CASHIERS, N.C. — Attorneys for 13 people who bought land in a controversial Big Ridge subdivision say federal prosecutors in Miami and Pittsburgh have opened a criminal investigation into loans obtained from SunTrust.
The 13 buyers have asked a federal judge in North Carolina to delay action in a civil fraud lawsuit filed against them by SunTrust.
"Defendants understand that they are more than material witnesses in the government's investigation and have not been ruled out as targets of the criminal investigation and/or potential defendants," lawyers argued in documents filed in U.S. District Court in Bryson City.
The buyers, from Florida and Pennsylvania, bought lots in the development in 2006 and later obtained mortgages of more than $1 million apiece from SunTrust. The bank alleges that all of them falsified their income to obtain the money. SunTrust is seeking repayment of more than $19 million.
In an affidavit filed in federal court, Michael P. O'Day Sr., a Pittsburgh lawyer, says he represents one of the 13 defendants in the criminal investigation and has been in contact with federal prosecutors in Miami and Pittsburgh.
O'Day said the SunTrust transactions are part of a broader investigation of the development and "certain individuals" involved with it.
"I have been advised that the U.S. government believes some and/or all of the individuals involved with the development potentially committed criminal acts," O'Day said.
Most work in the development started by Domenic Rabuffo is at a standstill as SunTrust and other banks foreclose on lot after lot. Partially constructed houses sit abandoned on more than 15 lots.
Rabuffo, a native of New York and part-time resident of Miami, was convicted of mortgage fraud in New York in the late 1980s.
The only recent activity in the development, initially named Hampton Springs, occurred last week when workers moved a mobile home from one lot to another after a mortgage foreclosure suit was filed on the lot where the mobile home had been located. The name of the development has since been changed to Spring Ridge Vista.
Foreclosure suits have been brought against owners of most of the lots in the development as well as individual lots Rabuffo purchased in the name of his ex-wife, Mae.
Sylva, N.C., lawyer Jay Pavey is fighting his own battle with SunTrust, asking a federal judge to quash the bank's effort to subpoena his files on the land purchases and mortgages he handled for the 13 buyers.
Last month Magistrate Dennis L. Howell ordered Pavey to surrender some of the documents SunTrust has requested. Last week Pavey argued that the subpoena is overly broad and would put an undue burden on his law firm.
Attorneys for SunTrust oppose any effort to delay proceedings in the civil suit and want to question Pavey under oath on Monday.
Pavey prepared all of the deeds and mortgages for Rabuffo's development over the last few years. He says he was not aware of anything improper.