdivision, Michael Townsend of Legasus introduced Michael Troiano to Michael Wolf and

stated that Mr. Wolf would “take care of you.” Michael Townsend of Legasus also stated to

Michael Troiano that NBSC had a vested interest in River Rock because it had underwritten a

significant portion of the development of River Rock. Legasus did not introduce Michael

Troiano to any other lenders at the Grand Opening Sales event and it appeared clear to Michael

Troiano that Legasus preferred that buyers of lots use NBSC to finance the purchase of lots in

River Rock.

226. On July 15, 2006, at the Grand Opening Sales event at the River Rock

subdivision, Michael Wolf expressed a lot of confidence in the River Rock subdivision to

Michael Troiano and stated to Michael Troiano that he had worked with Legasus before and that

regardless of whether the Troianos decided to sell the Troiano Lot or build on the Troiano Lot

themselves, they would be able to sell it for a profit because they were getting in on the ground

floor of the deal.

227. On July 15, 2006, at the Grand Opening Sales event at the River Rock subdivision

and during subsequent interstate telephone communications with Michael Troiano, Michael Wolf


51

stated to Michael Troiano that purchasing a lot in the River Rock subdivision was a good deal

because of the ability to re-sell the Troiano lot at a later date.

228. On July 15, 2006, Legasus and Michael Wolf stated to Michael Troiano that the

Grand Opening Sales event dinner was held for the first one hundred (100) buyers in the River

Rock subdivision. On July 15, 2006, Michael Wolf stated to Michael Troiano that if the

Troianos decided to sell the lot at a later date, they could pretty much name their price on the lot

because subsequent phases of the development would be released at higher selling prices, as

Phase 2 lots were to be released at a ten percent premium to Phase 1 lots. Michael Wolf stated

that this built in profit had already been realized by the initial lot owners.

229. At the Grand Opening Sales event on July 15, 2006, Michael Wolf stated to

Michael Troiano that the National Bank of South Carolina had a significant investment in the

River Rock subdivision and the fact that the Bank was behind the project provided significant

comfort to Michael Troiano with respect to his decision to purchase a lot in the River Rock

subdivision.

230. During the Grand Opening sales event, Michael Wolf acted as both an employee

and representative of the National Bank of South Carolina and a salesperson for the River Rock

subdivision. During the Grand Opening sales event, it appeared to Michael Troiano that Michael

Wolf could have been part of either the River Rock sales team or of the National Bank of South

Carolina.

231. On July 18, 2006, Michael Wolf sent Michael Troiano an interstate electronic

mail communication from South Carolina to Michael Troiano in Georgia with a loan application

and Michael Troiano sent the loan application back to Michael Wolf on July 19, 2006.


52

232. On August 14, 2006, Michael Wolf sent Michael Troiano an electronic mail

communication from South Carolina to Michael Troiano in Georgia stating, “all paper work is

approved.”

233. Michael and Audrey Troiano paid the National Bank of South Carolina a loan

origination fee of .5002 percent in the amount of one thousand two hundred and fifteen dollars

($1,215) at the closing on the Troiano Lot on November 20, 2006, as shown on the U.S.

Department of Housing and Urban Development Settlement Statement used in conjunction with

the closing on the Troiano Lot.

234. Michael and Audrey Troiano paid Marilyn McCoy Woods two hundred and fifty

dollars ($250) for an appraisal on the Troiano Lot as shown on the U.S. Department of Housing

and Urban Development Settlement Statement used in conjunction with the closing on the

Troiano Lot.

235. Even though Michael and Audrey Troiano paid for an appraisal on the Troiano

Lot, they did not receive a copy of the appraisal prior to their purchase of the lot.

236. Upon information and belief, the National Bank of South Carolina did not provide

Michael and Audrey Troiano with a copy of the appraisal conducted by Marilyn McCoy Woods

on the Troiano Lot because the National Bank of South Carolina knew that if Michael and

Audrey Troiano knew of the information in the appraisal, they would not have purchased the

Troiano Lot.

237. Michael and Audrey Troiano paid James S. Price & Associates, P.A. the amount

of five hundred dollars ($500) in attorney‟s fees to represent them at the closing on their lot, as

well as fifty ($50) dollars in title document retrieval fees, sixty dollars ($60) in courier fees, and

thirty-five dollars ($35) in copy-wire fees.


53

DONALD HILL AND TRICIA HILL SPECIFIC FACTUAL ALLEGATIONS

AGAINST THE BANK


plan to fraudulently induce Donald Hill and Tricia Hill to purchase an undeveloped lot in the

River Rock subdivision and Donald Hill and Tricia Hill did purchase Lot 155 in the Tuckasegee

section of the River Rock subdivision in Cullowhee, North Carolina (the “Hill Lot”) on

December 12, 2006 for two hundred and fifty-two thousand dollars ($252,000).

239. Donald Hill and Tricia Hill chose the National Bank of South Carolina to finance

the purchase of the Hill Lot because it offered an eighteen month no payment loan or a ten

percent principal reduction. In addition, Donald and Tricia Hill chose the National Bank of

South Carolina because when Donald Hill spoke to Michael Wolf via interstate telephone

communication during the loan application process, Michael Wolf informed Donald Hill that he

had closed many lots in the last six months in the River Rock subdivision and reselling the lot

that they would purchase in River Rock should be easy.

240. The National Bank of South Carolina induced Donald Hill and Tricia Hill into

purchasing the Hill Lot by offering to provide them with a two year interest only loan at a rate of

6.37 % with no payment for the first eighteen months of the loan.

241. Michael Wolf acted as a salesperson of lots in the River Rock subdivision when

speaking with Donald Hill during the loan application process because he made every effort to

make Mr. Hill feel good about buying a lot in the River Rock subdivision.

242. River Rock salesperson Matthew Mull met with Donald Hill at a trade show in

Los Angeles and gave him a piece of paper with three banks on it as possible lenders for the

purchase of a lot in the River Rock subdivision and those lenders were National Bank of South

Carolina, Wachovia and Bank of America.


54

243. Michael Wolf sent Donald Hill and Tricia Hill an interstate electronic mail

communication on November 13, 2006 informing Donald and Tricia Hill to let him know if they

had any questions regarding their loan.

244. Donald Hill and Tricia Hill paid the National Bank of South Carolina a Loan

Origination Fee of .5000% in the amount of one thousand one hundred and twenty-five dollars

($1,125) at the closing on the Hill Lot, as shown on the U.S. Department of Housing and Urban

Development Settlement Statement used in conjunction with the closing on their lot.

245. Donald Hill and Tricia Hill paid the National Bank of South Carolina three

hundred dollars ($300) in an appraisal fee at the closing on the Hill Lot as shown on the U.S.


the closing on the Hill Lot, but never received a copy of the appraisal from the National Bank of

South Carolina.


a copy of the appraisal on the Hill Lot to Donald Hill and Tricia Hill before they purchased the

Hill Lot because the National Bank of South Carolina knew that if Donald Hill and Tricia Hill

knew the information contained in that appraisal, they would not have purchased the Hill Lot and

would not have entered into a loan with the National Bank of South Carolina.

247. Donald Hill and Tricia Hill paid James S. Price & Associates, P.A. the amount of

five hundred dollars ($500) in attorney‟s fees to represent them at the closing on their lot, as well

as fifty dollars ($50) in title document retrieval fees, sixty dollars ($60) in courier fees, and



55

JOSEPH E. MCELROY‟S SPECIFIC FACTUAL ALLEGATIONS

AGAINST THE BANK


plan to fraudulently induce Joseph E. McElroy to purchase an undeveloped lot in the River Rock

subdivision and Joseph E. McElroy did purchase Lot 83 in the Tuckasegee section of the River

Rock subdivision in Cullowhee, North Carolina (the “McElroy Lot”) on November 17, 2006 for

four hundred and forty-nine thousand and nine hundred dollars ($449,900).

249. In June of 2006, Lee Boyd of Legasus and Joseph McElroy met in person to

discuss the financing options for the purchase of lots in the River Rock subdivision and Lee

Boyd recommended that he use the National Bank of South Carolina and Michael Wolf to

finance the purchase of the McElroy Lot.

250. In June of 2006, Michael Wolf made several interstate telephone communications

from his office in South Carolina to Joseph E. McElroy in Florida and during those

communications Michael Wolf stated that purchasing the McElroy Lot was a great investment,

that Legasus was a solid developer and that the National Bank of South Carolina held some of

the senior debt for the River Rock subdivision.

251. Joseph E. McElroy paid the National Bank of South Carolina a loan origination

fee of .5000 percent in the amount of two thousand and twenty-four dollars and fifty-five cents

($2024.55) at the closing on the McElroy Lot on November 17, 2006.

252. Joseph E. McElroy paid Marilyn McCoy Woods two hundred and fifty dollars

($250) for an appraisal as shown on the U.S. Department of Housing and Urban Development

Settlement Statement used in conjunction with the closing on the McElroy Lot.


56

253. Even though Joseph E. McElroy paid for an appraisal on the McElroy Lot, he did

not receive a copy of the appraisal conducted by Marilyn McCoy Woods prior to their purchase

of the lot.


Joseph E. McElroy with a copy of the appraisal conducted by Marilyn McCoy Woods because

the National Bank of South Carolina knew that if Joseph E. McElroy knew of the information in

the appraisal, he would not have purchased the McElroy Lot.

255. Joseph E. McElroy paid James S. Price & Associates, P.A. the amount of five

hundred dollars ($500) in attorney‟s fees to represent him at the closing on the McElroy Lot, as

well as fifty dollars ($50) in title document retrieval fees, sixty dollars ($60) in courier fees, and


256. The National Bank of South Carolina induced Joseph E. McElroy to open a

money market account at the National Bank of South Carolina and to sign a Deposit Account

Agreement.

257. Legasus transferred thirty-nine thousand seven hundred and eighty-two dollars

and forty-one cents ($39,782.41) into a money market account at the National Bank of South

Carolina to pay for the first eighteen months of interest on NBSC‟s loan to McElroy. The

National Bank of South Carolina automatically debited this account each month to make interest

payments on its loan to Joseph E. McElroy until this money was depleted and then closed the

account.

258. The National Bank of South Carolina induced Joseph E. McElroy to purchase the

McElroy Lot by offering to provide Mr. McElroy with a short term, thirty-six month loan with

interest only payments at an annual percentage rate of 6.73%.


57

259. The National Bank of South Carolina made its short term, interest only loan to

Joseph E. McEloy because the contemplated eighty-one thousand five hundred and eighty-nine

dollars and thirty-seven cents ($81,589.37) in finance charges on this loan was a significant short

term source of income for the National Bank of South Carolina.

