Miami, FL – Lawsuits Challenge Area’s Largest Private Land Sale

Miami, FL – Was the biggest private land sale in Volusia County history built on a fraud?

That’s the claim in a pair of federal lawsuits that allege the 6,000 acres in Edgewater known now as the Restoration development were originally purchased in 2006 with more than $30 million swindled from a Miami real estate tycoon before being resold on the same day for the record price of $96.7 million.

The lawsuits were filed by members of an Orthodox Jewish community who claim they were misled and denied a share of profits from subsequent sales. Lawyers for the original purchaser have denied the allegations of fraud, denouncing the lawsuits as a reaction from real estate investors who lost out when the market plunged.

But the suit alleges a darker side to the deal, including a Bernie Madoff-like scam and tall tales of orange groves in Edgewater that sold for twice the going rate.

Volusia County Property Appraiser Morgan Gilreath called the Jan. 20, 2006, sale for $96.7 million a “landmark sale.” Four years later, it remains the highest price for a vacant land sale in the county.

Don Mears Jr., the general manager for buyer Hammock Creek Green and the development company G.S. Florida, at the time called the price fair for such a big tract along Interstate 95. Ted Brown, an attorney for G.S. Florida, said this week the property would prove its worth ultimately.

“We believe when we have the ability to develop on it, we’ll be back to where we need to be,” Brown said.

The price certainly marked a peak for area real estate — the price per acre was double the going rate for large-acre vacant parcels, according to an analysis by the property appraiser’s office. While other large-acreage properties in the area were selling for $7,500 per acre, Hammock Creek Green paid $15,385 per acre.

The purchase price turned out to be so high the property appraiser’s office couldn’t use it in calculating property values for the next year, Jan Cornelius, Volusia’s chief deputy property appraiser, said in an e-mail response to questions about the sale.

“While we review and consider all sales in our market analysis, this sale was an outlier and certainly not one that we wanted to base the surrounding property values on,” Cornelius wrote. “Other than this one sale, it would have been difficult to defend and probably not a fair indicator of value” for other properties.

Restoration, Hammock Creek Green and G.S. Florida are not mentioned in the lawsuits against the man who sold them the property, part of which is in New Smyrna Beach, though no development is proposed there.

The project plans to bring 8,500 housing units during the next 20 years, doubling the population of Edgewater. Developers have used so-called smart-growth principles such as clustering construction to preserve as much as 3,700 acres (more than 40 percent of the parcel is wetlands) in hopes of a favorable review from government planners.

Edgewater’s City Council signed off on changes to its future growth plan, but the Florida Department of Community Affairs objected, finding the development represents urban sprawl and that Edgewater doesn’t have the water supply or road network to meet its future needs. Changes have been worked out over the course of nine months between the land-planning agency, developer and city, and the council plans to vote on modifications at the end of the month.

A lawsuit filed last May in U.S. District Court in New Jersey alleges the money Eli Weinstein used to first purchase the Edgewater property came from Miami real estate tycoon Harvey Wolinetz. The lawsuit says Weinstein, who lives in New Jersey, was the “mastermind of the schemes” in which he and some partners defrauded Wolinetz of at least $79 million in real estate deals involving 12 properties in Florida and five other states.

Attorneys for Weinstein have denied the accusations, dismissing the claims as nothing more than investors angered by their losses once the market turned sour.

The lawsuit — and another, filed earlier in the federal district court in South Florida — allege Weinstein capitalized on his association with Wolinetz as members of the same Orthodox Jewish community to bilk him out of the money. Wolinetz had recently lost his wife and mother and was caring for his father and trusted Weinstein to conduct their business, the lawsuitstates.

The suit portrays a classic affinity fraud — similar to the way many of Madoff’s victims were friends and acquaintances — in which transactions were built on trust and completed with a handshake or simple letter.

“Members of the community believe that a man’s honor is his most valuable possession and a man’s word is as good as any written contract,” the South Florida lawsuit says. “As a result, business is often transacted without any documentation or through simple letter agreements prepared by the parties themselves.”

Six others — including a rabbi — have made similar allegations in separate federal lawsuits.

Those suits describe a scheme that used false or forged documents to support a series of land deals that either never happened, or — as in the case with the Edgewater property — led to sales that cut out the plaintiffs from a share of the proceeds.

“This particular transaction (in Edgewater) is part of a much, much larger claim,” said Ari Weisbrot, a New Jersey-based attorney working for Wolinetz. “Mr. Wolinetz believed he paid for (the Edgewater property). It was only much later that he found out it had been sold.”

According to the suit, Weinstein sought a loan in September 2005 of $37.5 million from a company owned and controlled by Wolinetz to purchase the Edgewater property. Weinstein promised the property would yield rental income from orange groves and presented two rent checks to Wolinetz. Only the first check cleared, and there are no orange groves. Weinstein also talked of valuable mineral rights leading to purchase offers for the land.

Wolinetz was to be repaid on the resale of the land, along with 50 percent of any profits from its sale. The suit states Weinstein claims he bought the land with his own company and sold it to a third party without Wolinetz’s knowledge. Wolinetz was told his money was reinvested in the purchase of other properties.