Valley of Broken Dreams

A Pocono development goes sour

Twenty-two years ago, Salvatore DiCostanza borrowed $7,000 from the bank so that he could stake his claim in paradise.

His haven from the bustle of suburban North Jersey, the place where he planned to bring his children on weekends to fish and camp and breathe clean mountain air, was Valley of Lakes, a 4,000-acre resort nestled in the hills of northeastern Pennsylvania.

The recreation community was billed as a place that would have it all: Miles of hiking, horseback, and snowmobile trails, Four lakes. Tennis courts. A championship golf course designed by Arnold Palmer. Ski resort and convention center. Indoor and outdoor pools. The good life.

So with dreams of one day building a home there, DiCostanza bought property.

Flash ahead to 1995.

DiCostanza still owns his lot, but things have changed. Dreamshave turned to hassles. DiCostanza estimates that he's poured $25,000 into his property through the years, including taxes and annual maintenance fees.

Even worse, his lot is still empty. "I'm afraid to build on this property," he says. "I don't know what's going to happen to it."

Hampered over the years by a developer who was later convicted of fraud, by a soured economy, and, most recently, by a legal battle between builders and property owners, Valley of Lakes has become a money pit, a sore spot, a faded dream, a loss written off long ago for scores of New Jerseyans.

Most of the action at the resort community appears to be taking place in court: The resort's latest developer, Frank Cedrone, has become the subject of a federal lawsuit - 5 inches thick in all - filed by 16 of the more than 1,000 Valley of Lakes property owners. In it, Cedrone is accused of "extortion" by demanding fees from property owners for services and facilities he promised but never delivered.

After he won the rights to the development in a foreclosure sale in 1986, Cedrone unveiled grand ambitions for Valley of Lakes, seeking to develop it into a premier resort. But supporters say Cedrone was a victim of bad timing: He bought the development a year before the stock market crash sent real estate prices into a nose dive and led scores of developers into U.S. Bankruptcy Court.

Cedrone, a general partner of CBG Ltd., filed for corporate bankruptcy in 1992; the case is still winding its way through court.

The suit filed by property owners alleges that Cedrone set up checkpoints, equipped with guards, at the resort's two entrances. Those who don't pay the fees are subject to a lengthy inspection and must receive a "visitor's pass," even though they are property owners.

At the same time, Cedrone has established his own disciplinary board at the resort, and has barred state police and local sheriffs officers from entering Valley of Lakes, the suit contends.

"It was like Cedrone's own kindgom," says Sharon Miele, whose father purchased a home at the development in 1988 for $55,000. Miele, one of the plaintiffs in the suit against Cedrone, took control of the property last year after her father's death. "The promises he made were astronomical. Now it's a mess."

Cedrone says the resort's legal troubles are largely the result of complaints from "a handful of dissident property owners" and attorneys who ought to "lose their license" to practice law.

"Our only guarantee was that we would break our backs 24 hours a day to make this a great resort," he says. Cedrone characterized the suit against him as "ridiculous" and says he is planning to countersue

As for broken promises, Cedrone says he presented "plans" to prospective buyers, not guarantees.

Valley of Lakes, which has also been marketed under the name Eagle Rock Resort, continues to attract new buyers, he says.

Pennsylvania's largest bank Pittsburgh-based PNC Bank Corp., has also become entangled in the suit. Since purchasing First Eastern Bank of Wilkes-Barre last year, PNC has been pulled into the legal conflict based on allegations of civil racketeering and a host of other charges. The suit claims that First Eastern refused to foreclose on CBG, thus aiding in the enterpnse.

With, all this, Valley of Lakes property has become a hard sell, say local real estate agents. "The homes up there are beautiful, the setting is wonderful. But everything's in limbo," says Cheryl Roman, a broker in Century 21's office in Hazelton, Pa. "People are reluctant to buy in an uncertain situation."

Twenty years ago, Valley of Lakes seemed to be anything but uncertain. Developers at a company called High Vista Corp. marketed Valley of Lakes as the ideal getaway for New Jerseyans, persuading hundreds to buy property.

Robert Behr remembers the promise of Valley of Lakes. The Park Ridge resident purchased property there in 1971, paying $8,195 for an 80-foot-by-150-foot lot. "I bought it as an investment, and I thought I could either sell it later or build on it," he says.