260. The National Bank of South Carolina made its loan to Joseph E. McElroy because

it received thirty-nine thousand seven hundred and eighty-two dollars and forty-one cents

($39,782.41) at the closing on the Lot, which represented approximately forty-nine percent of the

eighty-one thousand five hundred and eighty-nine dollars and thirty-seven cents ($81,589.37) in

total finance charges due to the National Bank of South Carolina over the course of its loan to

Joseph E. McElroy.

261. The National Bank of South Carolina made its loan to Joseph E. McElroy because

it recognized that receiving approximately forty-nine percent of the total finance charges on a

loan at closing was unusual in the banking industry and provided a level of comfort with the loan

that made the National Bank of South Carolina‟s bank officers push loan officers and other

employees to do as many of these types of loans as possible.

MARC J. BROWNER‟S SPECIFIC FACTUAL ALLEGATIONS

AGAINST THE BANK


plan to fraudulently induce Marc J. Browner to purchase an undeveloped lot in the River Rock

subdivision and Marc J. Browner did purchase Lot 36 in the Tuckasegee section of the River

Rock subdivision in Cullowhee, North Carolina (the “Browner Lot”) on December 6, 2006 for

two hundred and eighty-nine thousand nine hundred dollars ($289,900).


58

263. The National Bank of South Carolina induced Marc J. Browner to purchase the

Browner Lot by offering him an interest only loan for thirty six months to purchase the Browner

Lot with no payments for the first eighteen months of the loan on the Browner Lot.

264. The National Bank of South Carolina required Marc J. Browner to open a money

market account at the National Bank of South Carolina and to establish an automatic payment

mechanism to pay its loan to Marc J. Browner from this account.

265. Legasus transferred twenty-two thousand seven hundred and thirty-eight dollars

($22,738.00) into a money market account at the National Bank of South Carolina that was used

to make payments on the National Bank of South Carolina‟s loan to Marc J. Browner.

266. Marc J. Browner paid the National Bank of South Carolina a loan origination fee

of .5002 percent in the amount of one thousand three hundred and five dollars ($1305.00) at the

closing on the Browner Lot on December 6, 2006, as shown on the U.S. Department of Housing

and Urban Development Settlement Statement used in conjunction with the closing on the

Browner Lot.

267. Marc J. Browner paid James S. Price & Associates, P.A. the amount of five

hundred dollars ($500) in attorney‟s fees to represent him at the closing on the Browner Lot, as

well as fifty dollars ($50) in title document retrieval fees, sixty dollars ($60) in courier fees, and


268. Marc J. Browner paid Marilyn McCoy Woods two hundred and fifty dollars

($250) for an appraisal as shown on the U.S. Department of Housing and Urban Development

Settlement Statement used in conjunction with the closing on the Browner Lot.


59

269. Even though Marc J. Browner paid for an appraisal by Marilyn McCoy Woods,

he did not receive a copy of the appraisal prior to his purchase of the Browner Lot or at any time

thereafter.


Marc J. Browner with a copy of the appraisal conducted by Marilyn McCoy Woods because the

National Bank of South Carolina knew that if Marc J. Browner knew of the information in the

appraisal, he would not have purchased the Browner Lot.

271. The National Bank of South Carolina never provided Marc J. Browner with an

executed copy of the HUD-1 document associated with his purchase of the Browner Lot or any

of the other closing documents on the closing on the Browner Lot.

JOSEPH P. GRUSSER AND CATHERINE V. GRUSSER‟S SPECIFIC FACTUAL

ALLEGATIONS AGAINST THE BANK


plan to fraudulently induce Joseph P. Grusser and Catherine V. Grusser (collectively referred to

hereinafter as the “Grussers”) to purchase two undeveloped lots in the River Rock subdivision

and the Grussers did purchase Lot 17 (“Grussers Lot 17”) in the Bear Pen Section of the River

Rock subdivision for two hundred and nineteen thousand dollars ($219,000) on April 6, 2006

and Lot 89 (“Grussers Lot 89”) in the Bear Pen Section of the River Rock subdivision for four

hundred and forty nine thousand ($449,000) dollars on April 6, 2006.

273. In April of 2006, Michael Wolf stated to Joseph P. Grusser via interstate

telephone communication that Michael Wolf himself was buying a lot in the River Rock

subdivision.


60

274. From April of 2006 through June of 2008, Michael Wolf stated to Joseph P.

Grusser via several interstate telephone communications that the Grussers Lot 17 and the

Grussers Lot 89 were both very sound investments.

275. In April of 2006, Michael Wolf stated to Joseph P. Grusser that lenders do not ask

on applications if any loans are currently "in process" because "they don't want to know or don't

care."

276. In April of 2006, Joseph P. Grusser stated to Michael Wolf that he could not

afford the loans on the Grussers Lot 17 and the Grussers Lot 89.

277. The National Bank of South Carolina induced Joseph P. Grusser to purchase the

Grussers Lot 17 as part of a scheme whereby Joseph P. Grusser would make a ten percent down

payment to Legasus for the purchase of the Grussers Lot 17 and Legasus would then transfer that

money to an account at the National Bank of South Carolina to be used to pay interest payments

on the National Bank of South Carolina‟s loan to Joseph P. Grusser until such funds were

depleted.

278. The National Bank of South Carolina received nineteen thousand one hundred

and fifty-one dollars ($19,151.00) from Legasus in seller paid interest at the closing on the

Grussers Lot 17 on April 7, 2006 as shown on the Additional Disbursements Exhibit that was

part of the closing documents at the closing on the sale of the Grussers Lot 17 to Joseph P.

Grusser.

279. The National Bank of South Carolina charged a .5002% loan origination fee in the

amount of one thousand dollars ($1,000) to Joseph P. Grusser and received this amount from

Joseph P. Grusser at the closing on the Grussers Lot 17 on April 7, 2006 as shown on the U.S.


61


the closing on the Grussers Lot 17.

280. The National Bank of South Carolina received nineteen thousand one hundred

and fifty-one dollars ($19,151.00) from Legasus in seller paid interest at the closing on the

Grussers Lot 17, which was approximately forty-nine percent of the total finance charges of

thirty-nine thousand two hundred and thirty-two dollars and seventy-nine cents ($39,232.79) that

the National Bank of South Carolina was to receive over the term of the loan.

281. The National Bank of South Carolina made its loan to Joseph P. Grusser, in part,

because it knew that receiving approximately forty-eight percent of the interest payments on a

loan at closing provided a level of payment certainty that was very unusual in the banking

industry and thus it was highly motivated to do loans that involved Legasus and purchasers of

lots in River Rock.

282. The National Bank of South Carolina made its loan to Joseph P. Grusser, in part,

because it received a loan origination fee of one thousand dollars ($1,000) at closing, which

when added to all of the many loans that it was funding in the River Rock subdivision, provided

an additional substantive source of short term accounting income for the National Bank of South

Carolina.

283. Joseph P. Grusser paid two hundred and fifty dollars ($250) to Marilyn McCoy

Woods for an appraisal of the Grussers Lot 17 as shown on the Settlement Statement that was

used in conjunction with the closing on the sale of the Grussers Lot 17 to Joseph P. Grusser.

284. Even though Joseph P. Grusser paid for an appraisal of the Grussers Lot 17, he

did not receive a copy of this appraisal before his purchase of the Grussers Lot 17.


62


Joseph P. Grusser with a copy of the appraisal conducted by Marilyn McCoy Woods on the

Grussers Lot 17 because the National Bank of South Carolina knew that if Joseph P. Grusser

knew of the information in the appraisal, he would not have purchased the Grussers Lot 17.

286. Joseph P. Grusser paid James S. Price & Associates, P.A. the amount of five

hundred dollars ($500) in attorney‟s fees to represent him at the closing on the Grussers Lot 17,

as well as sixty dollars ($60) in courier fees as shown on the Settlement Statement that was used

in conjunction with the closing on the sale of the Grussers Lot 17 to Joseph P. Grusser.

KENNETH KOSCO‟S SPECIFIC FACTUAL ALLEGATIONS AGAINST THE BANK


plan to fraudulently induce Kenneth Kosco (“Kosco”) to purchase two undeveloped lots in the

River Rock subdivision and Kosco and Kathleen Thyne did purchase Lot 4 (“Kosco Lot 4”) in

the Bear Pen Section of the River Rock subdivision on May 3, 2006 for two hundred and ninety-

nine thousand nine hundred dollars ($299,900) and Kosco did purchase Lot 55 (“Kosco Lot 55”)

in the Bear Pen Section of the River Rock subdivision for two hundred and eighty-nine thousand

nine hundred dollars ($289,900) on April 6, 2006.

288. The National Bank of South Carolina induced Kosco into purchasing the Kosco

Lot 4 by offering Kosco and Kathleen Thyne a two year, interest only loan at a rate of 6.52% for

the purchase of the Kosco Lot 4.

289. The National Bank of South Carolina induced Kosco to purchase the Kosco Lot 4

as part of a scheme whereby Kosco and Kathlyn Thyne would make a ten percent down payment

to Legasus for the purchase of the Kosco Lot 4 and Legasus would then transfer that money to an

account at the National Bank of South Carolina to be used to pay interest payments on the


63

National Bank of South Carolina‟s loan to Kosco and Kathleen Thyne until such funds were

depleted.

290. The National Bank of South Carolina received twenty-seven thousand nine

hundred and ninety dollars ($27,990) from Legasus in seller paid interest at the closing on the

Kosco Lot 4 on May 3, 2006 as shown on the Additional Disbursements Exhibit.


amount of one thousand three hundred and forty-nine dollars and fifty-five cents ($1349.55) to

Kosco and Kathleen Thyne and received this amount from Kosco and Kathleen Thyne at the

closing on the Kosco Lot 4 on May 3, 2006.

292. The National Bank of South Carolina received twenty-seven thousand nine

hundred and ninety dollars ($27,990) from Legasus at the closing on the Kosco Lot 4, which was

approximately eighty percent of the thirty-five thousand one hundred and eighteen dollars and

ninety-nine cents ($35,118.99) in total finance charges that the National Bank of South Carolina

was to receive over the term of the loan.

293. The National Bank of South Carolina made its loan to Kosco and Kathleen Thyne,

in part, because it knew that receiving approximately eighty percent of the interest payments on a

loan at closing provided a level of repayment certainty that was very unusual in the banking

industry, while providing significant short term income to the National Bank of South Carolina.

294. The National Bank of South Carolina made its loan on the Kosco Lot 4 to Kosco

and Kathleen Thyne, in part, because it received a loan origination fee in the amount of one

thousand three hundred and forty-nine dollars and fifty-five cents ($1349.55) from Kosco and

Kathlyn Thyne at the closing on the Kosco Lot 4, which when added to all of the many loans it


64

was doing in the River Rock subdivision, provided an additional substantive source of short term

accounting income for the National Bank of South Carolina.

