Friday, June 20, 2008

Chambers bank investors sue over fraudulent development scheme

Investors sue Chambers Bank, four developers
BY SCOTT F. DAVIS Northwest Arkansas Times
Posted on Friday, June 20, 2008
URL: http://www.nwanews.com/nwat/News/66357/
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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Anonymous said...

Sounds like John Russell Meeks, Mitchell Massey, etc are in a heap of trouble. If true about Meeks, a loan officer getting a $1 million interest for nothing, with his bank loaning the money on the project, is a big no-no. Even if he did contribute something, he should have sold out of the deal when Chambers Bank got involved.

Not surprised that a lot of these banks and developers who played fast and loose during the boom times are in hot water now.

Anonymous said...

Whats up with this Trifecta of complete conflicts of interest. Here you have John Russell Meeks working for Chambers banks, making loans to Brandon Barber (Barber Development who was caught with another woman in his Range Rover drunk taking out mailboxes at 4am resulting in a DUI) whose wife is Kerri Barber (#1 realtor for Barber Development..BIG SURPRISE THERE) and her dad is John Chambers (CEO of CHambers Bank funding this whole scandalous operation) I mean what the hell is going on there? They are all in too deep as far as Im concerned.

Anonymous said...

Dont believe everything you read! i have heard that Meeks signed 2 mill in debt to recieve his ownership and was not the loan officer on the loan. Trevor Lavy (Priority Bank) the primary person behind the law suit is trying to save face for getting all his buddies in a bad real estate deal. not to mention that Lavy turned his father in law over to the OCC (Don Pitts owner of United Bank) and that turned out to be a whole bunch of nothing.

i have known Massey for several years and find it hard to believe he would ever do anything malicious. i have also heard Massey put in 10 or 15 times more money than these investors. i think the worst thing these guys did was to get 8 attorneys as their partners. we all know what happens then!! Sour Grapes

Anonymous said...

Obviously we know who wrote the above comment. Thanks for your thoughts Meeks. Glad to know you are also in tight with other thieves.

Anonymous said...

It's so funny to read all these stupid ass posts. Anyone that knows anything about this case knows that Lavy and his followers hired the top lawyers money can buy and still got a 12 to ZERO vote from a Jury! I'm sure all the TRUE details came out in that week long trial. Take a look at any land deal on the Florida coast done between '05-'08. They all failed. LOL