Resort builders blame financier
Emptied escrow infuriates buyers of unbuilt condos
Atlewa Trust was formed in 2004 in Adairsville, Ga., to be a partner in a proposed $175 million timber deal that never was completed, according to Rufus Paul Harris, who founded Atlewa with Woods and Ancil Garvin, a former Myrtle Beach resident.
By David Wren
The Sun News
Posted on Sun, Oct. 14, 2007
myrtlebeachonline.com
Developers of the failed Bahama Island Resort and Marina say a man who promised to finance the project took off with $5.1 million in condominium deposits and may have left the country.
Duwayne Woods, the purported financier, is nowhere to be found.
"We've chased him all over the country," said Tommy Brittain, a lawyer representing developers Jeff Shoup and Tommy Hix, whose T&J Development of North Myrtle Beach was supposed to build Bahama Island.
One of Woods' former business partners said he heard recently that Woods had moved to Switzerland, and Brittain said "there's some indication he might be out of the country."
Woods did not return messages left at his last known telephone number.
Wherever Woods has gone, some buyers say he is not the culprit in the Bahama Island debacle.
They say Shoup and Hix are to blame for their financial losses because the two men took all of the deposit money out of an escrow account at Bank of America last year and gave it to Woods based on his promise to finance the project.
"You're supposed to be smart businessmen, yet you take millions of dollars out of escrow and just give it to some guy named Duwayne?" said Darla Madden, a Connecticut resident who lost her deposit of nearly $20,000.
"That doesn't sound very smart or sophisticated," Madden said.
The Bahama Island project was supposed to have 320 condos, views of the Intracoastal Waterway, a pool, marina and dry dock storage building. Only the storage building has been built.
It is not clear how Shoup and Hix met Woods.
Brittain said Shoup and Hix made their deal with Woods because "he seemed to have a lot of clout and ability to cut through red tape."
Woods, who said he represented a finance company called Atlewa Trust, also offered the developers better terms than conventional bank financing, Brittain said, which would have increased profits for Shoup and Hix.
"Looking back on it, of course, it was a huge mistake," Brittain said.
Shoup said he is "doing everything I can to assist the buyers," but referred all questions to Brittain. Hix did not return telephone calls seeking comment.
Randall Mullins, a lawyer with the Mullins Law Firm in North Myrtle Beach, said he doesn't buy the story about Woods and disappearing money.
"I see no evidence of any money being transferred to Mr. Woods," Mullins said.
Some of that money might have found its way into one or more of at least 59 corporations Shoup and Hix have formed over the years, according to lawsuits Mullins and lawyer Jarrod Ownbey have filed on behalf of Bahama Island buyers.
Those lawsuits say the condo developers "intended to defraud the [buyers]" because Shoup and Hix knew Bahama Island would never get built.
Mullins said in court documents that he believes Shoup and Hix "have withdrawn deposits from the escrow agent and kept those funds for their own benefit."
Shoup, Hix and T&J Development have defaulted on a combined $13.7 million worth of loans taken out since July 2004, according to court documents. Shoup and Hix are contesting the defaults in court.
Those defaults are in addition to the $5.1 million in missing condo deposits. It is not clear whether any of those deposits will be returned to buyers because the National Bank of South Carolina has filed a foreclosure lawsuit against the Bahama Island property.
That lawsuit, filed in September, says Shoup and Hix have not paid $7.7 million in loans they took out in 2004 as partners in Ship Ahoy LLC, the corporation that owns the land.
The bank wants to sell the land to recover its $7.7 million.
Brittain said the foreclosure might be good news for buyers, because any sale price greater than $7.7 million could generate money for deposit refunds.
Brittain said the 22.2-acre Bahama Island property is worth about $15 million.
"The bank would get its $8 million or so, and there should be enough money left for the $5 million or so we need to collect for the depositors," he said. "That's what I'm hoping will happen."
Mullins said a $15 million price tag - roughly $675,067 per acre - might be overpriced in the slumping Grand Strand real estate market.
Horry County property records show a similar piece of property located adjacent to the Bahama Island site sold for $298,786 per acre a little more than a year ago.
A murky meeting
Atlewa Trust was formed in 2004 in Adairsville, Ga., to be a partner in a proposed $175 million timber deal that never was completed, according to Rufus Paul Harris, who founded Atlewa with Woods and Ancil Garvin, a former Myrtle Beach resident.
Garvin, who now lives in Georgia, did not return a telephone message seeking comment.
Harris said he and Garvin left Atlewa after the timber deal fell through, and he doesn't know what Atlewa was involved in after that. Woods, however, continued to use the business name until at least early this year.
Harris said he last heard from Woods in the late winter or early spring, when he met his former business partner in Atlanta.
Woods, Harris said, wanted to discuss a real estate venture.
"[Woods] said he had $750 million in bonds loaded on Euroclear and he wanted me to help him find investors," Harris said.