295. Kosco and Kathleen Thyne paid two hundred and fifty dollars ($250) to Marilyn

McCoy Woods for an appraisal of Kosco Lot 4 as shown on the U.S. Department of Housing and

Urban Development Settlement Statement that was used in conjunction with the closing on the

sale of Kosco Lot 4.

296. Even though Kosco and Kathleen Thyne paid for an appraisal of the Kosco Lot 4,

they did not receive a copy of this appraisal before their purchase of the Kosco Lot 4.


Kosco and Kathleen Thyne with a copy of the appraisal conducted by Marilyn McCoy Woods

because the National Bank of South Carolina knew that if Kosco and Kathleen Thyne knew of

the information in the appraisal, they would not have purchased the Kosco Lot 4.

298. Kosco and Kathleen Thyne paid James S. Price & Associates, P.A. the amount of

five hundred dollars ($500) in attorney‟s fees to represent them at the closing on the Kosco Lot

4, as well as forty dollars ($40) in courier fees.

299. The National Bank of South Carolina induced Kosco into purchasing the Kosco

Lot 55 by offering him a two year, interest only loan at a rate of 6.52% for the purchase of the

Kosco Lot 55.

300. The National Bank of South Carolina induced Kosco to purchase the Kosco Lot

55 as part of a scheme whereby Kosco would make a ten percent down payment to Legasus for

the purchase of the Kosco Lot 55 and Legasus would then transfer that money to an account at

the National Bank of South Carolina to be used to pay interest payments on the National Bank of

South Carolina‟s loan to Kosco until such funds were depleted.


65

301. The National Bank of South Carolina received twenty-six thousand nine hundred

and ninety dollars ($26,990) from Legasus in seller paid interest at the closing on the Kosco Lot

55 on April 7, 2006, as shown on the Additional Disbursements Exhibit.


amount of one thousand three hundred and three hundred and four dollars and fifty-five cents

($1304.55) to Kosco and received this amount from Kosco at the closing on the Kosco Lot 55 on

April 7, 2006, as shown on the U.S. Department of Housing and Urban Development Settlement

Statement used in conjunction with the closing on the Kosco Lot 55.

303. The National Bank of South Carolina received twenty-six thousand nine hundred

and ninety dollars ($26,990) from Legasus at the closing on the Kosco Lot 55, which was

approximately eighty percent of the thirty three thousand nine hundred and fifty-one dollars and

fourteen cents ($33,951.14) in total finance charges that the National Bank of South Carolina

was to receive over the term of the loan.

304. The National Bank of South Carolina made its loan to Kosco on Kosco Lot 55, in

part, because it knew that receiving approximately eighty percent of the interest payments on a

loan at closing provided a level of repayment certainty that was very unusual in the banking

industry and thus it was highly motivated to do loans that involved Legasus and purchasers of

lots in River Rock.

305. The National Bank of South Carolina made its loan to Kosco on the Kosco Lot

55, in part, because it received a loan origination fee in the amount of one thousand three

hundred and three hundred and four dollars and fifty-five cents ($1304.55) from Kosco at the

closing on the Kosco Lot 55, which when added to all of the many loans it was doing in the


66

River Rock subdivision, provided an additional substantive source of short term accounting

income for the National Bank of South Carolina.

306. Kosco paid four hundred and fifty dollars ($450) to Highlands Appraisal

Company for an appraisal of Kosco Lot 55 as shown on the Settlement Statement that was used

in conjunction with the closing on the sale of Kosco Lot 55.

307. Even though Kosco paid for an appraisal of the Kosco Lot 55, he did not receive a

copy of this appraisal before his purchase of the Kosco Lot 55.


Kosco with a copy of the appraisal conducted by Highlands Appraisal Company because the

National Bank of South Carolina knew that if Kosco knew of the information provided in the

appraisal on Kosco Lot 55, he would not have purchased Kosco Lot 55.

309. Kosco paid James S. Price & Associates, P.A. the amount of five hundred dollars

($500) in attorney‟s fees to represent him at the closing on the Kosco Lot 55, as well as sixty

dollars ($60) in courier fees as shown on the U.S. Department of Housing and Urban

Development Settlement Statement used in conjunction with the closing on Kosco Lot 55.

EDWARD WISHNER AND BEVERLY J. WISHNER‟S SPECIFIC FACTUAL

ALLEGATIONS AGAINST THE BANK


plan to fraudulently induce Edward Wishner and Beverly J. Wishner (collectively referred to

hereinafter as the “Wishners”) to purchase undeveloped lots in the River Rock subdivision and

the Wishners did purchase Lot 43 (“Wishner Lot 43”) in the Tuckasegee Section of the River

Rock subdivision on December 12, 2006 for five hundred and seventy-four thousand nine

hundred dollars ($574,900).


67

311. NBSC induced the Wishners to purchase Lot 43 by offering them a three year

interest only loan to purchase Wishner Lot 43 at a rate of 6.73%.

312. The National Bank of South Carolina induced the Wishners to purchase Wishner

Lot 43 as part of a scheme whereby the Wishners would make a ten percent down payment to

Legasus for the purchase of the Wishner Lot 43 and Legasus would then transfer that money into

an account at the National Bank of South Carolina to be used to pay interest payments on the

National Bank of South Carolina‟s loan to the Wishners until such funds were depleted.

313. Legasus transferred fifty thousand eight hundred and thirty-five dollars and fifty-

three cents ($50,835.53) into an account at the National Bank of South Carolina in the name of

the Wishners at the closing on the Wishner Lot 43 on December 12, 2006 as shown on the

Additional Disbursements Exhibit used in conjunction with the closing on the Wishner Lot 43.


amount of two thousand five hundred and eighty-seven dollars ($2,587.00) and received this

amount from the Wishners at the closing on the Wishner Lot 43 on December 12, 2006.

315. The National Bank of South Carolina received fifty thousand eight hundred and

thirty-five dollars and fifty-three cents ($50,835.53) from Legasus at the closing on the Wishner

Lot 43, which was approximately forty-nine percent of the one hundred and four thousand two

hundred and fifty-eight dollars and six cents ($104,258.06) in total finance charges that the

National Bank of South Carolina was to receive over the term of the loan.

316. The National Bank of South Carolina made its loan to the Wishners on the

Wishner Lot 43, in part, because it knew that receiving approximately forty-nine percent of the

interest payments on a loan at closing provided a level of repayment certainty that was very


68

unusual in the banking industry and thus it was highly motivated to do loans that involved

Legasus and purchasers of lots in River Rock.

317. The National Bank of South Carolina made its loan on the Wishner Lot 43, in

part, because it received a loan origination fee in the amount of two thousand five hundred and

eighty-seven dollars ($2,587.00) from the Wishners at the closing on the Wishner Lot 43, which

when added to all of the many loans it was doing in the River Rock subdivision, provided an

additional source of short term accounting income for the National Bank of South Carolina.

318. The Wishners paid two hundred and fifty dollars ($250) to Marilyn McCoy

Woods for an appraisal of the Wishner Lot 43 as shown on the Settlement Statement that was

used in conjunction with the closing on the sale of the Wishner Lot 43.

319. Even though the Wishners paid for an appraisal of the Wishner Lot 43, they did

not receive a copy of this appraisal before their purchase of the Wishner Lot 43.


the Wishners with a copy of the appraisal conducted by Marilyn McCoy Woods because the

National Bank of South Carolina knew that if the Wishners knew of the information in the

appraisal, they would not have purchased the Wishner Lot 43.

321. The Wishners paid James S. Price & Associates, P.A. the amount of five hundred

dollars ($500) in attorney‟s fees to represent him at the closing on the Wishner Lot 43, sixty

dollars ($60) in courier fees, thirty-five dollars ($35) in courier-wire fees, and fifty dollars ($50)

in title documents retrieval fees as shown on the Settlement Statement that was used in

conjunction with the closing on the sale of the Wishner Lot 43 to the Wishners.


plan to fraudulently induce Edward Wishner and Beverly J. Wishner to purchase an undeveloped


69

lot in the River Rock subdivision and the Wishners did purchase Lot 35 (“Wishner Lot 35”) in

the Tuckasegee Section of the River Rock subdivision on December 7, 2006 for three hundred

and forty-nine thousand and nine hundred dollars ($349,900).

323. NBSC induced the Wishners to purchase Wishner Lot 35 by offering them a three

year interest only loan to purchase the Wishner Lot at a rate of 6.75%.

324. The National Bank of South Carolina induced the Wishners to purchase the

Wishner Lot 35 as part of a scheme whereby the Wishners would make a ten percent down

payment to Legasus for the purchase of the Wishner Lot 35 and Legasus would then transfer that

money to an account at the National Bank of South Carolina to be used to pay interest payments

on the National Bank of South Carolina‟s loan to the Wishners until such funds were depleted.

325. The National Bank of South Carolina charged a .4998% loan origination fee in

the amount of one thousand five hundred and seventy-four dollars ($1,574.00) and received this

amount from the Wishners at the closing on the Wishner Lot 35 on December 7, 2006.

326. The National Bank of South Carolina received thirty-one thousand eight hundred

and eighty-four dollars and sixty-four cents ($31,884.64) from Legasus at the closing on the

Wishner Lot 35.

327. The National Bank of South Carolina made its loan on the Wishner Lot 35, in

part, because it received a loan origination fee of one thousand five hundred and seventy-four

dollars ($1,574.00) from the Wishners at the closing on the Wishner Lot 35, which when added

to all of the many loans it was doing in the River Rock subdivision, provided an additional

substantive source of short term accounting income for the National Bank of South Carolina.

328. The National Bank of South Carolina made its loan to the Wishners on the

Wishner Lot 43, in part, because it knew that receiving thirty-one thousand eight hundred and


70

eighty-four dollars and sixty-four cents ($31,884.64) at closing on Wishner Lot 35 provided a

level of repayment certainty that was very unusual in the banking industry and thus it was highly

motivated to do loans that involved Legasus and purchasers of lots in River Rock.

329. The Wishners paid two hundred and fifty dollars ($250) to Marilyn McCoy

Woods for an appraisal of the Wishner Lot 35 as shown on the Settlement Statement that was

used in conjunction with the closing on the sale of the Wishner Lot 35.

330. Even though the Wishners paid for an appraisal of the Wishner Lot 35, they did

not receive a copy of this appraisal before their purchase of the Wishner Lot 35.


the Wishners with a copy of the appraisal conducted by Marilyn McCoy Woods because the

National Bank of South Carolina knew that if the Wishners knew of the information in the

appraisal, they would not have purchased the Wishner Lot 35.

332. The Wishners paid James S. Price & Associates, P.A. the amount of five hundred

dollars ($500) in attorney‟s fees to represent them at the closing on the Wishner Lot 35, sixty



conjunction with the closing on the sale of the Wishner Lot 35 to the Wishners.

