3D Resorts-Bluegrass, LLC (Green Farm)

Agency: Consumer Financial Protection Bureau
Date: July 2013
Type: enforcement action
Source: consumerfinance.gov/enforcement/actions/3d-resorts-bluegrass/
Pages: 49
PDFs: 3 documents (links below)

Documents in this case

Penalties and relief · July 2013 · 29 p.
Consent order · Dec. 2013 · 14 p.
Stipulation · Dec. 2013 · 5 p.

Case summary

In the bankruptcy action, the CFPB filed a proof of claim related to potential violations including alleged misrepresentations by a developer/lot seller and others regarding the registration, marketing, and sale of certain lots on a property known as the Green Farms Resort in Grayson and Breckinridge Counties, Kentucky. In the administrative action, the Bureau filed a Notice of Charges against 3D Resorts-Bluegrass alleging a series of violations of the Interstate Land Sales Full Disclosure Act. The Notice of Charges seeks rescission of contracts, restitution, civil money penalties, injunctive relief, and other legal and equitable relief. The parties have agreed to a proposed settlement of this action and have submitted it for the bankruptcy court’s approval.

Important documents

Notice of Charges

Consent Order

Stipulation

Case docket

View case filings

Penalties and relief (July 2013)

PDF of this document (29 pages)

Page 2

UNITED STATES OF AMERICA Before the CONSUMER FINANCIAL PROTECTION BUREAU

ADMINISTRATIVE PROCEEDING File No. 2013-CFPB-0002

In the Matter of:

NOTICE OF CHARGES

SEEKING RESCISSION,

RESTITUTION, CIVIL MONEY

PENALTIES, AND OTHER

LEGAL AND EQUITABLE RELIEF 3D Resorts-Bluegrass, LLC

The Consumer Financial Protection Bureau (“Bureau” or “CFPB”) hereby submits the following Notice of Charges against the Respondent, 3D Resorts-Bluegrass, LLC, relating to the offering, marketing, and sale of property in Grayson and Breckinridge Counties, Kentucky. In support of its Notice of Charges, the Bureau alleges and submits as follows: JURISDICTION AND LEGAL AUTHORITY FOR THE PROCEEDING

The CFPB has subject matter jurisdiction over this matter pursuant to Sections 1053 and 1055 of the Consumer Financial Protection Act of 2010 (“CFPA”), 12 U.S.C. §§ 5563, 5565.

The CFPB is an independent agency of the United States and has jurisdiction to enforce the CFPA and other Federal consumer financial laws, as defined in 12 U.S.C. § 5481(14), including the Interstate Land Sales Full Disclosure Act (“ILSA”), 15 U.S.C. §§ 1701-1720, and its implementing regulations. By virtue of the CFPA, the CFPB has assumed all federal government responsibility for administration and enforcement of ILSA.

2013-CFPB-0002 Document 1 Filed 06/14/2013 Page 1 of 29

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STATEMENT OF FACTS 3.

The Respondent, 3D Resorts-Bluegrass, LLC (“3D Resorts-Bluegrass”) is a limited-liability company organized under the laws of Kentucky. 4.

3D Resorts-Bluegrass is the owner and operator of property located in the Commonwealth of Kentucky known as the Green Farm Resort (the “Resort Property”), a golf/recreation facility with hundreds of individual lots spread over several different development phases.

The Resort Property is, and at all times relevant to this proceeding has been, a “subdivision,” as that term is defined under ILSA, 15 U.S.C. § 1701(3). 6.

3D Resorts-Bluegrass is, and at all times relevant to this proceeding has been, a “developer,” as that term is defined under ILSA, 15 U.S.C. § 1701(5), because it directly or indirectly sold, offered to sell, or advertised for sale lots on the Resort Property. 7.

Each lot sold and offered for sale on the Resort Property constituted a “lot” within the meaning of the regulations implementing ILSA, 12 C.F.R. § 1010.1(b), and was not exempt under 15 U.S.C. § 1702 or any subsection thereunder. 8.

3D Resorts-Bluegrass is the debtor in a bankruptcy currently pending in the United States Bankruptcy Court in the Western District of Kentucky, In re 3D Resorts- Bluegrass, LLC, Case Number 11-41599.

The Development of the Green Farm Resort and the Marketing and Sales of Lots

Since late 2008, 3D Resorts-Bluegrass has been engaged in the development, marketing, and sale of lots on the Resort Property. There were four sections in which lots, each generally a quarter-acre to a half-acre in size, were available for purchase. Lots were marketed as 2013-CFPB-0002 Document 1 Filed 06/14/2013 Page 2 of 29

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properties on which purchasers could build “vacation homes” and enjoy the golf course and other amenities of the Resort Property.

