When Rarity Club on Nickajack Lake was envisioned, the 578-acre development was seen as a pearl in the necklace of lakefront and golf course communities strung together by developer Michael Ross.
But the Marion County, Tenn., project ran into trouble in the wake of the housing slump, and now Ross has too.
The Maryville, Tenn., man was indicted this week for mail fraud, wire fraud and money laundering in connection with the floundering development that today only has one completed residence.
In a 28-count indictment handed down in U.S. District Court in Chattanooga on Tuesday, Ross is alleged to have devised a scheme to defraud those who bought real estate from him and several related business entities.
The indictment said that, from December 2006 to December 2009, Ross collected money from buyers in the proposed development for the construction of a clubhouse, golf course, and other amenities. The fees were generally $25,000, $50,000 or $75,000 per lot, according to court papers.
But, the indictment alleged that Ross removed the money which he said would be put into a segregated account for use in other real estate ventures.
Ross, who developed eight other Rarity resort communities across East Tennessee, has said that he tried to build and borrow too much. When the housing slump hit more than three years ago, he was left with too few sales and dollars to fulfill his development plans, he has said.
Ross is represented by Chattanooga attorney Lee Davis, who said Ross maintains his innocence, according to the Associated Press. Davis said the issues presented are business transactions, not criminal conduct, and are the result of the real estate economic downturn in 2008 and 2009.
Chattanoogan John "Thunder" Thornton, who assembled the Nickajack site by swapping land with TVA, sold the land to Ross but later sued him. Thornton said he wasn't surprised by the indictment.
"I think justice will be done when he's convicted," he said of Ross.
Thornton said he's still owed about $10 million by Ross.
"I've been a victim of Mike Ross along with 58 property owners...that trusted him and believed him," he said.
Bill Worley, another Chattanoogan who invested in the project and later sued, said the episode has been a strain.
"Both on the family and monetarily as well," he said. "It's an extremely unfortunate situation."
Tommy Stanfill of Century 21 Cumberland Realty said Capital Bank of North Carolina now owns the property and has it on the market.
He said there have been three offers, though they're considered "a little low."
Stanfill said the project could still turn out well "if there was somebody to do it right."
"If there's a prettier piece in the Southeast, I'd like to see it," he said.
The Associated Press contributed to this story.