Valley of Lakes developers indicted for fraud

Two men who took over development of the residential-leisure community of Valley of the Lakes, near Nuremberg, in 1975 after the $12 million project ran into financial difficulty, have been charged with 33 counts of mail fraud.

Named in a sealed indictment handed up Friday by a federal grand jury at Scranton and opened Monday were Jack Halperin, New York City, and Philip Cohen, West Orange, N.J. Both are listed in the indictment as officers of High Vista Inc.

Halperin is listed as president, chairman of the board of directors and stockholder of High Vista Inc., developer of the proposed 4,000-acre Valley of the Lakes.

He appeared before the grand jury Friday and later was arrested by postal inspectors. Halperin was arraigned before U.S. Magistrate Raymond Durkin, Wilkes-Barre, and released on $50,000 bail.

Cohen, described in the 22-page indictment as a vice president and director of High Vista Inc., is listed by federal officials as a fugitive from justice. He has been reported missing since March 12 when he failed to appear before the grand jury sitting at Scranton.

The proposed development, to be constructed on land formerly owned by the Tench Coxe Estates, 12 miles east of this city on the Luzerne-Shuylkill County line, first was announced in late summer of 1971. The original develoopment partners included Philip, Nathan and William Seltzer and the late Louis Schiavo. Also associated with the planned development was former National League football star Kyle Rote.

The indictment states that on or about Feb. 5, 1975, Halperin entered into a memorandum of agreement with the Seltzers for purchase of High Vista Inc. and the Valley of the Lakes subdivision.

Five months later, according to the indictment, Halperin entered into a formal stock purchase agreement with Schiavo and the Seltzers for purchase of High Vista Inc., American Urban Science Foundation Inc., Oneida Water Co., Eagle Rock Ski and Golf Club and Big Valley Utility Co.

The government contends from February 1975 through Dec. 1, 1978, Halperin and Cohen used the mails to defraud both purchasers of lots and lending institutions.

It is claimed that Halperin and Cohen accepted monies from property owners for general maintenance of the roads, lakes and other amenities in Valley of the Lakes, but then diverted those funds for other purposes.

The first 13 counts list individuals who reportedly were defrauded while counts 14 through 33 spell out a scheme allegedly used on unsuspecting potential buyers and lending institutions.

The alleged 13 victims are: Douglas Levy, John Mastropietro, Nicholas Cartabona, Eustachio Locantore, Ralph Gombetta, Edmund Succa, Charles Kilby, George Frick, Elizabeth Mamone, Joseph Natale, Charles Barrall, Michael Neglia and Lous Taffetante. Their addresses were not listed.

A sum of $500,000 was borrowed from the American Bank and Trust Co., Reading, in 1975 for the completion of all amenities, working capital and the improvement of Valley of Lakes development, according to federal prosecutors. However, the grand jury alleged that "only a portion of said funds were used for those purposes."

In the latter counts of the indictment, the grand jury charges that the High Vista officials weaved a complicated web of financial dealings involving a number of banks and other financial institutions in order to keep the project afloat.

According to the indictment, on Oct. 1, 1975, Halperin and Cohen borrowed $820,000 from the Hazleton National Bank; on Oct. 20, 1975, $400,000 was borrowed from the American Bank and Trust Co., Reading; and on Jan. 15, March 15 and April 15, 1976, Halperin caused High Vista to issue notes to American Bank and Trust Co. for funds disbursed for loans and checks issued by the trust company totaling $670,000.

The grand jury said that some of the financial dealings involved instances in which checks were issued without sufficient funds to cover them.

In October, November and December of 1977 and February of 1978, the government alleges, Halperin fraudulently induced Unity Savings Association of Chicago, Ill., to disburse loans totaling $2.6 million to American Urban Science Foundation, for the purpose of using a portion of the funds to complete the amenities of the Valley of Lakes, when he knew the funds would not be applied for that purpose.

The government also contends that Halperin and Cohen, from 1975 to Dec. 1, 1978, distributed to lending institutions, certain prospective purchasers of property, the U.S. Department of Housing and Urban Development and the New York Department of State, property reports and financial statements purporting to contain all current material facts and information and financial data to represent accurately the construction schedule of amenities, maintenance of escrow accounts and the financial condition of High Vista.

It is charged Halperin and Cohen offered to sell lots by means of false and fraudulent representations and promises and the High Vista officers made untrue statements of fact and omitted facts required to be included in property reports to both HUD and the New York Department of State.

U.S. postal inspectors, who have headed the federal investigation into the possibility of mail fraud in connection with the development, entered the case after numerous complaints of deceptive advertising were received from consumers.

In 1976 the state Bureau of Consumer Protection charged High Vista Inc., with deceptive advertising for allegedly failing to deliver promised U.S. Savings Bonds to consumers who visited the Valley of the Lakes vacation-land development after advertising that they would receive the bonds.

The state bureau claimed that the company enticed consumers to the development through a direct mail promotion that offered $25 and $50 savings bond to visitors.