10.

3D Resorts-Bluegrass, directly and through its agents, also engaged in the origination of mortgages by providing financing on sales of lots on the Resort Property and serviced such mortgages. Additionally, 3D Resorts-Bluegrass collected debts on allegedly delinquent notes.

11.

3D Resorts-Bluegrass, directly and through its agents, advertised and marketed the sale of lots on Resort Property through the mail, newspaper advertisements, the internet, and trade shows, and hosted promotional dinners or other events, made phone call solicitations, and used other instruments of transportation and communication in interstate commerce and the mails.

12.

For example, 3D Resorts-Bluegrass and its agents sent marketing materials by mail to potential purchasers, offered promotional material and tours at home shows in Kentucky and other states, and collected contact information from potential purchasers and then solicited them by phone, offering tours of the Resort Property accompanied by complimentary gifts or overnight accommodations at the property.

3D Resorts-Bluegrass’ Misrepresentations and Material Omissions 13.

In marketing the Resort Property to prospective purchasers, 3D Resorts- Bluegrass, directly and through its agents, made several material misrepresentations and material omissions in the Property Reports and elsewhere, in violation of ILSA, 15 U.S.C. §§ 1701-1720 and its implementing regulations.

14.

For example, in or about February 2009, 3D Resorts-Bluegrass filed with the United States Department of Housing and Urban Development (“HUD”), as part of its Statement 2013-CFPB-0002 Document 1 Filed 06/14/2013 Page 3 of 29

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of Record, a Property Report dated February 26, 2009 (“February 26, 2009 Property Report”), which is attached hereto as Exhibit A.

15.

3D Resorts-Bluegrass distributed to purchasers and prospective purchasers the February 26, 2009 Property Report.

16.

The February 26, 2009 Property Report contains numerous untrue statements of material fact or omits material facts.

17.

By way of example, the February 26, 2009 Property Report represented that 3D Resorts-Bluegrass escrowed sufficient funds to assure completion of certain electric lines in Section 2 of the Resort Property. In fact, 3D Resorts-Bluegrass never escrowed any such funds. 18.

By way of further example, the February 26, 2009 Property Report represented that a septic tank installation fee would cost approximately $260.00 to the consumer. In fact, the one-time cost of such an installation was more than ten times that amount. 19.

Similarly, in or about January 2010, 3D Resorts-Bluegrass filed with HUD, as part of its consolidated and amended Statement of Record, a Property Report dated January 13, 2010 (“January 13, 2010 Property Report”), which is attached hereto as Exhibit B. 20.

3D Resorts-Bluegrass distributed to purchasers and prospective purchasers the January 13, 2010 Property Report.

21.

The January 13, 2010 Property Report also contains untrue statements of material fact or omits material facts.

22.

By way of example, the January 13, 2010 Property Report represented that 3D Resorts-Bluegrass escrowed sufficient funds to assure completion of certain electric lines in Section 2 of the Resort Property. In fact, 3D Resorts-Bluegrass never escrowed any such funds. 2013-CFPB-0002 Document 1 Filed 06/14/2013 Page 4 of 29

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23.

By further way of example, the January 13, 2010 Property Report represented that the construction of a centralized sewage treatment plant for Section 4 of the Resort Property would begin on or about April 1, 2010, and should be “completed and available for use” by December 31, 2011. In fact, construction was not undertaken or reasonably expected to be undertaken or completed by the stated dates, and as of the filing of this Notice of Charges has not been undertaken.

24.

Due to the size of the lots in Section 4 of the Resort Property, no individual septic systems are permitted in Section 4, and therefore, a central sewage system is necessary to service these lots.

25.

By further way of example, the January 13, 2010 Property Report falsely and misleadingly stated that eight rental cabins were completed and available for use on the Resort Property. In fact, eight rental cabins were not completed and available for use. 26.

In addition, on or before March 22, 2010, 3D Resorts-Bluegrass made several material changes to the January 13, 2010 Property Report, but this Property Report retained the January 13, 2010 date on its cover. 3D Resorts-Bluegrass did not file this Property Report with HUD, but did distribute it to purchasers and prospective purchasers from on or about March 22, 2010 forward. This Property Report (the “March 22, 2010 Property Report”) is attached hereto as Exhibit C.

27.

The March 22, 2010 Property Report contains untrue statements of material fact or omitted material facts.

