If it sounds too good to be true, it probably is. In the case of the Tuscan Sands Barefoot Resort and Golf development in North Myrtle Beach, S.C., lenders are struggling to recover money from a company called Legacy Development SC Group LLC, which recruited buyers for the beach development through seminars conducted by Ronald LeGrand, a self-professed rags-to-riches millionaire. According to complaints by creditors, LeGrand told attendees — who paid thousands of dollars for their lesson — that he could teach them the secret to quick wealth through real estate investing. In the event, lenders pursuing the developer in court say, buyers working with Legacy used trumped-up qualifications to purchase properties at over-inflated prices. When the buyers defaulted on the loans, Legacy would swoop in to pick up the foreclosed lots at rock-bottom prices, the suit alleges — making money at both ends of a deal in which no homes ever got built.
The Myrtle Beach Sun News has the story ("Would-be North Myrtle Beach developers forced into bankruptcy, accused of fraud," by David Wren). "Horry County State Bank is the lead creditor in the forced bankruptcy, claiming more than $1 million is owed for a real estate loan given to Legacy Development SC Group LLC, which is owned by LeGrand and former sales agent Ken Gwynn. Four other creditors, all of them investors from out of state, also signed the petition to liquidate Legacy's assets," the report says. "No criminal charges have been brought against LeGrand, Gwynn or others involved in the alleged mortgage fraud scheme, but the U.S. Securities and Exchange Commission last year levied a $150,000 penalty against LeGrand for his role in an investment scheme that raised more than $9.5 million from 54 investors in a company called Mountain Country Partners LLC, which operated oil and gas wells in West Virginia and Kentucky."
The bankruptcy is just the latest of LeGrand's legal woes, reports the Sun News: "LeGrand, Gwynn and their development company ... are accused of mortgage-related fraud and deceptive trade practices in a pending lawsuit filed earlier this year by Flagstar Bank, which provided mortgage loans for at least 14 properties sold by Legacy. The bank claims LeGrand, Gwynn and others devised a scheme in which straw buyers would be recruited to purchase lots at the 34.2-acre Barefoot Resort development by obtaining loans based on inflated appraisals and misleading financial statements. When the loans went into foreclosure, the bank claims LeGrand repurchased the lots in short sales for a fraction of the mortgage amount. Flagstar says it lost $4.1 million on the loans."
Horry County State Bank filed the forced bankruptcy action in hopes of making Legacy disclose its assets, the report says. So far that hasn't happened, but an attorney for Legacy says any properties it still holds are encumbered by loans that exceed the land's value, according to the paper. LeGrand himself (shown below in a YouTube video leading an investment seminar) has now started a new investing program called "Ron LeGrand's Gold Club," the paper reports, and declined to comment on the Legacy case.
Buyers recruited at get-rich-quick seminars like this bought Myrtle Beach properties at inflated prices using sketchy documentation, then defaulted, banks alleged in bankruptcy proceedings.
Meanwhile, in an unrelated mortgage fraud case in Myrtle Beach, a developer convicted of fraud is appealing for a shorter sentence — arguing that the bank involved, not he, should be held accountable, according to the Sun News ("Myrtle Beach developer appeals prison sentence in mortgage fraud case," by David Wren). Reports the Sun News: "Condominium developer Ford Shelley is appealing his prison sentence in a mortgage fraud case involving the Pineapple Bay project here, claiming the bank that loaned money on the project committed more fraud than he did yet isn't being held accountable for its actions." According to the paper, Shelley fronted tens of thousands of dollars to mortgage applicants for down payments in order to help buyers qualify, without disclosing the payments in the mortgage documents (a Federal offense); he now says a GMAC Mortgage officer approved the idea and told Shelley that it was legal. "The fraud of GMAC greatly exceeds any wrongdoing of Shelley," the appeal argues.
It all goes to show: There's nothing new under the sun — even on the beach.
Chico Marx as Groucho's accomplice jacks up the auction price of a Florida building lot in the classic 1929 Marx Brothers film Cocoanuts, viewable on YouTube.