European Stars and Stripes (Newspaper) - May 15, 1990, Darmstadt, Hesse                                Tuesday May 15, 1990 the stars and stripes a a a Page 9 troubled company says buyers of residential lots should continue paying amps special report by Randy Mcclain financial writer Otis Wragg a spokesman for general development corp., is pleading with customers to continue paying monthly notes on undeveloped residential lots. A if lot owners quit paying now that will further aggravate general developments financial condition and make it More difficult for us to meet our obligations a Wragg said. Gds filed for reorganization under chapter 11 of the . Bankruptcy code on april 6. Under this provision a company obtains a Federal court order that frees it from the threat of creditors lawsuits until it can develop a plan to put its finances in order. Wragg said lot owners should keep paying for their own Good As Well. He said customers who done to pay could lose their lots and become unsecured creditors in bankruptcy court where dozens of other people Are also lining up to collect debts. Unsecured creditors often walk away from chapter 11 cases empty handed. A what management would like to do is reorganize the company work our Way out of bankruptcy and restore the company to sound operation. We want to deliver lots to our customers and build value in our communities a he said. Go cd a ability to continue developing House Sites a that is put in roads water sewer lines and electric services a depends in Large part on the company a securing new financing and on customers paying what they owe Wragg said. He said the company is working on a plan that would allow a a fully developed Home site to be delivered to each lot purchaser who completes his payments but it cannot be implemented without bankruptcy court approval. A first draft of the plan will be presented in court Friday. To make the plan work some customers will be asked to Swap one lot for another deemed by gds to be a More easily developed from a Cost Point of View a he said. Many customers have charged that gds routinely sold lots at wildly inflated prices backing up the sales with false claims of fast rising property values in Florida. Wragg hinted that a restitution plan might be worked out for lot owners who think they paid too much but he said the company has More important priorities at this Point. A right now we re trying to get in a position to deliver lots to customers at general development delinquent taxes general development corp. Owes More than $12.5 million in late property taxes in these eight Florida counties. Source staff reports 0 20 40 60 80 100 1 i i in Iii i Miles St. Johns $600,000 i Brevard $2 million Indian River $686,000 Sarasota $2 million Charlotte $2.4 million St. Lucie $2.5 million Hendry $1.5 millions amps Susan Harris any Price a he said. Wragg said customers should Trust gds because it has turned Over a new Leaf. Former gds chairman David f. Brown and former president Robert f. Ehrling both of whom pleaded guilty in connection with the mail fraud Case against gds have left the company. The company a new chief executive is Charles j. Simon a former vice chairman and executive vice president with Eastern airlines. Simon has been a member of go cd a Board since 1985. Quot the new chairman has said publicly that it is his intention to run this business in accordance with the highest ethical standards and to make every Effort to restore what had been some years ago a proud and honorable company a Wragg said. Foes of general development maintain that Many of the company slots arc in Remote locations overtaken by dense undergrowth and virtually worthless. Wragg takes Issue with that. Gds has been developing residential communities for More than 30 years in Florida he said and at one time every lot was far from civilization and wild. A now Many of our lots Are in the Middle of town a he  hid value of real estate indictment says general development corp. Went to great lengths to hide the True value of the real estate it sold to an unsuspecting Public according to Federal charges. The company sold primarily to out of state buyers unfamiliar with land values in Florida. According to . Attorney Dexter Lehtinen in Miami go cd a real estate scheme started with the Sale of undeveloped residential lots in the nine Florida communities where the company operates. A after a Home site contract is signed gds remains in Contact with the customer through its customer service department its sales people and through mailings of brochures and other advertising a the Federal mail fraud indictment said. A by Means of these contacts gds seeks to instill in its Home site owners Trust in gds As a reputable benevolent and trustworthy corporation. A after some period of time generally one year to three years gds salesperson contacts the Home site purchaser to induce him to buy a House. The salesperson stresses the advantages of acting now rather than waiting several years. A the salesperson May Tell the Home site owner that his lot has appreciated since he contracted to buy it and that he will receive a credit for some or All of his appreciation and his equity i.e., the Cash already paid toward the Purchase of a lot a if he buys a House now. A in its written literature gds defines a appreciation As the difference Between the current gds Price for the Home site and the Price at which the customer bought the lot several years earlier. A however. Customers commonly and wrongly believe that such appreciation reflects an increase in the value of their land. In fact that is not the Case. Go cd a prices for these Home Sites Are substantially higher than their value on the open Market. A those customers who become aware that their Home Sites Are priced substantially above the Market May be told by gds sales people that the Only Way to recoup their investment is by trading the Home site in for a gds  the Federal indictment outlines How gds Home buyers Are duped into thinking they re getting a Good Deal when in fact houses sold by the company Are priced abnormally High As Well. Mark Binstein a real estate fraud investigator in new Jersey who represents 7,500 property owners in a damage lawsuit against gds said one Home buyer paid More than $90,000 for a gds House that four years later was appraised for less than $50,000. Other gds Homes Are routinely inflated in value by 25 percent Binstein said. Under one of the company a favorite Home sales tactics gds plays Host to customers on a three Day trip to the Florida Community of their Choice the indictment said. Most if not All expenses Are paid by gds. That a when the gds sales Force really bears Down. Quot the gds salesperson. Is supposed to slay with the customer the entire time he is there in order to maintain control. Furthermore sales people May arrange with the customer s hotel to screen incoming Telephone Calls a Federal prosecutors said. Efforts Are made to keep customers away from areas where other builders houses or models Are located because comparable houses Are on Sale for much lower prices than gds charges. A sales people Are supposed to drive customers around the communities on certain routes in order to avoid other builders houses and advertisements a a spokesman with the . Attorneys office said. The next step is to steer House buyers to a gds owned company that provides Home mortgages. But mortgages written by the company. Adv financial Are based on faulty appraisals that do not conform to accepted standards the mail fraud indictment said. A a adv financial does not Tell the Home buyer that if he were to seek financing at other lending institutions he would most Likely be turned Down because the open Market value of the property is substantially lower than the Price of the House and frequently lower than the amount of the mortgage Quot it said. Customers who later learn they have been cheated arc Given a number of excuses but some clients have been Given Cash settlements the indictment said. A opposed restitution plan could help some owners a. -___1__.� i .1________i i., _________4u a a a. Gds has tentatively agreed to a Resti Tion plan under which an estimated ,000 Home buyers Are to be paid $100 illion or More in damages Over a 25-Iar period. People must have bought a Home from eneral development Between Jan. 1, 83, and Jan. 1, 1990, to be considered Gible. But there is one word of caution fed Al judge Lenore Nesbitt who is Over seeing the criminal Case against gds Hasni to approved the plan yet. A special master appointed by the court is studying the company a financial condition to determine whether the restitution agreement is workable. Customers who own gds lots but not a House wont be included in the restitution plan. The company has admitted criminal wrongdoing Only in connection with its Home sales. Mark Binstein a real estate investigator working on a Federal lawsuit filed against gds in new Jersey thinks the $100 million settlement does no to go far enough to Correct what he Calls a the obscenity of gds land fraud. A fall that boils Down to is a bureaucratic slap on the wrist Quot he said. Binstein who represents the North port out of state lot owners association of River Edge n.j., has signed up several thousand lot owners for his damage suit including about 200 service members living overseas. One potential problem with the House owner restitution plan is that gds May not be Able to pay in full. A lot depends on whether the company survives chapter 11 bankruptcy proceedings continues to develop residential communities in Florida and keeps making Money