MARK TAMN AND ANDRA LYNN TAMN‟S SPECIFIC FACTUAL ALLEGATIONS

AGAINST THE BANK


plan to fraudulently induce Mark Tamn and Andra Lynn Tamn (collectively referred to

hereinafter as the “Tamns”) to purchase an undeveloped lot in the River Rock subdivision and

the Tamns did purchase Lot 110 (“Tamn Lot 110”) in the Tuckasegee Section of the River Rock


71

subdivision for three hundred and twenty-four thousand and nine hundred dollars ($324,900) on

January 3, 2007.

334. In June of 2006, Legasus sales representative Jason Wallace informed Mark Tamn

that the National Bank of South Carolina was offering lot purchasers in River Rock a loan

program where lot purchasers made no payments for eighteen month, with interest only

financing and a ten percent down payment to Legasus. Jason Wallace told Mark Tamn to

contact Michael Wolf at NBSC to discuss this financing program in more detail.

335. In June of 2006, Legasus sales representative Jason Wallace stated to Mark Tamn

via interstate telephone communication that all of the amenities at River Rock would be

completed by the loan maturity date and that all of the values in River Rock would increase

significantly then.

336. In June of 2006, Michael Wolf made an interstate telephone communication from

his office in South Carolina to Mark Tamn in North Carolina and during that communication he

described the no payment for eighteen month, interest only, ten percent down payment loan that

NBSC was offering.

337. In June of 2006, Michael Wolf made an interstate telephone communication

from his office in South Carolina to Mark Tamn in North Carolina and stated that the Tamns Lot

110 was already worth more than what they were going to pay for it and that it was a great

investment opportunity.


his office in South Carolina to Mark Tamn in North Carolina and stated that the Tamns Lot 110

had kept going up in value during the loan application process.


72


his office in South Carolina to Mark Tamn in North Carolina and during that communication

stated to Mark Tamn that it would be no problem to convert the contemplated Tamn Lot 100

acquisition loan into a construction loan.

340. The National Bank of South Carolina induced the Tamns to purchase the Tamn

Lot 110 as part of a scheme whereby the Tamns would make a ten percent down payment to

Legasus for the purchase of the Tamn Lot 110 and Legasus would then transfer that money to an

account at the National Bank of South Carolina to be used to pay interest payments on the

National Bank of South Carolina‟s loan to the Tamns until such funds were depleted.

341. The National Bank of South Carolina induced the Tamns into purchasing the

Tamn Lot 110 by provided the Tamns with a three year, interest only loan at a rate of 6.73% to

purchase the Tamn Lot 110.

342. The National Bank of South Carolina received twenty-eight thousand seven

hundred and twenty-nine dollars and twenty-nine cents ($28,729.29) from Legasus in seller paid

interest at the closing on the Tamn Lot 110 on January 3, 2006 as shown on the Additional

Disbursements Exhibit that was part of the closing documents at the closing on the sale of the

Tamn Lot 110 to the Tamns.


amount of one thousand dollars four hundred and eighty-two dollars ($1,482) at the closing on

the Tamn Lot 110 on January 3, 2007, as shown on the U.S. Department of Housing and Urban

Development Settlement Statement used in conjunction with the closing on the Tamns Lot 110.

344. The National Bank of South Carolina received twenty-eight thousand seven

hundred and twenty-nine dollars and twenty-nine cents ($28,729.29) from Legasus in seller paid


73

interest at the closing on the Tamns Lot 110 on January 3, 2006, which was approximately forty-

nine percent of the total finance charges of fifty-eight thousand nine hundred and twenty dollars

and fifty-seven cents ($58,920.57) that the National Bank of South Carolina was to receive over

the term of the loan.

345. The National Bank of South Carolina made its loan to Tamns, in part, because it

knew that receiving approximately forty-nine percent of the interest payments on a loan at

closing provided a level of payment certainty that was very unusual in the banking industry and

thus it was highly motivated to do loans that involved Legasus and purchasers of lots in River

Rock.

346. The National Bank of South Carolina made its loan to the Tamns, in part, because

it received a loan origination fee in the amount of one thousand dollars four hundred and eighty-

two dollars ($1,482) at the closing on the Tamn Lot 110, which when added to all of the many

loans that it was funding in the River Rock subdivision, provided an additional substantive

source of short term accounting income for the National Bank of South Carolina.

347. The Tamns paid two hundred and three hundred dollars ($300) to NBSC for an

appraisal of the Tamn Lot 110, as shown on the Settlement Statement that was used in

conjunction with the closing on the sale of the Tamn Lot 110.

348. Even though the Tamns paid for an appraisal of the Tamn Lot 110, they did not

receive a copy of this appraisal before his purchase of the Tamn Lot 110.


the Tamns with a copy of the appraisal conducted on the Tamn Lot 110 because the National

Bank of South Carolina knew that if the Tamns knew of the information in the appraisal, they

would not have purchased the Tamn Lot 110.


74

350. The Tamns paid James S. Price & Associates, P.A. the amount of five hundred

dollars ($500) in attorney‟s fees to represent him at the closing on the Tamn Lot 110, sixty



conjunction with the closing on the sale of the Tamn Lot 110.

351. In July of 2009, Travis Andrews of NBSC had an interstate telephone

communication from his office in South Carolina with Mark Tamn in North Carolina and during

that communication Mark Tamn discussed modifying the Tamns‟ original loan with NBSC.

During that interstate communication, Mark Tamn requested a copy of the appraisal that was to

be conducted in conjunction with the loan modification and Travis Andrews refused to provide

them with a copy of the appraisal. Travis Andrews also stated to Mark Tamn during that

conversation that the appraisal of the Tamn Lot 110 was done as a group with the other lots at

River Rock and that there was not an appraisal done individually on the Tamn Lot 110.

352. In July of 2009, NBSC and its employees, including Travis Andrews, stated via

interstate telephone communication to Mark Tamn that they would not proceed with a loan

modification of the loan on the Tamn Lot 110 unless the Tamns agreed to sign a Modification

and Amendment of Note and Deed of Trust agreement containing a provision releasing NBSC

from all liability associated with its loan to the Tamns.

353. In July of 2009, the Tamns contacted other lending institutions to determine

whether those lending institutions would re-finance their loan and there were no lending

institutions who were interested in providing financing on the Tamn Lot 110.


75

354. The Tamns contacted other lending institutions to determine whether those

lending institutions would re-finance the loan on Tamn Lot 110 because they did not want to sign

any document releasing NBSC from liability for its action related to the loan on Tamn Lot 110.

355. After determining that no other lending institution would re-finance the Tamn Lot

110, the Tamns were left with the option of either paying the balloon payment on the loan, which

they could not afford to do, defaulting on the loan or signing the Modification and Amendment

of Note and Deed of Trust.

356. By August of 2009, the Tamn Lot 110 was virtually worthless and the Tamns had

no option other than signing the Modification and Amendment of Note and Deed of Trust, so

they signing this agreement under duress on August 3, 2009.

BANK PLAINTIFFS‟ ALLEGATIONS DEMONSTRATING THE PLAUSIBILITY OF THE

BANK‟S ACTIONS

357. In 2005-2007, the National Bank of South Carolina was attempting to take

advantage of the rapid increase in inflation adjusted real estate prices that occurred in the United

States from 2003 through 2006, which time period has been widely described as a real estate

boom (the “Real Estate Boom”), by rapidly increasing the number of loans that it made to

borrowers to increase its short term profitability through the collection of interest payments and

fees.

358. The National Bank of South Carolina reports loans as assets on its balance sheet

and thus used its rapid increase in lending volume as a mechanism to demonstrate on its balance

sheet that the National Bank of South Carolina‟s asset base and corresponding profitability were

rapidly increasing in 2005-2007.

359. The National Bank of South Carolina provided the Bank Plaintiffs with loans to

purchase lots in the River Rock subdivision even though it knew that these loans posed a high


76

level of long term risk to the National Bank of South Carolina due to the fact these lots were

undeveloped and the River Rock subdivision did not have sufficient amenities or infrastructure

to support the amount of money that it was loaning on each of these lots because NBSC was

participating in a very competitive lending market and was attempting to maximize the short

term financial growth of the National Bank of South Carolina.

360. The National Bank of South Carolina provided each of the Bank Plaintiffs with a

loan to purchase lots in the River Rock subdivision even though it new that these loans posed a

high level of long term risk to the National Bank of South Carolina due to the fact that these lots

were undeveloped and the River Rock subdivision did not have sufficient amenities or

infrastructure to support the amount of money that it was loaning on these lots because NBSC

was attempting to grow rapidly by making loans that were of low quality and charging borrowers

a premium yield.

361. The National Bank of South Carolina instituted a compensation system that was

designed to incentivize loan officers like Michael Wolf to make high volume, high yield loans in

order to increase the National Bank of South Carolina‟s short term revenue and thus increase the

appearance of the National Bank of South Carolina‟s profitability on its financial statements.

362. The National Bank of South Carolina‟s compensation system caused Michael

Wolf and other loan officers and employees of NBSC to make false statements to borrowers,

including, but not limited to the Bank Plaintiffs, designed to mislead the Bank Plaintiffs and

other borrowers into obtaining loans and purchasing lots in the River Rock subdivision to

increase the loan officer‟s volume and employee compensation even though Michael Wolf and

other employees of the National Bank of South Carolina knew that the loans the National Bank

of South Carolina was offering the Bank Plaintiffs were very high risk loans.


77

363. The National Bank of South Carolina‟s compensation system caused Michael

Wolf and other loan officers and employees to omit material facts and conceal information from

the Bank Plaintiffs for the purpose of misleading those borrowers into obtaining loans and

purchasing lots in the River Rock subdivision to increase the loan officer and employee‟s volume

and compensation even though Michael Wolf and other loan officers knew that the loans the

National Bank of South Carolina was offering the Bank Plaintiffs were very high risk loans.

364. The National Bank of South Carolina made its loans to the Bank Plaintiffs during

a time period when the real estate market was very active and characterized by rapid price

appreciation and thus the National Bank of South Carolina participated in the then common

industry practice of providing high risk, short term loans with very high leverage like its loans to

the Bank Plaintiffs to promote its rapid growth by lending at a high yield to borrowers who were

frequently unqualified to repay such loans.

365. The National Bank of South Carolina made short term, high yield loans that posed

substantial long term risk to the National Bank of South Carolina because it believed that rapid

real estate price appreciation would continue to occur in the short term and thus provide a market

that would yield a third party purchaser to buy the lots from the Bank Plaintiffs with funds from

a third party lender or market conditions would allow the re-finance of Bank Plaintiffs‟ lots with

funds from a third party lender.