28.

By way of example, the March 22, 2010 Property Report continued to represent that all lots in Section 4 of the Resort Property will be served by a central sewage system that would be constructed by 3D Resorts-Bluegrass.

2013-CFPB-0002 Document 1 Filed 06/14/2013 Page 5 of 29

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29.

By further way of example, the March 22, 2010 Property Report represented that the construction of a centralized sewage treatment plant would begin on or about April 1, 2010, and should be “completed and available for use” by December 31, 2011. In fact, construction was not undertaken or reasonably expected to be undertaken or completed by the stated dates, and as of the date of the filing of this Notice of Charges has not been undertaken. 30.

Due to the size of the lots in Section 4 of the Resort Property, no individual septic systems are permitted in Section 4, and therefore, a central sewage system is necessary to service these lots.

31.

By further way of example, the March 22, 2010 Property Report falsely and misleadingly stated that eight rental cabins were completed and available for use on the Resort Property. In fact, eight rental cabins were not completed and available for use. 32.

By further way of example, the March 22, 2010 Property Report falsely and misleadingly stated that a General Store was completed and available for use. In fact, on or about February 6, 2010, the General Store was completely destroyed in a fire and has not been reconstructed.

33.

In addition to those false, fraudulent, and misleading statements and omissions in the Property Reports identified above, 3D Resorts-Bluegrass, directly and indirectly through its agents, made additional material misrepresentations to purchasers and potential purchasers in advertisements, marketing materials, sales pitches, and other materials used to induce consumers to purchase lots on the Resort Property.

34.

By way of example, 3D Resorts-Bluegrass and its agents made misrepresentations, through oral communications, demonstratives, and other promotional 2013-CFPB-0002 Document 1 Filed 06/14/2013 Page 6 of 29

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materials, pertaining to the infrastructure and amenities available to the lot or on the Resort Property. These misrepresentations included:

3D Resorts-Bluegrass and its agents falsely represented orally to purchasers and prospective purchasers and on maps distributed and made available to purchasers and prospective purchasers that a large (eighty-acre) man-made lake was being constructed on the Resort Property, thus making available “lakefront” and “lakeview” lots, and that owners of lots not affronting the man-made lake would still have access to the same; b.

3D Resorts-Bluegrass and its agents falsely represented orally, on maps distributed and made available to purchasers and prospective purchasers, and in other promotions, advertisements, depictions, or communications, that an RV Park, an amenity available to lot owners, was being constructed on the Resort Property; c.

3D Resorts-Bluegrass and its agents falsely represented orally and in other promotions, advertisements, depictions, or communications that a centralized sewage system was being constructed for all of the lots in Section 4 of the Resort Property; d.

3D Resorts-Bluegrass and its agents falsely represented orally and in other promotions, advertisements, depictions, or communications that the water lines in Section 2 were complete;

3D Resorts-Bluegrass and its agents falsely represented orally and in other promotions, advertisements, depictions, or communications that construction of eight cabins, for use by lot owners and their guests at a discounted rate, were complete, and they were available for use;

3D Resorts-Bluegrass and its agents falsely represented in the March 22, 2010 Property Report and in other promotions, advertisements, depictions, or communications that a 2013-CFPB-0002 Document 1 Filed 06/14/2013 Page 7 of 29

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General Store was in operation on the Resort Property, despite the fact that the store had been completely destroyed by fire and has not been reconstructed; g.

3D Resorts-Bluegrass and its agents falsely represented orally and in other promotions, advertisements, depictions, or communications that the “governor” had purchased one of the lots, and that the “governor” had committed to provide funding for a children’s camp on the Resort Property;

3D Resorts-Bluegrass and its agents falsely provided inflated historical sales prices of lots that had been previously sold on the Resort Property, despite the fact that such lots had sold at prices far less than what was represented to prospective purchasers; and i.

3D Resorts-Bluegrass and its agents falsely indicated that its property was properly registered with HUD, and omitted the material fact that HUD had suspended 3D Resorts-Bluegrass’ Statement of Record, thereby prohibiting further sales of lots on the Resort Property.

Continued Sale Post-Suspension 35.

On or about April 19, 2011, HUD served a suspension notice (the “Suspension Notice”) on 3D Resorts-Bluegrass and its agents, pursuant to 15 U.S.C. § 1706(b) and its implementing regulations, which is attached hereto as Exhibit D. The Suspension Notice advised that HUD had conducted a review of 3D Resorts-Bluegrass’ consolidation and amendment to the filed Statement of Record, including the January 13, 2010 Property Report, and found it deficient in certain material respects.

