BENTON, Tenn. - Gerald and Kathi Barrett's first years of what they thought would be glorious retirement to quiet, beautiful Tennessee have become a fight with land developers who promised more than they could deliver.
Their neighbors at the Ocoee Mountain Club in Polk County, Joan and Kenneth McIlrath and Carolyn and Mike Van Demark, are in a similar spot.
All three couples were lured from other states by lovely advertisements for inexpensive Tennessee mountain living in a posh clubhouse resort specifically aimed at retirees.
Instead, they say, they've met one broken promise after another, along with mishandled down payments, contractor liens and a neighborhood and resort that have stalled around them.
Rather than having 211 fellow homeowners, the couples have about a dozen full-time neighbors and another 10 or so part-time ones. The promised clubhouse has never been built. The swimming pool still doesn't exist.
The fire hydrants have the same water pressure as their kitchen taps. The sewer lines never were adequately pressure tested and have broken so badly that all three of their new homes have had multiple sewage backups in just the first two years. Several roads are still gravel.
To add insult to injury, each couple has paid extra for their houses, either because contractors who went unpaid by the developers filed liens against them or because money they paid the developers up front disappeared rather than going to their homes.
And there's the matter of the $350 homeowners' association fees paid every year whether property owners have built a house yet on their lot or not. The dues, intended to keep up the development - pool, clubhouse, roads and the like - have not been accounted for, according to the residents.
"We're still glad we built here. It's beautiful. But they should take the 'resort' off the sign," said Joan McIlrath, a retired Publix worker from Florida.
"Yeah, the only resort we have is when we resort to lawsuit," said Van Demark, a retired accountant.
In fact, the couples - all of whom paid Ocoee Mountain Homes developers for the building of their homes - have filed a lawsuit. They said their builders were not paid or were paid less than arranged, yet their money was not refunded or accounted for.
The Barretts faced nine builder liens totaling about $70,000. The Van Demarks paid $20,000 down before their home was started, but that money didn't reach the builder and the Van Demarks had to scale back their building plans. The McIlraths say they are out about $7,000 that their builder was not paid from their $17,000 first payment.
Among other things, the lawsuit claims the development is operated as a "Ponzi scheme where monies paid by consumers to [Ocoee] Mountain Homes from construction of individual homes and to [Ocoee] Land Holdings for association dues would be co-mingled with their own personal funds with the hope that enough investment could be attracted to the scheme to allow the development to be completed and full profits realized by them in spite of the lack of sufficient funding to permit a development of this scope to be undertaken."
According to the U.S. Securities and Exchange Commission, a Ponzi scheme is an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors. Ponzi scheme organizers often solicit new investors by promising to invest funds in opportunities claimed to generate high returns with little or no risk.
In many Ponzi schemes, the fraudsters focus on attracting new money to make promised payments to earlier investors and to use for personal expenses, instead of engaging in legitimate investment activity.
"Ponzi schemes collapse with little or no legitimate earnings, the schemes require a consistent flow of money from new investors to continue," according to an SEC Web page. "Ponzi schemes tend to collapse when it becomes difficult to recruit new investors or when a large number of investors ask to cash out."
Chattanooga attorney Brian O'Shaughnessy represented Ocoee Land Holdings LLC and the DMC Family Holdings LLC, which recently purchased the development when Ocoee Land Holdings went bankrupt.
O'Shaughnessy said the principle member of DMC, Floridian Glen Fetzner, who also was a member of the Ocoee Land Holdings, declined an opportunity to speak with the Chattanooga Times Free Press for this story.
O'Shaughnessy said the other principles named in the Ocoee Land Holdings are not going to have any further involvement with the new property developer, DMC. O'Shaughnessy said he doesn't know who the other principles in DMC are, although he is listed as the registered agent.
He said Fetzner told him he plans to begin framing the clubhouse in a couple of months and hopes to finish it this year. O'Shaughnessy said a pool is planned, but there is no timeline.