366. Upon information and belief, the National Bank of South Carolina pursued a loan

strategy like the one that it employed with the Bank Plaintiffs that would allow it to grow rapidly

during and immediately after the Real Estate Boom, which would in turn enrich its loan officers,

as well as other employees, officers, and directors of the National Bank of South Carolina in the

short term.


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strategy of rapidly increasing the amount of loans that it provided during the Real Estate Boom

and reducing its loss reserves on such loans to maximize the appearance of the National Bank of

South Carolina‟s profits on its financial statements.

368. The National Bank of South Carolina‟s short term approach to lending resulted in

a culture where loan officers and underwriters failed to utilize proper underwriting standards

because they were compensated for loan production, not for denying loans for failure to meet

basic underwriting standards.

369. The National Bank of South Carolina‟s short term approach to lending that is

characterized by a collapse of underwriting standards was similar to the approach instituted by

many banks across the United States of America and similar to the lending approach that caused

a significant number of bank failures in the past three years.

370. During the time period from 2003-2007, only eleven banks in the United States

failed and were taken over by the Federal Deposit Insurance Corporation, demonstrating the fact

that banks were thriving during the Real Estate Boom and aggressively lending money to

increase profits during this time period. During the years of 2005 and 2006, zero banks failed in

the United States, as this was the peak of both the housing market and the lending market in the

United States.

371. In 2008, twenty-five banks (25) in the United States failed and were taken over by

the Federal Deposit Insurance Corporation, while one hundred and forty (140) banks failed and

were taken over by the Federal Deposit Insurance Corporation in 2009 in the United States.

372. The National Bank of South Carolina‟s aggressive lending strategy designed to

maximize short term profits during and immediately after the Real Estate Boom caused the long


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term failure of the National Bank of South Carolina that resulted in its merger with Synovus

Bank.

373. The National Bank of South Carolina selected Marilyn McCoy Woods to perform

appraisals on lots in the River Rock subdivision and pressured her to reach a certain amount for

the value of the lot in each appraisal as part of its strategy to do as many high yield mortgage

loans as possible with supporting appraisals without regard to credit quality because this strategy

maximized short term accounting income.

374. The National Bank of South Carolina‟s use of inflated appraisals caused higher

sales prices for lots in the River Rock subdivision which generated higher interest payments to

the National Bank of South Carolina on loans that it made in the River Rock subdivision and

higher fees to the National Bank of South Carolina than it would have yielded if the lots in the

River Rock subdivision would have been appraised at their true values.

375. The National Bank of South Carolina‟s use of inflated appraisals caused

artificially inflated sales prices for the lots in the River Rock subdivision and these artificially

inflated lot sales prices caused a corresponding increase in the lot release prices for the lots that

were secured by the development loans that the National Bank of South Carolina provided

Legasus to develop the River Rock subdivision. Due to the existence of other lenders providing

loans for the purchase of lots at the River Rock subdivision, these higher lot release prices

caused the National Bank of South Carolina to receive more funds from third party lenders who

financed the purchase of lots at the River Rock subdivision than it would have otherwise

received, which allowed its development loans to Legasus to be paid off more quickly.

376. During the Real Estate Boom and its immediate aftermath, loan loss reserves were

at the lowest levels since 1985 at American lending institutions due to the pattern and practice of


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attempting to maximize short term income. Upon information and belief, National Bank of

South Carolina similarly failed to maintain sufficient loan loss reserves during the period of time

from 2005-2009.

377. During the time period beginning in 2008, the National Bank of South Carolina

began offering loan extensions and/or modifications to Bank Plaintiffs and other Plaintiffs at low

interest rates even though it knew that these loans were severely under-collateralized because the

value of the subject lots was substantially less than the loan amount.

378. Upon information and belief, NBSC offered the Bank Plaintiffs and others loan

extension and modifications because it chose to attempt to continue to realize short term

accounting income on these loans, rather than taking losses on loans that it knew were severely

impaired due to the value of the underlying real estate.

379. Upon information and belief, NBSC offered the Bank Plaintiffs and others loan

extension and modifications as part of its continued strategy to attempt to show gains in short

term income, while pushing known loan losses off until some future uncertain date.

380. The National Bank of South Carolina knew or reasonably should have known that

loaning ninety percent of the putative value of undeveloped lots in the River Rock subdivision

was not a sustainable business practice and would cause the Bank Plaintiffs to own lots that were

not capable of being re-financed except through the National Bank of South Carolina at the end

of the loan term thereby damaging the Bank Plaintiffs.

381. The National Bank of South Carolina used various tactics to induce the Bank

Plaintiffs to purchase lots in the River Rock subdivision by using high pressure and rigged

appraisals in violation of several laws designed to protect consumers like Bank Plaintiffs.


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382. The Bank is legally responsible for all of the acts and omissions of the National

Bank of South Carolina as alleged in the Complaint as the successor in interest to the assets and

liabilities of the National Bank of South Carolina.

383. The Bank is legally responsible for the acts and omissions of its employees

Michael Wolf, Ashia Woodruff, and other employees committed during the course and scope of

their employment.

384. The National Bank of South Carolina was working closely with the Legasus

Defendants, the agents of Legasus and entities related to Legasus in selling lots in the River

Rock subdivision.

385. The Bank is a “Developer” as defined in 15 U.S.C. § 1701(5) because it engaged

directly or indirectly in the sale and offered to sell a lot in a subdivision, as well as participated in

the advertising of lots for sale in the subdivision known as River Rock.

386. River Rock is a "Subdivision" as that term is defined by the Interstate Land Sales

Full Disclosure Act (“ILSA”).

387. The sale of the lots to the Plaintiffs was not exempt from ILSA.

388. The National Bank of South Carolina had extensive involvement in the

development, marketing and sale of lots in the River Rock subdivision, by among other things,

participating in sales events with Legasus to offer the sale of lots in the River Rock subdivision

and holding itself out to be a significant financial backer of the River Rock subdivision.


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COUNT 1: VIOLATION OF 15 U.S.C § 1703(a)(2)

(All Defendants)

389. The previous allegations are incorporated herein.

390. As set forth more fully above, the Defendants, as co-developers of the

subdivision, with respect to the sale or offer to sell a lot or lots not exempt under ILSA,

employed a device, scheme, or artifice to defraud; obtained money or property by means of an

untrue statement of a material fact, or an omission to state a material fact necessary in order to

make the statements made (in light of the circumstances in which they were made and within the

context of the overall offer and sale) misleading, with respect to any information pertinent to the

lot or subdivision; engaged in a transaction, practice, or course of business which operated or

would operate as a fraud or deceit upon a purchaser; and represented that roads, sewers, water,

gas, or electric service, or recreational amenities would be provided or completed by the

developer without stipulating in the contract of sale that such services or amenities would be

provided or completed.

391. As set forth more fully above, Defendants, as co-developers of the subdivision,

made use of instrumentalities of interstate commerce including telephone communications,

mailing, electronic mail, and internet communications to the Plaintiffs and others in furtherance

of the scheme to defraud.

392. Defendants' violations of ILSA caused damages to Plaintiffs.

COUNT 2: VIOLATION OF THE NORTH CAROLINA DECEPTIVE TRADE

PRACTICES ACT

(The Legasus Defendants)


394. The Legasus Defendants participated in unfair or deceptive acts or practices in a

scheme to sell lots at the subdivision, by, among other things:


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(a) falsely representing to Plaintiffs that roads, utilities, and various amenities would

be constructed while they knew or should have known they could not do so;

(b) making false representations related to the roads, utilities, amenities, development

timeline and other information related to River Rock in various advertising and

marketing materials, as well as other publications, including, but not limited to the

2007 Legasus Report, August 2008 Progress Summary Report, the Sneak Peek,

and the 2009 Legasus Update;

(c) falsely representing to Plaintiffs that roads, utilities, and various amenities would

be constructed while the funds available to construct them were being diverted by

Defendants;

(d) using deceptive and false advertising; and

(e) breaching their fiduciary duty to Plaintiffs to disclose all material facts regarding

the transactions, including the facts identified above, the diversion of funds that

were supposed to be used for the construction of infrastructure and other promised

improvements in River Rock, and Legasus‟ resulting financial inability to

complete infrastructure and other promised improvements.

395. The sales of the lots at the subdivision were in or affecting commerce.

396. As a direct and proximate result of Legasus Defendants' actions, the Plaintiffs

were damaged in an amount to be determined at trial, with their damages to be trebled pursuant

to N.C. General Statute 75-16.

COUNT 3: VIOLATION OF THE NORTH CAROLINA

DECEPTIVE TRADE PRACTICES ACT

(The Bank)



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398. The Bank participated in unfair or deceptive acts or practices in a scheme to sell

lots at River Rock as set forth more fully above, by, among other things:

(a) the use of inflated and exaggerated appraisals to artificially inflate lot purchase

prices to facilitate the repayment of development loans, to maximize fees and to maximize the

transfer of funds to the Bank at the closing on lots in River Rock, all in conjunction with selling

lots in River Rock;

(b) participating in sales events with Legasus to sell lots in the River Rock

subdivision;

(c) churning the Bank Plaintiffs through the lending process for the purpose of

maximizing fees, commissions and interest paid by the Bank Plaintiffs;

(d) engaging in improper loan origination, underwriting and closing procedures;

(e) structuring an agreement with Legasus to transfer ten percent of the proceeds

from the sale of each lot to the Bank Plaintiffs to itself at the closing on those lots without

disclosing the terms of that agreement to the Bank Plaintiffs;

(f) directing Bank Plaintiffs to use James S. Price & Associates, P.A. for the closing

on his purchase of the Lot, even though the Bank knew that James S. Price was representing

Legasus at the closing, selling lots in the River Rock subdivision and receiving sales

commissions on lots in the River Rock subdivision;

(g) engaging in a scheme to artificially inflate the price of lots at the River Rock

subdivision;

(h) inducing the Bank Plaintiffs to enter into loan agreements and purchase lots in the

River Rock subdivision because the Bank had an agreement with Legasus to transfer ten percent

of the purchase price of each lot the Bank financing to the Bank at closing;


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(i) inducing the Bank Plaintiffs to enter into loan agreements and purchase lots in the

River Rock subdivision in order to receive a loan origination fee;

(j) failing to disclose the information contained in appraisals conducted by Marilyn

McCoy Woods to Bank Plaintiffs and the circumstances surrounding Marilyn McCoy Woods‟

appraisal of lots in River Rock to induce the Bank Plaintiffs to purchase lots in River Rock and

enter into loan agreements with the Bank;

(k) making false statements concerning lots in the River Rock subdivision and the

development of the River Rock subdivision to the Bank Plaintiffs; and

(l) otherwise engaging in unfair, unethical, unscrupulous, immoral, and substantially

injurious conduct as alleged herein.