Euroclear is a securities clearinghouse based in Brussels, Belgium.
Harris said the bonds Woods described "were supposedly supported by real estate projects that supposedly already had assets and the first phase of construction financing," Harris said. "The sale of the bonds was supposed to provide the rest of the financing for those projects."
Harris said Woods "had hundreds of millions of dollars in mortgages for projects everywhere - a couple of them in South Carolina, Florida, a big one on the Baja Peninsula. The paperwork looked really good."
Harris said he grew suspicious of the deal when Woods would not provide documentation to prove his claims that Atlewa had $70 million in escrow.
"He just kind of blew over my questions and said he'd supply the information later," Harris said. "That's when I ended the meeting."
Harris said he never heard from Woods again.
"The last I heard of Duwayne, he was in Zurich [Switzerland] or Europe and he wasn't coming back to America," Harris said.
Market sours, suits emerge
Hix and Shoup say their companies have sold $628.2 million worth of vacation properties along the Grand Strand and in the U.S. Virgin Islands, according to their company Web site.
The business partners' main company, T&J Development, had $40.76 million in assets as of May 1, 2005, according to unaudited financial statements Hix and Shoup gave to a lender. Those financial statements were included in court documents.
The men's fortunes started to turn sour last year, however, as this area's condo market tanked, according to court records.
Three lenders have filed lawsuits since November against Shoup and Hix, accusing the men of defaulting on a combined $6 million in loans, including $1.75 million that was supposed to help build Tilghman Beach Villas in North Myrtle Beach.
Shoup and Hix deny they have defaulted on the loans, according to court filings, and no court dates have been set.
Another lawsuit says Oceanfront Real Estate Co., which was formed by Shoup and Hix to market their condo projects, abandoned an office it leased at the Gator Hole Plaza shopping center in North Myrtle Beach.
THF Gator Hole Development LLC, which filed the lawsuit in September, wants unspecified back rent and damages. Shoup and Hix have not filed an answer to that lawsuit and no court date is set.
The men were dealt another setback in late September when another company they formed, Smith Bay Developers LLC, couldn't get a permit to build a 214-unit condo project in St. Thomas, Virgin Islands.
A government committee denied the permit because the developers failed to address concerns about traffic, building height and public beach access.
Smith Bay Developers bought the 8.6-acre St. Thomas property for $2.75 million in February 2006, a few months before Shoup and Hix say they made their Bahama Island deal with Woods.
Smith Bay Developers still owes $1.8 million on the Virgin Island property, according to mortgage documents.
Despite the mounting debts and legal problems, Hix and Shoup have continued to advertise the Bahama Island project on their Web site as late as last week.
"What amazes me is that nothing has been done to stop listing these properties," said Mark Chapman of Greenville, who gave Bahama Island's developers $36,000 in deposits for two units. "People out there can still be taken by this group of people."
The bottom lineSome buyers now say they aren't concerned with how their money disappeared but whether they will get it back.
"I want my money; I need my money," said Joan DiGregorio, a New York resident who invested $74,000 in Bahama Island with her sister.
"I don't know if they stole it outright and I don't even care," DiGregorio said. "I just want my money back."
Buyers and their lawyers, however, say they have not been able to get much information from Hix and Shoup. An answering machine takes calls at the telephone number for Oceanfront Real Estate's remaining office in North Myrtle Beach, and buyers say their calls are not returned.
Many of the condos were sold to out-of-state buyers, making it more difficult for them to get in touch with the developers.
In a Sept. 26 letter to Brittain, Mullins said correspondence sent to Shoup and Hix "has proved to be a worthless endeavor."
Shoup and Hix added to buyers' frustrations, Mullins said, when their Oceanfront Real Estate company filed a $5.1 million lien against the Bahama Island property in July.
Oceanfront Real Estate sent the project's buyers a letter saying the lien was supposed to protect their interests in the property in case developers tried to sell it.
"The property can not be transferred to another party or a new construction loan closed until the lien is satisfied" and buyers' deposits are returned, according to the letter.
Mullins said the lien "is just a stall" to keep buyers from getting their money back.
"There was no purpose in filing that lien because they [Shoup and Hix] are the only ones who could have sold the property anyway," Mullins said.
Now that a bank is foreclosing on the land, the lien will take a back seat to the $7.7 million mortgage on the land.
Some buyers say they have been promised their money, only to see the deadline for repayment come and go.
Jim Stadick, a Tampa resident who gave Oceanfront Real Estate a $30,000 deposit, said the company told him buyers would get their money in September.
"That didn't happen," Stadick said.
"I probably would have been better off spending my money on the lottery."
Chapman, the buyer from Greenville, said he feels as if he's been robbed twice - first of his money and then of his condo.
"It's one thing to buy a condo and the value goes down, because you still have a condo," he said.
"I don't have anything."
The Sun News staff writer Jenny Burns contributed to this article.
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