36.

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Bluegrass an effective date for the Statement of Record, and that the sale of lots on the Resort Property, unless exempt, would violate ILSA and potentially subject 3D Resorts-Bluegrass and others to penalties.

37.

The Suspension Notice advised 3D Resorts-Bluegrass and others of the deficiencies apparent in the consolidation and amendment filed to its current Statement of Record filed on or about March 29, 2011, explained how to correct those deficiencies, and informed it of its right to a hearing before an Administrative Law Judge. Neither 3D Resorts- Bluegrass nor others have taken the appropriate corrective actions with respect to the deficiencies cited in the Suspension Notice, which remains in effect. 38.

As a result of the Suspension Notice, there was no longer an effective Statement of Record for the Resort Property. ILSA therefore prohibited the sale of any lot on the Resort Property. 15 U.S.C. § 1703(a)(1)(A).

39.

Notwithstanding this Suspension Notice and prohibitions upon the further marketing and sale of lots on the Resort Property, 3D Resorts-Bluegrass, directly and through its agents, continued to market and sell lots on the Resort Property. 40.

Furthermore, 3D Resorts-Bluegrass and its agents also failed to comply with several registration and filing requirements mandated by ILSA and the applicable regulations. 41.

As set forth in the Suspension Notice, 3D Resorts-Bluegrass and its agents failed to timely file financial statements for fiscal year 2009, and the annual report of activity due in March 2010 and March 2011 required under the regulations implementing ILSA, 24 C.F.R. §§ 1710.212 and 1710.310 (now codified at 12 C.F.R. §§ 1010.212 and 1010.310). 42.

3D Resorts-Bluegrass and its agents failed to timely file amendments disclosing changes to representations of material fact required to be in the Statement of Record. On or about 2013-CFPB-0002 Document 1 Filed 06/14/2013 Page 9 of 29

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October 29, 2010, 3D Resorts-Bluegrass entered into a Management Agreement with National Resort Marketing Corp. (“NRMC”) pursuant to which NRMC, as an agent of 3D Resorts- Bluegrass, became involved in the marketing and sale of lots on the Resort Property, as well as the operation and development of the Resort Property. The Management Agreement dated October 29, 2010, by and between 3D Resorts-Bluegrass and NRMC was required to be disclosed no later than 15 days after the contract was executed, but this disclosure was not made until March 29, 2011.

43.

The complete destruction of the General Store by a fire on or about February 6, 2010, required 3D Resorts-Bluegrass to amend the January 13, 2010 Property Report to reflect that the General Store was not “100%” complete and available for use no later than 15 days after the fire, but this disclosure was never made.

VIOLATIONS OF LAW Count I: Untrue Statements of Material Fact in the February 26, 2009 Property Report (15 U.S.C. § 1703(a)(1)(C))

44.

Paragraphs 1 through 43 are incorporated here by reference. 45.

3D Resorts-Bluegrass and its agents, directly or indirectly, made use of means or instruments of transportation or communication in interstate commerce or the mails with respect to the sale of lots on the Resort Property.

46.

3D Resorts-Bluegrass and its agents sold lots on the Resort Property although the February 26, 2009 Property Report included untrue statements of material fact or omitted material facts required to be stated therein pursuant to 15 U.S.C. §§ 1704-1707 or the regulations implementing ILSA.

47.

By way of example, the February 26, 2009 Property Report falsely and misleadingly stated, among other things, that 3D Resorts-Bluegrass escrowed sufficient funds in 2013-CFPB-0002 Document 1 Filed 06/14/2013 Page 10 of 29

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Leitchfield Deposit Bank to assure completion of electrical service lines in Section 2 of the Resort Property, where in fact, such funds were not escrowed. 48.

Additionally, the Property Report represented that a septic tank installation fee would cost approximately $260.00 to the consumer, where, in fact, the cost of such installation was more than ten times this amount.

49.

These misrepresentations were material in that they had a natural tendency to influence, or were capable of influencing, the decision of the purchaser or prospective purchaser. 50.

This false and misleading February 26, 2009 Property Report was filed with HUD and furnished to purchasers and prospective purchasers. 51.

Therefore, 3D Resorts-Bluegrass, through the conduct described in Paragraphs 44 through 50 above, violated 15 U.S.C. § 1703(a)(1)(C). Count II: Untrue Statements of Material Fact in the January 13, 2010 Property Report (15 U.S.C. § 1703(a)(1)(C))

52.

