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Robert Trigaux

Lennar: Fighting fraud claim, drywall woes



Miami-based homebuilder Lennar Corp. is fighting battles on two fronts. As first detailed in a Venture blog posting on Jan. 12 , the company is contesting fraud allegations made by San Diego-based Fraud Discovery Institute Inc. and its chief, Barry Minkow, that the home lender employs a Ponzi-like scheme to fund one housing project by collecting money for others. Separately, Lennar is fighting a homeowner backlash apparently tied to a drywall product that emits a bad smell, damages home wiring and in some cases sickens residents.

Lennar is now suing Minkow -- who has his own history of fraud -- claiming the Institute's fraud allegations are false and prompted by its ties with a developer being sued by Lennar. (Lennar amended a libel and extortion lawsuit against developer Nicolas Marsch on Tuesday, adding the Fraud Discovery Institute and Minkow, as defendants. See Lennar's 22-page complaint here.) Minkow has countered with another Web site snidely called "" that includes the "top 5 lies" by the company and a YouTube video in which he outlines his side of Lennar's alleged fraud.

Meanwhile, on the second battlefront, a growing chorus of complaints aimed at Lennar, as well as some other builders, focuses on drywall used in recent home construction. The claim: That the drywall -- which may have come from China -- emits a sulfur-like odor that can make residents of the home sick with respiratory problems and also corrodes the homes' metal wiring and air conditioning.

A powerful tale appears in Thursday's Sarasota Herald-Tribune ("Ground zero in drywall dispute" is the headline) about a Lennar housing development in Manatee County. The story begins:

"Within the Lighthouse Cove subdivision of Lennar's Heritage Harbour development, sits a quaint street of two-story homes called Montauk Point Crossing. Today, it is a virtual ghost town. At least six families have already moved out of their homes, either at Lennar's expense or their own. At least two more are planning their exits as soon as possible."

Some residents have moved out and stopped paying their mortgages, considering their homes uninhabitable. That has sparked foreclosure actions. Some of the homes are now for sale but the owners are not optimistic they will find anyone willing to buy them.

The extent of the Chinese drywall problem, apparently triggered by exposure to moisture, is not yet clear. But some say this may be big enough to require legislative action by the state. Stay tuned.

-- Robert Trigaux, Times Business Columnist

[Last modified: Tuesday, June 1, 2010 11:23am]


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