Caribbean real-es­tate dream turns into $100 mil­lion night­mare for re­tirees

Miami Herald (Sunday) - - Home - BY KEN­NETH R. HAR­NEY Har­n­ey­col­[email protected]

WASHINGTON

Ever fan­ta­size about flee­ing the win­ter cold and get­ting in on the ground floor of a beach­front realestate deal in which you dou­ble your money in a few years? If you’ve dreamed that dream, here’s how it could turn night­mar­ish.

When Frank Bal­luff and his wife, Re­becca, pur­chased a lot in what seemed to be an ex­cit­ing new Caribbean re­sort de­vel­op­ment, lit­tle could they imag­ine what they were get­ting into. In fact, it was what the Fed­eral Trade Com­mis­sion now calls the big­gest real-es­tate scam in­volv­ing over­seas prop­erty it has ever in­ves­ti­gated. Pro­mot­ers al­legedly fleeced 1,000-plus lot buy­ers out of $100 mil­lion or more. Ear­lier this month, the FTC sought and ob­tained a fed­eral court or­der tem­po­rar­ily shut­ting the pro­ject down and freez­ing pro­mot­ers’ as­sets.

Bal­luff, a busi­ness owner from Michi­gan, es­ti­mates that his per­sonal losses ex­ceed $310,000, but he says he’s heard of oth­ers who “in­vested their full re­tire­ment funds” and planned to build homes and move to the re­sort. Now “they just have noth­ing left,” he says.

Bal­luff and oth­ers — mainly Amer­i­cans near­ing re­tire­ment age or al­ready re­tired — bought into a slickly mar­keted de­vel­op­ment known var­i­ously as Sanc­tu­ary Belize, Sanc­tu­ary Bay and The Re­serve. The 14,000-acre pro­ject is lo­cated on the Caribbean coast in Belize, an English-speak­ing na­tion bor­der­ing Mex­ico.

Through ad­ver­tis­ing pitches on Bloomberg

News, Fox News and in­fomer­cials, de­vel­op­ers promised pur­chasers a se­duc­tive list of ameni­ties —fine restau­rants, a lux­ury ho­tel, a world-class ma­rina and shops, a hos­pi­tal staffed by Amer­i­cans, a cham­pi­onship golf course, a casino and even an airstrip, ac­cord­ing to the FTC. Plus they dan­gled fi­nan­cial cat­nip: fat and fast prof­its if buy­ers chose to sell their parcels. The pro­mot­ers pushed on­site tours to peo­ple like the Bal­luffs, who flew to Belize to in­spect the prop­erty be­fore putting down any money. How­ever, ac­cord­ing to the FTC, “many con­sumers” pur­chased lots cost­ing $150,000 to $500,000 sight-un­seen.

Bal­luff says he was at­tracted by the pro­mot­ers’ in­no­va­tive “no-debt” ap­proach; un­like most realestate de­vel­op­ers, they wouldn’t de­pend on lenders to fi­nance their ac­tiv­i­ties. In­stead they’d plow sales rev­enues back into the re­sort to speed its com­ple­tion within two to five years.

High on the Bal­luffs’ pri­or­ity list was that the pro­ject be com­pleted as quickly as promised, be­cause they wanted to build a home and get away from Michi­gan’s harsh win­ter weather. When they pe­ri­od­i­cally in­quired about progress at the site, they were as­sured by of­fi­cials that Sanc­tu­ary Belize “would meet its time­lines.” But six years have passed, and most of what was promised hasn’t been de­liv­ered. Hardly any homes have been built, ac­cord­ing to the FTC, and Bal­luff says the de­vel­op­ers seem “to be do­ing lit­tle more than mov­ing dirt around and mak­ing ex­cuses for de­lays.” When buy­ers ask for the de­vel­op­ers to buy back their lots or they stop mak­ing pay­ments, the de­vel­op­ers refuse re­funds and re­sell the lots to new buy­ers, the FTC al­leges.

But it gets worse. To gather in­for­ma­tion on Sanc­tu­ary Belize, the FTC cre­ated a sting op­er­a­tion that in­volved a fic­ti­tious small busi­ness whose own­ers fit the pro­file of Sanc­tu­ary’s tar­get mar­ket­ing. They posed as pur­chasers and in the process doc­u­mented dis­turb­ing facts, ac­cord­ing to the FTC: The per­son or­ches­trat­ing the Sanc­tu­ary de­vel­op­ment, An­dris Pukke, is a con­victed felon who had been sued by the FTC for con­sumer fraud in con­nec­tion with a debt-coun­sel­ing scheme; Pukke ul­ti­mately agreed to for­feit mil­lions of dol­lars in as­sets that could be used to re­fund money to vic­tims. James Kohm, di­rec- tor of the FTC’s con­sumer pro­tec­tion en­force­ment divi­sion, called Pukke “a hard­core re­cidi­vist scam­mer” who per­pe­trated the Sanc­tu­ary Belize scheme “even while serv­ing a prison sen­tence for ob­struc­tion of jus­tice.”

Sanc­tu­ary Belize of­fi­cials cov­ered up his in­volve­ment, ac­cord­ing to the FTC, re­peat­edly ly­ing to buy­ers such as the Bal­luffs, who had dis­cov­ered his con­nec­tion to the de­vel­op­ment af­ter their pur­chase. Nei­ther Pukke nor of­fi­cials of his com­pany, based in Irvine, Cal­i­for­nia, could be reached for com­ment last week; the main num­ber for Sanc­tu­ary Belize mar­ket­ing and sales was no longer in ser­vice.

Some take­aways? First, the FTC’s al­le­ga­tions and in­junc­tion will need to pass fur­ther tests in court. Even if suc­cess­ful in per­ma­nently shut­ting down the Sanc­tu­ary Belize enterprise, the agency may not re­cover the funds needed to re­pay al­leged vic­tims. Sec­ond, buy­ing into re­sort land de­vel­op­ments — whether in Florida at var­i­ous times in the past cen­tury or in ex­otic lo­ca­tions like Belize — has al­ways been in­her­ently high risk. You can never do too much due dili­gence, es­pe­cially when check­ing out the pro­mot­ers.

Ken Har­ney’s email ad­dress is Har­n­ey­col­[email protected] gmail.com.

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