399. The sale of the lots at the subdivision was in or affecting commerce.

400. As a direct and proximate result of the Bank‟s actions, the Plaintiffs were

damaged in an amount to be determined at trial, with their damages to be trebled pursuant to

N.C. General Statute 75-16.

COUNT 4: VIOLATION OF THE MORTGAGE LENDING ACT

N.C. GENERAL STATUTE §§ 53-243.11(1) and (8)

(The Bank)

401. The previous allegations are incorporated.

402. N.C. General Statute 53.243.11(1) makes it unlawful to misrepresent or conceal

material facts or make false promises likely to influence, persuade or induce an application for a

mortgage loan, or to pursue a course of misrepresentation through agents or otherwise.

403. The Bank has misrepresented and/or concealed material facts relating to the loan

transaction for the purchase of the Bank Plaintiffs‟ lots in the River Rock subdivision, by, among

other things, misrepresenting and/or concealing material facts relating to the nature and condition


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of the infrastructure and amenities in the River Rock subdivision, misrepresenting and/or

concealing material facts relating to the appraisals on those lots, misrepresenting and/or

concealing material facts relating to the closing on Bank Plaintiffs‟ purchases of their lots in the

River Rock subdivision, misrepresenting and/or concealing material facts relating to the

development of the River Rock subdivision and the Bank‟s financing of the development of the

River Rock subdivision, and misrepresenting and/or concealing material facts relating to the

value of the lots in the River Rock subdivision and the River Rock subdivision to influence,

persuade, or induce each of the Bank Plaintiffs, each as an applicant for a loan, to pursue a

course based on those misrepresentations and/or concealed material facts in violation of N.C.

General Statute 53-243.11(1).

404. N.C. General Statute 53.243.11(8) makes it unlawful to engage in any transaction,

practice, or course of business that is not in good faith or fair dealing or that constitutes a fraud

upon any person, in connection with the brokering or making of, or purchase or sale of, any

mortgage loan.

405. By using appraisals that it knew or should have known were materially false,

concealing material facts related to the appraisals on the Bank Plaintiffs‟ lots, participating in

sales presentations with Legasus for lots at the River Rock subdivision, directing Bank Plaintiffs

to use James S. Price & Associates, P.A. to conduct the closing on each Bank Plaintiff‟s

purchase of each Bank Plaintiff‟s lot and making false statements to each of the Bank Plaintiffs

in connection with the making of a mortgage loan, the Bank has engaged in practices, or courses

of business that are not in good faith or fair dealing, or that constitute fraud upon each of the

Bank Plaintiffs in connection with the brokering, making, purchase or sale of mortgage loans in

violation of N.C. General Statute 53.243.11(8).


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406. The Bank‟s violation of N.C. Gen. Stat. § 53-243.11(1) and N.C. Gen. Stat. 53-

243.11(8) proximately and legally caused each of the Bank Plaintiffs to sustain damages in an

amount to be determined at trial.

COUNT 5: CONSTRUCTIVE FRAUD

The Legasus Defendants


408. As Legasus was approaching insolvency, the Legasus Defendants owed the

Plaintiffs a fiduciary duty.

409. As noted above, Legasus was not prosecuting its business in good faith and it had

no reasonable prospect or expectation of doing so given the continuing defalcations and other

obstacles to development described herein.

410. The Legasus Defendants breached their fiduciary duty, causing Plaintiffs

damages.

411. This breach of duty constituted constructive fraud.

COUNT 6: NEGLIGENT MISREPRESENTATION

The Legasus Defendants


413. Legasus, at the direction of Defendants, Pitts, Morlok and Corliss, supplied false

information to the Plaintiffs during the course of their business.

414. Legasus, at the direction of Defendant, Pitts, Morlok and Corliss, supplied this

false information for the guidance of the Plaintiffs in the purchase of the lots.

415. The Plaintiffs justifiably relied to their detriment upon the false information

provided by Legasus, at the direction of Defendants, Pitts, Morlok and Corliss, in deciding to

purchase the lots.


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416. The Legasus Defendants failed to exercise reasonable care or competence in

communicating information concerning the Plaintiff‟s purchase of the lots, in an area that

involved subject matter requiring expertise and/or investigation beyond the scope of the

Plaintiffs' knowledge, opportunity, and capacity to discover in the exercise of reasonable

diligence, and involving particular areas of expertise of the Legasus Defendants. The Legasus

Defendants were obligated to disclose the facts stated above and were in the business of

disclosing such information to persons in the position of the Plaintiffs.

417. The Legasus Defendants undertook a duty to the Plaintiffs when, in the course of

their business, they supplied or caused to be supplied false information to the Plaintiffs for

the guidance of the Plaintiffs in a business transaction.

418. The Legasus Defendants owed a duty to the Plaintiffs and breached that duty by,

as alleged in more detail above, and by, among other things, the following:

(a) falsely representing to Plaintiffs that roads, utilities, and various amenities would

be constructed while they knew or should have known they could not do so;

(b) making false representations to the Plaintiffs related to the roads, utilities,

amenities, development timeline and other information related to River Rock in

various advertising and marketing materials, as well as other publications,

including, but not limited to the 2007 Legasus Report, August 2008 Progress

Summary Report, the Sneak Peek, the 2009 Legasus Update; and

(c) falsely representing to Plaintiffs that roads, utilities, and various amenities would

be constructed while the funds available to construct them were being diverted by

Legasus Defendants;


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419. The Legasus Defendants therefore owed a duty to the Plaintiffs and breached that

duty.

420. Legasus‟ negligent misrepresentations, made or caused to be made at the direction

of Defendants, Pitts, Morlok and Corliss, proximately and legally caused and continue to

cause the Plaintiffs damages in an amount to be determined at trial.

421. For the reasons stated above, Defendants, Pitts, Morlok and Corliss, are liable for

the acts and omissions of Legasus.


The Bank


423. The Bank, through its employee Michael Wolf, supplied false information to the

Bank Plaintiffs and omitted material facts from statements to the Bank Plaintiffs during the

course of its business in the process of a loan transaction to which the Bank has a pecuniary

interest.

424. The Bank, through its employee Michael Wolf, supplied this false information

and omitted material facts for the guidance of the purchase of each of the Bank Plaintiff‟s lots in

the River Rock subdivision, which was a business transaction.

425. Each of the Bank Plaintiffs justifiably relied to his or her detriment upon the false

information provided by the Bank‟s employee, Michael Wolf, in deciding to purchase a lot in the

River Rock subdivision and/or deciding to enter into a loan modification or extension with the

Bank.

426. The Bank and its employee Michael Wolf failed to exercise reasonable care or

competence in communicating information concerning the present and future value of each of

the Bank Plaintiff‟s lots and the River Rock subdivision to each of the Bank Plaintiffs, as well as


90

the nature and circumstances of the appraisals of Marilyn McCoy Woods and the nature and

circumstances of James S. Price, Esq.‟s representation of each of the Bank Plaintiffs at the

closings on their lots, in an area which involved subject matter which required expertise and

investigation beyond the scope of each of the Bank Plaintiff‟s knowledge, opportunity and

capacity in the exercise of reasonable diligence and involving subject matter within particular

areas of expertise by the Bank, which was obligated to disclose and in the business of disclosing

such information to persons in the position of the Bank Plaintiffs.

427. The Bank undertook a duty to each of the Bank Plaintiffs when the Bank, in the

course of its business, supplied false information to each of the Bank Plaintiffs for the guidance

of the Bank Plaintiffs in a business transaction.

428. The Bank owed a duty to the Bank Plaintiffs and breached that duty by as alleged

in more detail above, and by, among other things, the following:

(a) concealing the material facts contained in the appraisals of the lots purchased by

the Bank Plaintiffs;

(b) misrepresenting and/or concealing material facts relating to Marilyn McCoy

Woods‟ role in appraising lots in the River Rock subdivision for the Bank;

(c) misrepresenting and/or concealing material facts relating to James S. Price, Esq.‟s

representation of the Bank Plaintiffs at the closing on the purchase of each of the Bank

Plaintiff‟s lots;

(d) misrepresenting and/or concealing material facts relating to the nature and quality

of each of the Bank Plaintiff‟s investment in each of the Bank Plaintiff‟s lots and the River Rock

subdivision;


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(e) misrepresenting to Michael Troiano that regardless of whether the Troianos

decided to sell the Troiano Lot or build on the Troiano Lot themselves, the Troianos would be

able to sell the Troiano for a profit because they were getting in on the ground floor of the deal;

(f) misrepresenting to Barsanti that the purchase of the Barsanti Lot was a great deal;

(g) misrepresenting to Barsanti that he would be selling the Barsanti Lot within two

years for a profit;

(h) misrepresenting to Donald Hill that he had closed many lots in the last six months

in the River Rock subdivision and that reselling the lot that they would purchase in River Rock

should be easy;

(i) misrepresenting to Joseph E. McElroy that purchasing the McElroy Lot was a

great investment and that Legasus was a solid developer;

(j) misrepresenting to Joseph P. Grusser that Michael Wolf was buying a lot in the

River Rock subdivision; and

(k) misrepresenting to Joseph P. Grusser that the Grussers Lot 17 and the Grussers

Lot 89 were both very sound investments;

429. The Bank is liable for the actions of Michael Wolf because the Bank expressly or

impliedly authorized the actions of Michael Wolf.

430. The Bank is liable for the misrepresentations and omissions of Michael Wolf

because Michael Wolf‟s misrepresentations and omissions were committed within the course and

scope of his employment and in furtherance of the Bank‟s business.

431. The Bank is liable for the misrepresentations and omissions of Michael Wolf

because Michael Wolf‟s actions were ratified by the Bank.


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432. The Bank‟s negligent misrepresentations proximately and legally caused and

continue to cause the Bank Plaintiffs damages in an amount to be determined at trial.

COUNT 8: FRAUD

The Bank


434. The Bank, through its employee Michael Wolf, intentionally and falsely

represented and concealed material facts relative to the purchase of each of the Bank Plaintiff‟s

lots, as set forth more fully above, specifically:

(a) misrepresenting to Michael Troiano that regardless of whether the Troianos



(b) misrepresenting to Barsanti that the purchase of the Barsanti Lot was a great deal;

(c) misrepresenting to Barsanti that he would be selling the Barsanti Lot within two

years for a profit;

(d) misrepresenting to Donald Hill that he had closed many lots in the last six months


should be easy;

(e) misrepresenting to Joseph E. McElroy that purchasing the McElroy Lot was a


(f) misrepresenting to Joseph P. Grusser that Michael Wolf was buying a lot in the

River Rock subdivision;

(g) misrepresenting to Joseph P. Grusser that the Grussers Lot 17 and the Grussers



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(h) concealing material facts contained in the appraisals of the lots of the Bank

Plaintiffs;

(i) misrepresenting and/or concealing material facts relating to Marilyn McCoy


(j) misrepresenting and/or concealing material facts relating to James S. Price, Esq.‟s

representation of the Bank Plaintiffs at their closings on the purchases of lots in the River Rock

subdivision; and

(k) misrepresenting and/or concealing material facts relating to the nature and quality

of Bank Plaintiffs‟ investments in their lots in the River Rock subdivision.

