Investors sue Chambers Bank, four developers
Posted on Friday, June 20, 2008
A group of investors filed a federal lawsuit Thursday against Chambers Bank of North Arkansas, a loan officer and local developers Mitchell Massey, Edward Davis, Morgan Hooker and Rick Hancock.
The lawsuit alleges plaintiffs invested $ 2. 7 million to purchase land in 2005 for a Florida townhouse project known as Eastpoint Redevelopment LLC that "was no more than smoke or mirrors. "The project was never built, and the $ 14 million loan to buy the land is in default.
The developers are accused of securities fraud for marketing the failed and misrepresented project as a "private offering. "Plaintiffs seek to recover their lost investment and collect punitive damages.
The suit claims that defendant John Russell Meeks, a loan officer for the bank, received a $ 1 million interest in Eastpoint without making a cash contribution. He is the nephew of bank board of directors member John Ed Chambers III, according to the complaint.
Meeks was out of the office Thursday afternoon, and his home phone number is unlisted. Chambers'number appears to be unlisted. Massey, Davis, Hooker and Hancock could not be reached for comment.
The suits alleges that the bank knew or should have known that Meeks had an interest in the development and that Eastpoint had insufficient funds to close on the development loan. Two "John Does," which are asyet-unknown bank officials, are also named in the suit.
Bank board of directors member Robert Taylor, speaking from the Fayetteville branch, said he had not been served with the lawsuit and would not comment on it. Regarding Eastpoint, he said that he only "knew there had been some controversy with it."
Plaintiffs in the case include S. Bradley Daniels, Jay and Karen Garnett, Terry Harper, David Mix, James Renner, Scott Smith, Arthur Starr, James and Laura Smith, and four limited liability companies.
Other defendants include Br uce Millender, Scott McLain, J. Y. Massey, Dirk Van Veen and several limited liability companies, including Growth Group.
Brandon Barber, Chamber's son-in-law, allegedly made a short-term loan at a very high rate of interest to Eastpoint, but he is not named in the suit.
The developers are accused in the 62-page complaint of deceiving investors from the beginning of the project and then providing bogus project updates that lured the plaintiffs into investing more money.
Defendant developers are also accused of overstating the project equity and then later changing the scope of the project without advising the plaintiffs.
According to the complaint • In the spring of 2005, Massey, Davis and Hooker offered the plaintiff an opportunity to invest in "attractive waterfront homes in a new urban atmosphere "in the coastal village of Eastpoint, Fla.
• Plaintiffs were told the project had been approved by the city of Eastpoint for 220 mixed-use units on 16. 9 acres, but there is no such city in Florida. (Eastpoint is an unincorporated census area in Florida. )
• In October 2006, Massey issued a capital call that resulted in an additional investment totaling $ 388, 500, making the total investment more than $ 3 million.
• In June 2007, plaintiffs examined financial records of Eastpoint and learned the scope of the project had grown and Growth Group had failed to create and maintain proper accounting records, and that Massey, Hancock, Hooker, Davis and Van Veen had commingled funds with other projects.
• Defendant Strategic Builders LLC, acting through Massey and Hooker, invoiced Eastpoint and was paid more than $ 1. 7 million between May 2005 and February 2006.
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