Paragraphs 1 through 43 are incorporated here by reference. 53.

3D Resorts-Bluegrass, directly or indirectly, made use of means or instruments of transportation or communication in interstate commerce or the mails with respect to the sale of lots on the Resort Property.

54.

3D Resorts-Bluegrass sold lots on the Resort Property although the January 13, 2010 Property Report contained untrue statements of material fact or omitted material facts required to be stated therein pursuant to 15 U.S.C. §§ 1704-1707 or the regulations implementing ILSA.

55.

By way of example, the January 13, 2010 Property Report falsely and misleadingly repeated the statement that 3D Resorts-Bluegrass escrowed sufficient funds for the provision of electrical service in Section 2, where, in fact, such funds were not escrowed. 2013-CFPB-0002 Document 1 Filed 06/14/2013 Page 11 of 29

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56.

The January 13, 2010 Property Report falsely and misleadingly stated that 3D Resorts-Bluegrass secured a loan from PlainsCapital Bank to construct any required electric lines in Section 3 of the Resort Property, when, in fact, it had not secured such a loan. 57.

Additionally, the January 13, 2010 Property Report falsely and misleadingly stated that a sewage treatment plant was scheduled for construction, when, in fact, no such construction was ever undertaken or reasonably planned to be undertaken. 58.

Additionally, the January 13, 2010 Property Report falsely and misleadingly stated that water lines for Section 2 of the Resort Property were complete, when in fact, as of September 14, 2010, the Grayson County Water District refused to accept the Section 2 water lines into its system due to outstanding issues with the construction of the lines. 59.

Additionally, the January 13, 2010 Property Report falsely and misleadingly stated that construction of water lines for Section 4 of the Resort Property would begin on or about April 1, 2010 and was expected to be completed by December 31, 2011, when, in fact, such lines were not and are not completed, and were not reasonably intended to be completed by this date.

60.

Additionally, the January 13, 2010 Property Report falsely and misleadingly stated that eight rental cabins were completed and available for use on the Resort Property, when, in fact, eight rental cabins were not completed and available for use. 61.

These misrepresentations were material in that they had a natural tendency to influence, or were capable of influencing, the decision of the purchaser or prospective purchaser. 62.

This false and misleading January 13, 2010 Property Report was filed with HUD, and it was furnished to purchasers and prospective purchasers. 2013-CFPB-0002 Document 1 Filed 06/14/2013 Page 12 of 29

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63.

Therefore, 3D Resorts-Bluegrass, through the conduct described in Paragraphs 52 through 62 above, violated 15 U.S.C. § 1703(a)(1)(C). Count III: Property Report Created March 22, 2010 (15 U.S.C. § 1703(a)(1)(B) and 1707(b))

64.

Paragraphs 1 through 43 are incorporated here by reference. 65.

66.

On or about March 22, 2010, 3D Resorts-Bluegrass revised the January 13, 2010 Property Report in several material respects. Although the report was created on or about March 22, 2010, the Property Report retained the January 13, 2010 date on its cover. Furthermore, the March 22, 2010 Property Report was provided to purchasers and prospective purchasers with the false implication that it was the official Property Report that had been filed with HUD and was effective.

67.

Therefore, 3D Resorts-Bluegrass, through the conduct described in Paragraphs 64 through 66 above, violated 15 U.S.C. §§ 1703(a)(1)(B) and 1707(b). Count IV: Untrue Statements of Material Fact in the March 22, 2010 Property Report (15 U.S.C. § 1703(a)(1)(C))

68.

Paragraphs 1 through 43, inclusive are reincorporated here by reference. 69.

70.

3D Resorts-Bluegrass sold lots on the Resort Property although the March 22, 2010 Property Report contained untrue statements of material fact or omitted material facts 2013-CFPB-0002 Document 1 Filed 06/14/2013 Page 13 of 29

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required to be stated therein pursuant to 15 U.S.C. §§ 1704-1707 or the regulations implementing ILSA.

71.

By way of example, the March 22, 2010 Property Report falsely and misleadingly stated that a central sewage treatment plant was scheduled for construction, when, in fact, no such construction was ever undertaken or reasonably expected to be undertaken. 72.

Additionally, the March 22, 2010 Property Report falsely and misleadingly stated that water lines for Section 2 of the Resort Property were complete, when in fact, as of September 14, 2010, the Grayson County Water District refused to accept the Section 2 water lines into its system due to outstanding issues with the construction of the lines. 73.

