This Article: Hazleton Standard-Speaker, January 6, 1996, at pg. 19
VOL group liable for racketeering, judge rules
WILLIAMSPORT - A federal judge has ruled that a group of property owners in Valley of Lakes has established a prima facie case on racketeering and civil rights charges against a property owners' association at the Hazleton area resort.
In a 24-page decision, U.S. District Judge James F. McClure Jr. denied a motion by Property Owners Association of Valley of Lakes that had sought to have the case dismissed.
Court documents identify POA is an association whose board members are George Denke Jr., Dianne French, Ronald Kichline and Thomas Pierson.
In his decision, McClure ruled that POA may be held liable for alleged violations of the Racketeer-Influenced and Corrupt Organizations Act for alleged civil rights violations.
The ruling was based on claims from the plaintiffs in the case that POA is not a "real" property owners' association, but merely a "tool" of the developer and other defendants.
The plaintiffs brought suit as a class action in Federal Court in Newark, N.J., in June, 1994.
Named defendants were: PNC Bank Corp.; CBG Ltd., developer of the 3,856-acre residential and recreational development; Frank Cedrone, CBG's general partner; MLA Management Associates, Inc., and related parties.
The court in New Jersey previously ruled that a prima facie case charging RICO violations had been established against PNC, and transferred the proceeding to Pennsylvania for the convenience of the parties, witnesses and jurors.
Valley of Lakes, promoted as the Northeast's "premier resort," has been in a state of uncertainty since March, 1992, when the developer filed for Chapter 11 bankruptcy protection.
The development's ski slopes have been idle for years, the lodge has closed, and numerous lots described as "lakefront" actually are situated in front of an empty pit, the plaintiffs claim.
The suit also maintains that hundreds of lots have no access roads and no water or sewer connections despite being paid for by unsuspecting purchasers, and that a promised golf course designed by professional golfer Arnold Palmer has not been built.
The RICO suit charges that PNC Bank, the developer and their "accomplices" have operated the development as a racketeering enterprise that systematically defrauded thousands of individuals of their life savings.
Painting a picture of a massive "Whitewater-like real estate development scheme in the heart of the Northeast," the suit also alleges that the defendants engaged in extortion rackets and sought to cover up the alleged racketeering.
In denying POA's motion for dismissal of the charges, McClure wrote:
"POA argues that plaintiffs cannot prevail against it on a RICO claim because their is no allegation that it manages or controls the affairs of the alleged RICO enterprise.
"We disagree. It can be reasonably inferred from plaintiffs' allegations that POA was formed to serve as the alter ego of Cedrone, CBG and the others allegedly involved in a long term scheme to defraud and extract money from Valley of Lakes property owners.
"The suggestion is that POA is only the latest incarnation of the various entities which have been used over the years to unlawfully control Valley of Lakes and extract money from property owners."
McClure also found that the degree of control the defendants have over the development may constitute state action, thereby making them liable for violations of the property owners' civil rights.
The lawsuit alleges that the defendants systematically deprived the property owners of their civil rights by fining them in a "kangaroo court" for critcizing the developer.
The case is Dongelewicz, et al. v. First Easter Bank, N.A. et al., 3:DV-95-0457.