Like DiCostanza, Behr estimates that he's poured close to $20,000 into the property over the years, and he still hasn't built on the site. Last year he paid $335 in property taxes, $197 in water and utility fees, and $360 in maintenance fees.

Behr says he'd be happy to get $10,000 in a sale, or half of what he's paid out through the years.

The fact that developers have not fulfilled their original plans has hurt property values, he says. "They never completed the golf course, which would have been a draw."

One of the resort's first developers, Jack Halperin, was sentenced to six months' incarceration in the early Eighties. Halperin was convicted of mail fraud related to a scheme to "defraud and to obtain money" from prospective Valley of Lakes property owners through the mail.

After that, little happened at Valley of Lakes for nearly six years, according to court documents. Then Cedrone, a partner in CBG Ltd., bought the resort at a foreclosure proceeding in 1986.

Things began happening again. "He [Cedrone] said he was going to build this premier development. He put this huge hype on," says Roger Antao, a New York City attorney representing property owners in the suit against Cedrone and First Eastern Bank. "He actually brought in Arnold Palmer. That's how good he was."

Cedrone recruited the championship golfer and businessman to help design a golf course and clubhouse that would bear Palmer's name. Promotional material featured photos of Cedrone and Palmer together. Cedrone sold lots around the golf course. The course was to be finished in 1991. It never was. A billboard featuring Palmer still stands near the resort.

"We're just as much a victim in this as anybody," says Ed Seay, executive vice president of the Palmer Course Design Co. in Ponte Vedra Beach, Fla., and Palmer's business partner. Seay also characterizes Cedrone as a victim who fell prey to "bad timing and insufficient funding."

"Frank [Cedrone] thought he had the money to get the job done," he says. "I think he had the best of intentions and would have built if he had the funding."

Cedrone also established a New Jersey sales headquarters in Belmar and began a massive print, radio, and television blitz, the suit claims.

Hundreds more bought. One plaintiff named in the lawsuit paid $100,000 for a lot right on the never-completed golf course. Others bought property on Lake Algonquin, an 80-acre lake that was never constructed. In fact, little was actually being built by Cedrone in the wilderness of Luzerne and Schuylkill counties, the suit alleges.

Cedrone says he has delivered on plenty of promises since taking the resort over: Though lakes and golf courses remain incomplete, the resort now has paved roads, a water and sewer system, and 24-hour security.

Residents at Valley of Lakes have filed numerous complaints with the Pennsylvania Public Utility Commission about water services, citing low water pressure and raising concern that new homes were being hooked up to a system unable to support current homes.

And along with these services came fees. Those who have refused to pay them have been taken to court.

Management "prosecuted hundreds of property owners in front of local justices of the peace" for not paying fees, Antao says. "They tried to collect service fees for services which were never provided."

DiCostanza, of North Arlington, remembers receiving what he describes as threatening letters from Valley of Lakes management, demanding payment for fees.

Then in 1992, citing financial troubles, CBG Ltd. and its affiliated companies filed for bankruptcy protection, under which it remains today. Published reports on the Chapter 11 filing said CBG faced debts of more than $15 million and that some of the company's creditors were "leaning heavily on them."

In a recent interview, Cedrone said he is "very close" to getting approval on a financing package that would pay off his creditors and give him capital to proceed with developing Valley of Lakes.

PNC Bank Corp. has also become ensnared in litigation over the resort. Last month, a U.S. District Court judge in Newark rejected a motion by PNC attorneys to throw out all charges brought against the bank holding company by property owners, but did dismiss three of the charges, says Jonathan Williams, a PNC spokesman.

"There has been no evidence of any wrongdoing, on the behalf of [the bank]. We will defend vigorously against the remaining allegations," says Williams, refusing to respond to specific allegations in the lawsuit.

Although Cedrone agrees that the resort has not lived up to its original billing, he says more than 300 property owners have built homes there; many live at the resort year-round.

But for many New Jersey residents who bought property there, the idea of finding happiness at Valley of Lakes has soured.

Ann Erdmann, a Ridgefield resident and a property owner at Valley of Lakes since 1975, says simply: "It's been nothing but bad things."

Says DiCostanza: "You get to the point where you don't know whether to give it up or hold on to it. Sometimes I feel like I would sell it tomorrow if I could. Other times, I think, 'I've come this far with it.'"