Additionally, the March 22, 2010 Property Report falsely and misleadingly stated that construction of water lines for Section 4 of the Resort Property would begin on or about April 1, 2010, and was expected to be completed by December 31, 2011, when, in fact, such construction was not begun at such time, such lines were not and are not completed, and the lines were not reasonably intended to be begun or completed by the stated dates. 74.

Additionally, the March 22, 2010 Property Report falsely and misleadingly stated that eight rental cabins were completed and available for use on the Resort Property, when, in fact, eight rental cabins were not completed and available for use. 75.

Additionally, the March 22, 2010 Property Report falsely and misleadingly stated that a General Store was completed and available for use, when, in fact, on or about February 6, 2010, the General Store was completely destroyed in a fire and has not been reconstructed.

76.

These misrepresentations were material in that they had a natural tendency to influence, or were capable of influencing, the decision of the purchaser or prospective purchaser. 2013-CFPB-0002 Document 1 Filed 06/14/2013 Page 14 of 29

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77.

This false and misleading March 22, 2010 Property Report was not filed with HUD, and it was furnished to purchasers and prospective purchasers. 78.

Therefore, 3D Resorts-Bluegrass, through the conduct described in Paragraphs 68 through 77 above, violated 15 U.S.C. § 1703(a)(1)(C). Count V: Fraud in Offering and Sale of Lots (15 U.S.C. § 1703(a)(2)(A), (B), & (C))

79.

Paragraphs 1 through 43 are incorporated here by reference. 80.

3D Resorts-Bluegrass and its agents falsely represented to purchasers and prospective purchasers that an eighty-acre lake would be constructed on the Resort Property. In fact, no such lake was constructed or intended to be constructed, and each of these representations was false at the time it was made. 82.

In making these representations, 3D Resorts-Bluegrass and its agents employed devices, schemes, or artifices to defraud, and obtained money by means of untrue statements of material fact, and by means of omissions of material facts necessary to make the statements not misleading. Additionally, in making these representations and omissions, 3D Resorts-Bluegrass engaged in a transaction, practice, or course of business which would operate as a fraud or deceit upon purchasers.

83.

The representations were also material and had a natural tendency to influence, and were capable of influencing, the decisions of purchasers and prospective purchasers. 84.

Therefore, 3D Resorts-Bluegrass, through the conduct described in Paragraphs 79 through 83 above, violated 15 U.S.C. § 1703(a)(2)(A), (B), and (C). 2013-CFPB-0002 Document 1 Filed 06/14/2013 Page 15 of 29

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Count VI: Fraud in Offering and Sale of Lots (15 U.S.C. § 1703(a)(2)(A), (B), &(C))

85.

Paragraphs 1 through 43 are incorporated here by reference. 86.

3D Resorts-Bluegrass and its agents falsely represented to purchasers and prospective purchasers that an RV Park would be constructed on the Resort Property. In fact, no such RV Park was constructed or intended to be constructed, and each of these representations was false at the time it was made.

88.

In making these representations, 3D Resorts-Bluegrass and its agents employed devices, schemes, or artifices to defraud, and obtained money by means of untrue statements of material facts, and by means of omissions of material facts necessary to make the statements not misleading. Additionally, in making these representations, 3D Resorts-Bluegrass engaged in a transaction, practice, or course of business which would operate as a fraud or deceit upon purchasers.

89.

The representations were also material and had a natural tendency to influence, and were capable of influencing, the decisions of purchasers and prospective purchasers. 90.

Therefore, 3D Resorts-Bluegrass, through the conduct described in Paragraphs 85 through 89 above, violated 15 U.S.C. § 1703(a)(2)(A), (B), and (C). Count VII: Fraud in Offering and Sale of Lots (15 U.S.C. § 1703(a)(2)(A), (B), & (C))

91.

Paragraphs 1 through 43 are incorporated here by reference. 2013-CFPB-0002 Document 1 Filed 06/14/2013 Page 16 of 29

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92.

3D Resorts-Bluegrass and its agents falsely represented to purchasers and prospective purchasers that a centralized sewage system would be constructed in Section 4 of the Resort Property. In fact, no such centralized sewage system was constructed or intended to be constructed, and each of these representations was false at the time it was made. 94.

In making these representations, 3D Resorts-Bluegrass and its agents employed devices, schemes, or artifices to defraud, and obtained money by means of untrue statements of material facts, and by means of omissions of material facts necessary to make the statements not misleading. Additionally, in making these representations, 3D Resorts-Bluegrass engaged in a transaction, practice, or course of business which would operate as a fraud or deceit upon purchasers.

