This $500 million golf course community was never finished. Now the developer is paying for it.

Developer Mike Ross to pay John Thornton $15 million

Development has stalled at Rarity Club on Nickajack Lake, listed as a high end golf community, only two residences currently sit on the 578-acre development with neither one being finished.
Development has stalled at Rarity Club on Nickajack Lake, listed as a high end golf community, only two residences currently sit on the 578-acre development with neither one being finished.
photo Development has stalled at Rarity Club on Nickajack Lake, listed as a high end golf community, only two residences currently sit on the 578-acre development with neither one being finished.

The developer of what was supposed to be one of the biggest residential developments in Southeast Tennessee has been ordered to pay the original project developer more than $15 million for failing to build the proposed $500 million golf course and lakefront development.

Maryville, Tenn., developer Mike Ross, who took over the proposed 578-acre Rarity Club nearly a decade ago, failed to build the promised golf course, marina and community facilities despite collecting more than $25 million from early land sales to Thornton and 58 others who bought into the project.

Chattanooga developer John "Thunder" Thornton assembled the property from the Tennessee Valley Authority and sold the development to Ross to build along with other Rarity communities Ross was building at the time across East Tennessee. Thornton later sued Ross, claiming the developer took money from Rarity Club property sales and improperly used it for other developments.

A Marion County Circuit Court judge has ordered Ross to pay Thornton nearly $15.5 million in damages, interest and legal fees for not fulfilling his contract obligations to Thornton.

Thornton conceded that suing Ross has been "a long and expensive legal process" and is unlikely to bear much fruit, given previous judgments against Ross for other failed Rarity communities.

"I may never recover one penny of this judgment, but it was important to me that I establish beyond any reasonable doubt that Mike Ross personally was the sole developer and he alone was responsible for the failure of this project that harmed so many people," Thornton said. "I had also invested in home sites in the project along with over 50 other citizens. We all were harmed greatly by the actions of Mr. Ross as was this community."

Thornton is developing another, even larger 3,000-acre project atop Jasper Mountain -- Jasper Highlands -- and is eager to distance himself from the failed Rarity Club only a few miles away.

Thornton has likened Ross to Bernie Madoff, the New York financier who was convicted of running a Ponzi scheme by illegally diverting investors' money to his own use. Ross was indicted by federal prosecutors in late 2012, but the U.S. Attorney's Office in Knoxville dropped the charges against Ross the following year.

In 2010, a Marion County jury ordered Ross and his development firm, Rarity Communities, to pay nearly $5.8 million to Chattanooga builder Bill Worley for failing to build promised amenities at Rarity Club.

Two years later, a federal jury in Knoxville ruled that Ross owed nearly $15 million to his partners in another Rarity development in Loudon County, where he also failed to finish other projects he started. One of his former partners, Robert Stooksbury, claims Ross engaged in illegal racketeering at the Rarity Pointe residential community.

photo Mike Ross

Ross has blamed the failed real estate developments on the housing meltdown in 2008-2009.

The former GreenBank, which was acquired by Capital Bank Financial Corp. in 2011, foreclosed on Rarity Club and now owns the undeveloped site on the Nickajack Lake.

Marion County Mayor David Jackson said several developers have looked at taking over the unfinished development but none have reached any agreement yet with the bank to acquire the property.

"We'd love to see it developed and built out some day," Jackson said. "It would increase our tax base tremendously and I hope that happens some day."

Contact Dave Flessner at dflessner@timesfreepress.com or at 757-6340.

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