Lawsuit alleges racketeering, but developer scoffs

The suit asks an unspecified amount of money for attorney's fees and damages

By LISA SCHEID
Times Leader-Hazleton Bureau Chief

Sixteen Valley of Lakes property owners from New jersey and Pennsylvania filed a class action lawsuit June 17 against a six companies, including First Eastern Bank and CBG Ltd., the developer of the resort in lower Luzerne County.

The lawsuit contends promises by Frank Cedrone, managing partner of CBG, were illegal and that he hid his growing financial problems from would-be property buyers.

The lawsuit alleges Cedrone extorted an 8 percent construction fee on all new homes and extorted maintenance fees for water, sewer and road services, which he failed to deliver.

The lawsuit also alleges the developer violated the civil rights of property owners by ruling over them "as if the subdivision were his own personal fiefdom" such as placing security check points at both entrances to enforce rules, setting up his own private court for violations of resort rules and issuing fines to property owners for advertising meetings of their association.

The 7.5-inch-thick lawsuit was filed in U.S. District Court in Newark, N.J. on behalf of "numerous purchases of property in the subdivision."

Cedrone and his attorney, Frank Hoegen, of Hoegen and Marsh in Wilkes-Barre, say they had not received a copy of the lawsuit.

"They can't sue CBG because it is protected by federal bankruptcy laws," Hoegen said. Cedrone sought bankruptcy protection from creditors in March 1992 but has yet to file a reorganization plan. Two scheduled sheriff's sales have been canceled with promises from Cedrone that new financial investments were imminent.

Responding to a press release on the lawsuit, Cedrone said every complaint is erroneuos.

The property owners contend Cedrone and the other defendants violated federal racketeering laws, the Interstate Land Sales Full Disclosure Act, the U.S. Constitution and the New Jersey Real Estate Full Disclosure Act. The lawsuit was filed in New Jersey because Cedrone lives there, some of the plaintiffs are former New Jersey residents and many sales transactions occurred in the state.

Property owners allege CBG, Cedrone and the bank used the development to extort money. The lawsuit alleges CBG made promises to improve the property and then inflated prices.

Stretching across Schuylkill and Luzerne counties, the lush 4,004-acre Valley of Lakes was advertised as the "premier resort in the Northeast." The resort included ski slopes, a lodge and the Eagle Rock restaurant, that attracted visitors from as far away Philadelphia and New York.

Cedrone promised to build an Arnold Palmer-designed golf course and Lake Algonquin, but never did. In fact, the lawsuit alleges CBG had no permit to build a dam to hold waters of Lake Algonquin.

The lawsuit alleges Cedrone was not financially capable of making the improvements or maintaining the property and the bank knew it.

The property owners want a New Jersey judge to stop the alleged illegal activity and award an unspecified amount of money for attorney's fees and damages to compensate property owners for any losses and punish the corporation.

"This whole case shows that nobody pays attention to ordinary hard-working people," said Roger Antao, the property owners' attorney, with offices in New York and New Jersey. "It seems the big developer and bank get away with anything."

First Eastern Bank merged with PNC Bank on the day the lawsuit was filed and PNC assumed all of First Eastern's liabilities, including lawsuits.

PNC spokeswoman Karen Shonk declined to comment.

"People are fed up," said Ray Dongelewicz, a 66-year-old executive who moved to the resort three years ago. He had hoped to spend his retirement playing golf. Instead, he has spent it fighting Cedrone.

"Finally, there is documentation which represents the feelings of many people in the valley, people who spent hard-earned money and received nothing in return," said Dongelewicz, president of the Valley of Lakes Civic Association, the organization to which many of the plaintiffs belong.

One of the plaintiffs is John Miele of Belleville, N.J. Miele, a retiree with heart problems, bought a lot in Valley of Lakes in the spring of 1988. The lawsuit alleges the developer, with the help of two New Jersey real estate agents, defrauded him of $10,000.

The lawsuit alleges a New Jersey real estate agent told Miele the land he wanted to buy was owned by Paul Mallon Associates, who were asking $55,000 for the property. But real estate documents show the land was really owned by another couple, the Missinas of Valley of Lakes, who were asking $45,000.

When Miele agreed to buy the land, Mallone purchased the land from the couple, and then sold it at the higher price to Miele, the lawsuit alleges.

Also among those suing the developer and bank are John and Betsy Knox of Chadds Ford. According to exhibits in the lawsuit, the couple spent $99,000 in 1990 for a lot on the promised Lake Algonquin. CBG agreed to buy the lot back if the lake was not built in two years.

With no lake created, the Knoxes decided they no longer wanted to reside in the resort. Cedrone was financially unable to buy back their lot but they were able to exchange lots. The Knoxes said they could put their new lot up for sale, but they would not get the $99,000 they paid.

Residents have complained to the state attorney general's office and other government agencies that Cedrone has not built the promised amenities and has not corrected many other problems. Among the documents filed with the lawsuit are copies of dozens of complaints to the Public Utility Commission about water and sewer problems.

Dongelewicz said the lawsuit was a last resort for property owners.

"The state and others have not listened to our pleas and we've really had no other alternative than to proceed as we did."