95.

The representations were also material and had a natural tendency to influence, and were capable of influencing, the decisions of purchasers and prospective purchasers. 96.

Therefore, 3D Resorts-Bluegrass, conduct described in Paragraphs 91 through 95 above, violated 15 U.S.C. § 1703(a)(2)(A), (B), and (C).

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Count VIII: Fraud in Offering and Sale of Lots (15 U.S.C. § 1703(a)(2)(A), (B), & (C))

97.

Paragraphs 1 through 43 are incorporated here by reference. 98.

99.

3D Resorts-Bluegrass and its agents falsely represented to purchasers and prospective purchasers that water lines in Section 2 of the Resort Property were complete and that water lines in Section 4 of the Resort Property would be constructed beginning on or about April 1, 2010 and were expected to be completed on or before December 31, 2011. In fact, as of September 14, 2010, the Grayson County Water District refused to accept the Section 2 water lines into its system due to outstanding issues with the construction of the lines, and no water lines in Section 4 of the Resort Property were constructed or intended to be constructed. Each of these representations was false at the time it was made. 100.

In making these representations, 3D Resorts-Bluegrass and its agents employed devices, schemes, or artifices to defraud, and obtained money by means of untrue statements of material facts, and by means of omissions of material facts necessary to make the statements not misleading. Additionally, in making these representations, 3D Resorts-Bluegrass engaged in a transaction, practice, or course of business which would operate as a fraud or deceit upon purchasers.

101.

The representations were also material and had a natural tendency to influence, and were capable of influencing, the decisions of purchasers and prospective purchasers. 102.

Therefore, 3D Resorts-Bluegrass, through the conduct described in Paragraphs 97 through 101 above, violated 15 U.S.C. § 1703(a)(2)(A), (B), and (C). 2013-CFPB-0002 Document 1 Filed 06/14/2013 Page 18 of 29

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Count IX: Fraud in Offering and Sale of Lots (15 U.S.C. § 1703(a)(2)(A), (B), & (C))

103.

Paragraphs 1 through 43 are incorporated here by reference. 104.

3D Resorts-Bluegrass and its agents falsely represented to consumers and prospective consumers that eight rental cabins were completely constructed on the Resort Property. In fact, no such eight rental cabins were constructed, and each of these representations was false at the time it was made.

106.

In making these representations, 3D Resorts-Bluegrass and its agents employed devices, schemes, or artifices to defraud, and obtained money by means of untrue statements of material facts, and by means of omissions of material facts necessary to make the statements not misleading. Additionally, in making these representations, 3D Resorts-Bluegrass engaged in a transaction, practice, or course of business which would operate as a fraud or deceit upon purchasers.

107.

The representations were also material and had a natural tendency to influence, and were capable of influencing, the decisions of purchasers and prospective purchasers. 108.

Therefore, 3D Resorts-Bluegrass, through the conduct described in Paragraphs 103 through 107 above, violated 15 U.S.C. § 1703(a)(2)(A), (B), and (C). Count X: Fraud in the Offering and Sale of Lots (15 U.S.C. § 1703(a)(2)(A), (B), & (C))

109.

Paragraphs 1 through 43 are incorporated here by reference. 2013-CFPB-0002 Document 1 Filed 06/14/2013 Page 19 of 29

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110.

On and after February 6, 2010, 3D Resorts-Bluegrass and its agents falsely represented to consumers and prospective consumers that a General Store was completed and available for use on the Resort Property. In fact, the General Store was destroyed in a fire on or about February 6, 2010, and has not been reconstructed. Each of these representations was false at the time it was made.

112.

In making these representations, 3D Resorts-Bluegrass and its agents employed devices, schemes, or artifices to defraud, and obtained money by means of untrue statements of material facts, and by means of omissions of material facts necessary to make the statements not misleading. Additionally, in making these representations, 3D Resorts-Bluegrass engaged in a transaction, practice, or course of business which would operate as a fraud or deceit upon purchasers.

113.

The representations and omissions were also material and had a natural tendency to influence, and were capable of influencing, the decisions of purchasers and prospective purchasers.

114.

Therefore, 3D Resorts-Bluegrass, through the conduct described in Paragraphs 109 through 113 above, violated 15 U.S.C. § 1703(a)(2)(A), (B), and (C). Count XI: Fraud in the Offering and Sale of Lots (15 U.S.C. § 1703(a)(2)(A), (B), & (C))

115.

Paragraphs 1 through 43 are incorporated here by reference. 2013-CFPB-0002 Document 1 Filed 06/14/2013 Page 20 of 29

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116.