435. The Bank, through its employee Michael Wolf, reasonably calculated that the

misrepresentations and/or omissions listed in this Complaint, and other misrepresentations and/or

omissions, would deceive the Bank Plaintiffs. Had each of the Bank Plaintiffs been aware of

these misrepresentations and/or omissions, none of the Bank Plaintiffs would have purchased his

or her lot in the River Rock subdivision, nor would the Bank Plaintiffs have entered into any loan

modifications or extensions with the Bank.

436. The Bank, through its employee Michael Wolf, made the aforementioned

misrepresentations and/or omissions of material fact with the intent of deceiving the Bank

Plaintiffs.

437. Each of the Bank Plaintiffs was deceived by the misrepresentations and omissions

set forth in this Complaint.

438. Each of the Bank Plaintiffs could not discover the truth about the

misrepresentations and omissions through the exercise of reasonable diligence.


94

439. Each of the Bank Plaintiffs was induced to forego additional investigation of his

or her lot purchase by the Bank‟s misrepresentations and high pressure sales tactics.

440. The Bank is liable for the actions of Michael Wolf because the Bank expressly or

impliedly authorized the actions of Michael Wolf.

441. The Bank is liable for the misrepresentations of Michael Wolf because Michael

Wolf‟s misrepresentations were committed within the scope of his employment and in

furtherance of the Bank‟s business.

442. The Bank is liable for the misrepresentations of Michael Wolf because Michael

Wolf‟s misrepresentations were ratified by the Bank.

443. The Bank proximately and legally caused the Bank Plaintiffs harm and damages

in an amount to be determined at trial through its intentional misrepresentations and/or omissions

of material fact upon which it intended that each of the Bank Plaintiffs rely, who did in fact

reasonably rely on said misrepresentations and/or omissions to each of the Bank Plaintiff‟s

detriment, in an amount to be proved at trial.


Michael Wolf


445. Michael Wolf made false representations or concealed material facts that he had a

duty to disclose relative to the purchase of lots in the River Rock subdivision by the Bank

Plaintiffs.

446. Michael Wolf supplied this false information and omitted material facts for the

guidance of the purchase of each of the Bank Plaintiff‟s lots in the River Rock subdivision,

which was a business transaction.


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447. Each of the Bank Plaintiffs justifiably relied to his or her detriment upon the false

information provided by Michael Wolf, in deciding to purchase a lot in the River Rock

subdivision and/or deciding to enter into a loan modification or extension with the Bank.

448. Michael Wolf failed to exercise reasonable care or competence in communicating

information concerning the present and future value of each of the Bank Plaintiff‟s lots and the

River Rock subdivision to each of the Bank Plaintiffs, as well as the nature and circumstances of

the appraisals of Marilyn McCoy Woods and the nature and circumstances of James S. Price,

Esq.‟s representation of each of the Bank Plaintiffs at the closings on the purchases of their lots,

in an area which involved subject matter which required expertise and investigation beyond the

scope of each of the Bank Plaintiff‟s knowledge, opportunity and capacity in the exercise of

reasonable diligence and involving subject matter within particular areas of expertise of Michael

Wolf, which he was obligated to disclose and in the business of disclosing such information to

persons in the position of the Bank Plaintiffs.

449. Michael Wolf undertook a duty to each of the Bank Plaintiffs when Michael

Wolf, in the course of his business, supplied false information to each of the Bank Plaintiffs for

the guidance of the Bank Plaintiffs in a business transaction.

450. Michael Wolf undertook this duty to each of the Bank Plaintiffs when he provided

investment advice to each of the Bank Plaintiffs.

451. Michael Wolf owed a duty to the Bank Plaintiffs and breached that duty by as

alleged in more detail above, and by, among other things, the following:

(a) concealing the material facts contained in the appraisals of the lots purchased by

the Bank Plaintiffs;


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(b) misrepresenting and/or concealing material facts relating to Marilyn McCoy


(c) misrepresenting and/or concealing material facts relating to James S. Price, Esq.‟s

representation of the Bank Plaintiffs at the closings on the purchases of each of the Bank

Plaintiff‟s lots;

(d) misrepresenting and/or concealing material facts relating to the nature and quality

of each of the Bank Plaintiff‟s investment in each of the Bank Plaintiff‟s lots and the River Rock

subdivision;

(e) misrepresenting to Michael Troiano that regardless of whether the Troianos



(f) misrepresenting to Barsanti that the purchase of the Barsanti Lot was a great deal;

(g) misrepresenting to Barsanti that he would be selling the Barsanti Lot within two

years for a profit;

(h) misrepresenting to Donald Hill that he had closed many lots in the last six months


should be easy;

(i) misrepresenting to Joseph E. McElroy that purchasing the McElroy Lot was a


(j) misrepresenting to Joseph P. Grusser that Michael Wolf was buying a lot in the

River Rock subdivision; and

(k) misrepresenting to Joseph P. Grusser that the Grussers Lot 17 and the Grussers



97

452. The false representations made by Michael Wolf directly relate to the underlying

purchase and sale of lots in the River Rock subdivision.

453. Michael Wolf made false representations and/or omitted material facts with the

intent to deceive each of the Bank Plaintiffs

454. Each of the Bank Plaintiffs reasonably relied on these representations and

omissions of material fact and acted upon them by borrowing the money to purchase and

entering into the agreement to purchase each of their lots or re-finance their lots in the River

Rock subdivision.

455. Michael Wolf proximately and legally caused each of the Bank Plaintiffs harm

and damages in an amount to be determined at trial through his negligent misrepresentations

and/or omissions of material fact upon which he intended that each of the Bank Plaintiffs rely,

who did in fact reasonably rely on said misrepresentations and/or omissions of material fact to

each of the Bank Plaintiff‟s detriment, in an amount to be proved at trial.

COUNT 11: FRAUD

Michael Wolf


457. Michael Wolf, intentionally and falsely represented and concealed material facts

relative to the purchase of each of the Bank Plaintiff‟s lots, as set forth more fully above, by,

among other things, the following:

(a) misrepresenting to Michael Troiano that regardless of whether the Troianos



(b) misrepresenting to Barsanti that the purchase of the Barsanti Lot was a great deal;


98

(c) misrepresenting to Barsanti that he would be selling the Barsanti Lot within two

years for a profit;

(d) misrepresenting to Donald Hill that he had closed many lots in the last six months

in the River Rock subdivision and reselling the lot that they would purchase in River Rock

should be easy;

(e) misrepresenting to Joseph E. McElroy that purchasing the McElroy Lot was a


(f) misrepresenting to Joseph P. Grusser that Michael Wolf was buying a lot in the

River Rock subdivision;

(g) misrepresenting to Joseph P. Grusser that the Grussers Lot 17 and the Grussers


(h) concealing material facts contained in the appraisals of the lots of the Bank

Plaintiffs;

(i) misrepresenting and/or concealing material facts relating to Marilyn McCoy


(g) misrepresenting and/or concealing material facts relating to James S. Price, Esq.‟s

representation of the Bank Plaintiffs at their closings on the purchases of lots in the River Rock

subdivision; and

(h) misrepresenting and/or concealing material facts relating to the nature and quality

of Bank Plaintiffs‟ investments in their lots in the River Rock subdivision.

458. Michael Wolf reasonably calculated that the misrepresentations and/or omissions

listed in this Complaint, and other misrepresentations and/or omissions, would deceive the Bank

Plaintiffs because had each of the Bank Plaintiffs been aware of these misrepresentations and/or


99

omissions, there is no question that each of the Bank Plaintiffs would not have purchased his or

her lot in the River Rock subdivision.

459. Michael Wolf made the aforementioned misrepresentations and/or omissions of

material fact with the intent of deceiving each of the Bank Plaintiffs.

460. Each of the Bank Plaintiffs was deceived by the misrepresentations and omissions

set forth in this Complaint.

461. Each of the Bank Plaintiffs could not discover the truth about the


462. Each of the Bank Plaintiffs was induced to forego additional investigation of his

or lot purchase by Michael Wolf‟s misrepresentations and high pressure sales tactics.

463. Michael Wolf proximately and legally caused the Bank Plaintiffs harm and

damages in an amount to be determined at trial through his misrepresentations and/or omissions

of material fact upon which he intended that each of the Bank Plaintiffs rely, who did in fact

reasonably rely on said misrepresentations and/or omissions to each of the Bank Plaintiff‟s

detriment, in an amount to be proved at trial.


Marilyn McCoy Woods


465. Marilyn McCoy Woods made false representations and concealed material facts

in the appraisals that she conducted of lots in the River Rock subdivision for the Woods

Appraisal Plaintiffs.

466. Marilyn McCoy Woods supplied this false information and concealed material

facts for the guidance of the purchase of each of the Woods Appraisal Plaintiffs‟ lots in the River

Rock subdivision, which was a business transaction.


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467. Each of the Woods Appraisal Plaintiff justifiably relied to his or her detriment

upon the false information provided by Marilyn McCoy Woods, in deciding to purchase a lot in

the River Rock subdivision and/or deciding to enter into a loan modification or extension with

the Bank.

468. Marilyn McCoy Woods failed to exercise reasonable care or competence in

communicating information concerning the value of each of the Woods Appraisal Plaintiffs‟ lots

in the River Rock subdivision to each of the Woods Appraisal Plaintiffs, as well as the other

information that she provided in these appraisals, in an area which involved subject matter which

required expertise and investigation beyond the scope of each of the Woods Appraisal Plaintiffs‟

knowledge, opportunity and capacity in the exercise of reasonable diligence and involving

subject matter within particular areas of expertise of Marilyn McCoy Woods. She was obligated

to disclose and was in the business of disclosing such information to persons in the position of

the Plaintiffs and breached her duties to do so.

469. Marilyn McCoy Woods undertook a duty to each of the Woods Appraisal

Plaintiffs when Marilyn McCoy Woods held herself out to be a Certified Residential Appraiser

and in the course of her business, supplied false information to each of the Woods Appraisal

Plaintiffs for the guidance of the Woods Appraisal Plaintiffs in a business transaction.

