menu bar

navigate through articles

This Article: AMERICAN BANKER, June 27, 1996

Valley of Lakes RICO Class Action against PNCBANK, et al.
ripped edge: news articles

Fraud Suit Against PNC Gets Class-Action Status


A federal judge has given class-action status to lawsuits filed by Pennsylvania vacation home-owners who allege that they were defrauded by PNC Bank Corp. and a New Jersey developer.

PNC said it will ask U.S. District Judge James F. McClure Jr. to reconsider the classification.

Bank officials also said they hope the issue can be partly resolved in U.S. Bankruptcy Court in Wilkes-Barre, Pa., this week.

Property owners in a Hazleton, Pa., resort called Valley of Lakes say developer Frank M. Cedrone failed to make road, sewer, water, and other improvements promised in their purchase contracts.

PNC's involvement stems from a $23 million loan on the resort it inherited when it acquired First Eastern Corp. of Scranton in June 1994.

PNC said it is seeking to sell the loan, which has been written down to $1 million, to Double Diamond Inc., a Texas developer that promises to spend $6 million to complete Valley of Lakes' infrastructure.

The class-action designation covers 1,300 lot owners in the unfinished Valley of Lakes resort. They are seeking an undetermined amount of punitive and monetary damages.

"The issue here is what can be done to the satisfaction of the homeowners group as well as others," said PNC spokesman Jonathan Williams.

Roger S. Antao, the property owner's attorney, said PNC is not off the hook even if it sells the loan. First Eastern knowingly wrote mortgages for a project that would never be developed, and as the lender's successor, PNC is liable, he claimed.

For residents of Valley of Lakes, a 3,900-acre recreational housing development near the Pocono Mountains, the ordeal has been a nightmare, Mr. Antao said. Owners paid as much as $100,000 each for lots that are now worth about $5,000.

Mr. Antao said Mr. Cedrone made numerous contractual promises - to build road, water and, sewer systems, a man-made lake, and an Arnold Palmer-designed golf course - that were never honored. Many of the lot owners were retired, including some who lost their life savings and were impoverished, Mr. Antao said.

PNC and First Eastern had the opportunity to foreclose for three years, Mr. Antao said, and the bank's inaction has held up bankruptcy proceedings. PNC said it simply chose another route rather than foreclose on the worthless property.

Valley of Lakes RICO Class Action against PNCBANK, et al.

| Next Article

Home | Court Decisions | News Articles | RICO Complaint | Exhibits