Racketeer charges against PNC Bank, CBG go to trial

Civil racketeering charges filed against PNC Bank Corp. by property owners at the Valley of Lakes will go to trial, a U.S. District Court judge ruled last week.

Judge William H. Walls, sitting in Newark, N.J., dismissed several of the claims, including that the property owners' civil rights were violated. But he rejected a motion by PNC to dismiss the racketeering allegations.

Walls' ruling also directed that the trial be held in Scranton, to be more convenient for the 16 plaintiffs and to allow jurors to visit the development.

The civil lawsuit alleges violations of the Racketeer Influenced and Corrupt Organizations Act in relation to the 4,000-acre development in Black Creek, Hazle, East Union and North Union townships.

It also names the property's owner, CBG Limited, which filed for bankruptcy three years ago.

The planitiffs' attorney, Roger S. Antao of New York, is pleased with the ruling.

"It means the court has said, 'Yeah, you've made a prima facie case on all this stuff, and you can go forward.' It's very rare," he said Wednesday. "This doesn't happen every day, to allow racketeering charges to go forward against a national bank."

In addition, he said the ruling allows the plaintiffs to obtain depositions from witnesses and to subpoena other evidence in support of their claims.

CBG and its affiliated companies filed for bankruptcy in April 1992. Its debts include more than $24 million to PNC.

Early this year, PNC appointed a trustee after the developer missed the latest of several deadlines to obtain new financing. The trustee, Scranton attorney Mark J. Conway, will market the development and its various improvements and sell them to a third party.

The lawsuit, filed June 17, lists the plaintiffs as Leon "Ray" Dongelewicz and others. Dongelewicz is president of the Valley of Lakes Civic Association, a property owners' group which has existed since 1976 but is not recognized by Frank M. Cedrone, the development's managing general partner.

It was filed in New Jersey because Cedrone's headquarters is located there.

First Eastern Bank was listed as the original defendant. PNC, in acquiring the First Eastern Corp. last summer, also assumed its liabilities.

"PNC Bank denies the allegations as to First Eastern's conduct, and will vigorously defend against the lawsuit," spokeswoman Karen Shonk said.

"The point is the judge dismissed all but two of the many, many allegations."

Antao, though, said the RICO violations are the main portion of the complaint.

"The bank's people are trying to put the best face on this, saying the judge dismissed all but two of the charges. That's really like fudging the whole thing. The racketeering one is the main one, which applies to all the plaintiffs," he said.

"He did not dismiss one iota of the racketeering charges, not one iota."

In filing civil racketeering charges, he said, a plaintiff also must "allege that criminal laws were violated." Four classes of criminal activity - securities fraud, mail fraud, wire fraud and extortion - have been alleged, he said.

According to Antao, the complaint alleges that PNC Bank participated in:

• A securities fraud scheme in which it wrote numerous mortgages for properties it knew wouldn't be developed. PNC received a payment of $2,000 to $3,000 each time a lot was sold, Antao said.
• Actively concealing the developer's insolvency.
• Several extortion schemes to "shake down" residents and property buyers.

In addition, the complaint alleges the bank knew CBG Limited had no legal right to take over the Valley of Lakes after its previous developer, Jack Halprin of High Vista Corp., served six months in prison on land sale and mail fraud charges.

And it says thousands of families have lost their life savings by investing in the development based on promises of an 18-hole golf course, a manmade lake, water and sewer lines, and other amenities that have not been completed.

Antao is seeking class action certification for the suit, and said it actually involves more than 1,000 property owners.