470. Marilyn McCoy Woods owed a duty to the Woods Appraisal Plaintiffs and

breached that duty, as alleged in more detail above, and by, among other things, the following:

(a) failing to provide information in her appraisals that acknowledged the significant

financial incentives that were being offered by Legasus and its agents to lot purchasers in River

Rock;

(b) misrepresenting the values of comparables used in her appraisals;


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(c) misrepresenting that the listed purchase price for lots in River Rock was the actual

purchase price, when Marilyn McCoy Woods knew that Legasus was returning ten percent of the

purchase price to the buyer and/or transferring that ten percent down payment to financial

institutions at closing to be applied to the loans on those lots;

(d) concealing known market risks in her appraisals;

(e) misrepresenting the value of comparable lots used in the appraisal of the lot

owned by Christian Barsanti;

(f) misrepresenting the value of comparable lots used in the appraisal of the lot

owned by Andrew Sweeney;

(g) misrepresenting the value of comparable lots used in the appraisal of the lot

owned by Gregory Keary;

(h) misrepresenting that there were, “no known risk factors to the appraiser that

adversely affect value or marketability within the defined Highland Cashiers market area” in

each of her appraisals, even though she knew that the lack of amenities in the River Rock

subdivision and failure of Legasus to provide utilities, amenities and infrastructure to the lots in

River Rock rendered this statement materially false; and

(i) misrepresenting the value of the Barsanti Lot in the 2008 Barsanti Lot Appraisal.

471. The false representations made by Marilyn McCoy Woods directly relate to the

underlying purchase and sale of lots in the River Rock subdivision.

472. Marilyn Woods reasonably calculated that the misrepresentations and/or

omissions listed in this Complaint, and other misrepresentations and/or omissions, would deceive

the Woods Appraisal Plaintiffs because had each of the Woods Appraisal Plaintiffs been aware

of these misrepresentations and/or omissions, there is no question that each of the Woods


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Appraisal Plaintiffs would not have purchased his or her lot in the River Rock subdivision, nor

would the Woods Appraisal Plaintiffs have entered into loan agreements and/or loan

modifications with the Bank.

473. Marilyn McCoy Woods made the aforementioned misrepresentations and/or

omissions of material fact with the intent of deceiving each of the Woods Appraisal Plaintiffs.

474. Each of the Woods Appraisal Plaintiffs was deceived by the misrepresentations

and omissions set forth in this Complaint.

475. Each of the Woods Appraisal Plaintiffs could not discover the truth about the


476. Each of the Woods Appraisal Plaintiffs was induced to forego additional

investigation of his or lot purchase by Marilyn McCoy Woods‟ misrepresentations.

477. Marilyn McCoy Woods proximately and legally caused the Woods Appraisal

Plaintiffs harm and damages in an amount to be determined at trial through misrepresentations

and/or omissions of material fact upon which she intended that each of the Woods Appraisal

Plaintiffs rely, who did in fact reasonably rely on said misrepresentations and/or omissions to

each of the Woods Appraisal Plaintiff‟s detriment, in an amount to be proved at trial.

COUNT 13: PROFESSIONAL NEGLIGENCE

Marilyn McCoy Woods


479. Marilyn McCoy Woods, when holding herself out as a Certified Residential

Appraiser, had a duty to the Woods Appraisal Plaintiffs to provide an appraisal that conformed in

every way with the standards of her practice and as set forth in the Uniform Standards of

Professional Appraisal Practice.


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480. Uniform Standards of Professional Practice Rule 1-1(b) states that an appraiser

cannot commit a substantial error of omission that significantly affects an appraisal.

481. Marilyn McCoy Woods violated Uniform Standards of Professional Practice Rule

1-1(b), by, among other things, failing to provide information in each appraisal regarding the

significant financing incentives provided by Legasus to lot purchasers and failing to provide

information in each appraisal concerning the risks inherent in buying raw land.

482. Marilyn McCoy Woods violated Uniform Standards of Professional Practice Rule

1-1(b), by, among other things, failing to provide a development timeline in each appraisal and

failing to provide information stating that the value placed on the property depended upon

infrastructure, amenities and utilities being provided in River Rock.

483. Uniform Standards of Professional Practice Rule 1-1(b) provides that appraisers

cannot render appraisal services in a careless or negligent manner, such as by making a series of

errors that, although individually might not significantly affect the results of an appraisal, in the

aggregate affects the credibility of those results.

484. Marilyn McCoy Woods breached her duty to the Woods Appraisal Plaintiffs by

negligently providing appraisals on property being purchased by the Woods Appraisal Plaintiffs

Without limitation, her acts and omissions included the following:

(a) stating in each of her appraisals that there were, “no known factors to the

appraiser that adversely affect value or marketability within the defined Highland Cashiers

mountain resort market area with excellent marketability and appeal,” even though Marilyn

McCoy Woods knew or should have known that the lack of infrastructure at the River Rock

subdivision adversely affected both the value and the marketability of the Lot;


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(b) stating in her appraisals that the adequacy of utilities was average in River Rock,

even though there were no utilities to serve any of the lots in River Rock;

(c) failing to indicate in any of her appraisals whether she had actually been to the

lots that she was appraising;

(d) assigning different values to lots that she was appraising on the same date, even

though she appraised those lots by using the same comparable lots;

(e) assigning different values to the same comparable lots on the same date and using

those different values on the same lots for different appraisals;

(f) failing to indicate in her appraisals that the listed purchase price for lots in River

Rock was not the actual purchase price, because Legasus was returning ten percent of the

purchase price to the buyer and/or transferring that ten percent down payment to financial

institutions at closing to be applied to the loans on those lots.

485. Marilyn McCoy Woods breached her duty to the Woods Appraisal Plaintiffs and

proximately caused the Woods Appraisal Plaintiffs damages in an amount to be determined at

trial.

COUNT 14: BREACH OF CONTRACT

Legasus


487. Each Plaintiff entered into a Reservation and Convertible Contract for Sale of a

lot with Defendant Legasus, which was a valid contract supported by valid consideration.

488. Defendant Legasus breached that contract, by, among other things, failing to

provide the roads, other infrastructure, and amenities as promised in the Reservation and

Convertible Contract for Sale.


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489. As a direct and proximate result of the breaches of contract, Plaintiffs have been

damaged in an amount to be proved at trial.

PRAYER FOR RELIEF

WHEREFORE, Plaintiffs request the following relief:

(a) That Plaintiffs be awarded compensatory damages in an amount to be determined

at trial;

(b) That Plaintiffs be awarded treble damages under N.C. Gen. Stat. 75-16;

(c) That this Court award Plaintiffs pre-judgment and post-judgment interest as

provided by law;

(d) That this Court pierce the corporate veil of Legasus and hold its agents and

members liable for the acts and omissions of Legasus;

(e) That this Court hold Defendants Corliss, Morlok and Pitts liable for the actions of

Legasus; and

(f) That this Court award Plaintiffs their attorneys' fees and costs of this action.

JURY DEMAND

Trial by jury is demanded as to all issues so triable.

This the 4th

day of February, 2011.

GERALD ABATEMARCO, BEN

ATKINSON, ANTHONY BARBIERI,

CHRISTIAN BARSANTI, SUSAN

BARSANTI, THOMAS BERITELLI,

SHARON BERITELLI, EDGAR BOWLIN,

PEGGY BOWLIN, EDGAR BOWLIN,

PAUL BOYDELL, TIFFANY BOYDELL,

BORIS BRAND, MARC BROWNER,


106

ROBERT BURT, DIANE CARROLL,

GREGORY CARTER, JOANNE CARTER,

JANAKI CHANDRAMOULI,

SRINIVASAN CHANDRAMOULI,

JEFFREY CHAUS, JO ANN CHAUS,

FREDERIC CLARK, CHRIS CRUZ,

CYNTHIA CRUZ, CONSTANCE FONG,

DAVID FONG, ANNA GIABOURANI,

DAVID GRASSE, SHELBY GRASSE,

CATHY GRUSSER, JOSEPH GRUSSER,

EDITH HANSEN, JACK HERZBERG,

KRISTINE HERZBERG, DONALD HILL,

TRICIA HILL, DANIEL HINKSON,

JULIAN HUTCHINS, LANE HUTCHINS,

MARK IPPOLITO, MELISSA JADICK,

RICHARD JADICK, ALISON JURGENS,

DAN JURGENS, JAMES KARP,

VIVIEN KARP, DENISE KEARY,

GREGORY KEARY, ALAN KESSLER,

SANDA KESSLER, SUSAN

KORNFELD, KENNETH KOSCO,

MICHELE KOSCO, CINDY LAMIR,

JOSEPH LAMIR, STEVE LANIER, ERIC

LAWRENCE, LENORA LAWRENCE,

COLE MACKELPRANG, TRENT

MACKIE, EUGENE MARKHAM

JOHANNA MARKHAM, DAVE MARKS

TERESA MARKS, CHRIS

MATTAROLLO, TINA MATTAROLLO

JOSEPH MCELROY, ANNE

MELLENTHIN, MICHAEL

MELLENTHIN, BETH MOSES, STEVEN

MOSES, DONNA PANARELLO,

JOHN PARK, PENELOPE PARK,

SUSAN PAYNE, JENNIFER PINKHAM,

ROGER PINKHAM, KATHLEEN

POWELL, RICHARD POWELL,

RANDAL PRICE, MEKO L PRICE,

PAMELA RATCLIFFE, BOYKIN

ROBINSON, JENNIFER P. ROBINSON,

DAVID SANDERS, KIM SANDERS,

JUDY SCHUNN, ROBERT SCHUNN,

CONNIE JOHNSON-SCOTT, ROBERT

SCOTT, G. DANIEL SIEGEL, GERRY

SMITH, JAMIE SMITH, JEFFREY

SNYDER, BRIDGET STEEN, JOSEPH


107

STEEN, PAUL TAFFE, TONYA TAFFE,

LYNN TAMN, MARK TAMN,

KATHRYN L. TRACY, KEVIN TRACY,

PATRICIA TRACY, AUDREY TROIANO,

MICHAEL TROIANO, CHRIS TURNER,

PAMELA R. TURNER, JENNIFER

ULLMAN, NEAL ULLMAN, EDWARD

VARON, BARRON WALL, PETE

WASILEWSKI, MICHAEL

WHITEHOUSE, SYLVIA WHITEHOUSE,

KATHERINE WILLIAMS, DARREN

WISHNER, JILL WISHNER, BEVERLY

WISHNER, EDWARD WISHNER,

RUSSELL WISHNER, CASEY WOOD,

JASON WOOD, DAVID WRIGHT,

STACEY WISHNER, WILLIAM

WRIGHT, AMANDA ZUMBRUN

By Counsel

/s/Edward L. Bleynat, Jr.

Edward L. Bleynat, Jr.[SB#16558]

FERIKES & BLEYNAT, PLLC

21 Broad Street

Asheville, NC 28801

Brian C. Athey

(upon admission pro hac vice)

Webster Book, LLP

300 N. Washington Street, Suite 404

Alexandria, VA 22314

Attorneys for Plaintiffs


abatemarco et al v. legasus of north carolina, llc et al

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