"I do want to put the best light on what they're [DMC] trying to do. Glen really is trying to salvage what had gone wrong and try to fix the development to the best of his ability," O'Shaughnessy said.
He added that he doesn't know "what had gone wrong."
What went wrong?
But the Barretts, Van Demarks and McIlraths believe they have been watching a collapse and fancy footwork.
In December, the developers, Lou Lentine, Paul Fetzner and Glen Fetzner, doing business as Ocoee Land Holdings, were foreclosed on by Chattanooga Agricultural Credit Association.
But Glen Fetzner had formed a new LLC called DMC Family Holdings a month before with O'Shaughnessy as his registered agent.
At the Polk County Sheriff's Office sale last week on the courthouse steps, O'Shaughnessy bid $1 higher than the Chattanooga Agricultural Credit Association on behalf of DMC. As part of the bankruptcy agreement, the credit company then agreed to pay the more than $40,000 in back taxes owed on the Ocoee Land Holdings property.
Additionally, all prior judgments against Ocoee Land Holdings were wiped out.
Among those judgments was a pending one the Barretts had won.
"How would you like to have a bank foreclose on you, then you buy your house again [for a dollar under a different name], get your debts and taxes paid off ... and to top it off the bank give you a new loan?" said Kathi Barrett. "It is unbelievable."
George McCoin, substitute trustee directed by Chattanooga Agricultural Credit Association to foreclose, did not return four phone messages and an email seeking comment.
Lou Lentine, co-founder and managing partner of Ocoee Land Holdings and listed by the Tennessee secretary of state's office as the registered agent for Ocoee Realty, Ocoee Mountain Homes and the Ocoee Mountain Club Homeowners Association, could not be reached for comment.
But in 2010, he blamed the contract builder who filed the first liens.
"We are not happy with this situation, caused by a vendor, who was fired from the job," he said in an email when residents first complained.
Lentine and Bill Michaels, then-spokesman for Ocoee Mountain Club, said those first liens resulted in a freeze being placed on all the construction loans.
"There is over $220,000 in construction draws owed to Ocoee Mountain Homes which well covers the $140,000 in liens," Lentine said in the email.
The contractor Lentine blamed, framer and builder Greg Hampton, of Blue Ridge, Ga., told a different story.
Hampton has said he tried many times to work out differences with Lentine, Fetzner and other company representatives. He said he finally told them he could do no more work for them until he was paid for previous work. When that still brought no payments, he said he did the only thing he could do - file liens against five houses.
"It's my fault because they owe me money?" Hampton said at the time. "I feel sorry for the homeowners. I hate it. They were taken advantage of, and we [subcontractors] were, too. It's pitiful."
In 2010, the Barretts, facing nine builder and contractor liens totaling about $70,000, went to Polk County authorities for help.
Drew Robinson, assistant district attorney for the 10th Judicial District, which covers Polk, Bradley, McMinn and Monroe counties, told the Times Free Press his office was looking into "possible criminality" in the situation.
"We have to show intent, not just that the developer went broke," Robinson said.
Kathi Barrett said the county prosecutor later told them their best hope might be civil action because, in a civil case, they would have more subpoena power, especially across state lines.
Polk County, the city of Benton and the state also have been burned by the development, which officials acknowledge sounded like a great tax boom when Lentine - the initial voice of the development - announced the plan to build more than 200 homes in the rural county.
Polk officials have said they now will require more infrastructure to be completed up front on developments before lots are sold and homebuilding begins.
The Tennessee Department of Environment and Conservation last year imposed a sewer moratorium on the development until the sewer line is completed properly and approved.
In a deposition for the Barrett case, Glen Fetzner said the other original parties involved in the subdivision's investment - Eleanor Long, Paul Fetzner and Lentine - are no longer actively involved and have declined to put up additional capital for the project.
The Barretts want to get on with their retirement and put the nerve-racking events of the past two years behind them. But not until every stone is turned over to find out why the development went so wrong.
"This shouldn't happen to people," Gerald Barrett said.