In order to provide prospective purchasers with information regarding the value of lots on the Resort Property, and to sell such properties at certain prices, 3D Resorts-Bluegrass and its agents falsely provided such purchasers with inflated historical sales prices of lots that had been previously sold on the Resort Property. In fact, such lots had sold at prices materially less than what was represented to prospective purchasers. 118.

In making these representations, 3D Resorts-Bluegrass and its agents employed devices, schemes, and artifices to defraud, and obtained money by means of untrue statements of material facts, and by means of omissions of material facts necessary to make the statements not misleading. Additionally, in making these representations and material omissions, 3D Resorts- Bluegrass engaged in transactions, practices, and a course of business which would operate as a fraud and deceit upon purchasers.

119.

The representations and omissions were also material and had a natural tendency to influence, and were capable of influencing, the decisions of purchasers and prospective purchasers.

120.

Therefore, 3D Resorts-Bluegrass, through the conduct described in Paragraphs 115 through 119 above, violated 15 U.S.C. § 1703(a)(2)(A), (B), and (C). Count XII: Fraud in the Offering and Sale of Lots (15 U.S.C. § 1703(a)(2)(A), (B), & (C))

121.

Paragraphs 1 through 43 are incorporated here by reference. 2013-CFPB-0002 Document 1 Filed 06/14/2013 Page 21 of 29

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122.

123.

On or about April 19, 2011, 3D Resorts-Bluegrass and its agents were served with a Suspension Notice from HUD pursuant to 15 U.S.C. § 1706(b) with respect to the Resort Property.

124.

The Suspension Notice served upon 3D Resorts-Bluegrass and its agents suspended the Statement of Record with respect to the lots that 3D Resorts-Bluegrass and its agents were marketing and selling on the Resort Property, and therefore, no Statement of Record was in effect after service of the notice.

125.

Pursuant to 15 U.S.C. § 1703(a)(1)(A), a developer or agent may not, directly or indirectly, make use of any means or instrument of transportation, or communication in interstate commerce, or the mails, to sell or lease any lot unless a Statement of Record is in effect for the property. The Suspension Notice prohibited 3D Resorts-Bluegrass and its agents from selling or leasing any lot until the Statement of Record was amended and the Suspension Notice was lifted. 126.

From approximately April 22, 2011 through approximately August 1, 2011, notwithstanding the Suspension Notice and the statutory prohibition, 3D Resorts-Bluegrass and its agents conducted twenty-eight tours of the Resort Property (and scheduled an additional fiftyfive such tours); marketed through interstate mailers the Resort Property and the lots to prospective purchasers; engaged in the same marketing and solicitation activities as it had prior to the suspension date; and sold at least three lots on the Resort Property. 2013-CFPB-0002 Document 1 Filed 06/14/2013 Page 22 of 29

Page 24

127.

In selling and offering to sell such lots, 3D Resorts-Bluegrass indicated that it was registered with HUD, and failed to disclose that it in fact had been suspended as of April 19, 2011.

128.

In making these representations and by failing to disclose the suspension, 3D Resorts-Bluegrass and its agents employed devices, schemes, and artifices to defraud, and obtained money by means of untrue statements of material facts, and by means of omissions of material facts necessary to make the statements not misleading. Additionally, in making these representations and material omissions, 3D Resorts-Bluegrass engaged in transactions, practices, and a course of business which would operate as a fraud and deceit upon purchasers. 129.

The representations and omissions were also material and had a natural tendency to influence, and were capable of influencing, the decisions of purchasers and prospective purchasers.

130.

Therefore, from on or about April 22, 2011, through on or about August 1, 2011, 3D Resorts-Bluegrass, through the conduct described in Paragraphs 121 through 129 above, violated 15 U.S.C. § 1703(a)(2)(A), (B), and (C).

Count XIII: April 23, 2011 Sale of Lot in Violation of Suspension Notice (15 U.S.C. § 1703(a)(1)(A))

131.

Paragraphs 1 through 43 are incorporated here by reference. 132.

On or about April 19, 2011, 3D Resorts-Bluegrass and its agents were served with a Suspension Notice from HUD pursuant to 15 U.S.C. § 1706(b) with respect to the Resort Property.

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134.

The Suspension Notice served upon 3D Resorts-Bluegrass, National Resort Marketing Corp., and Double Diamond, Inc. suspended the Statement of Record with respect to the lots that 3D Resorts-Bluegrass and its agents were marketing and selling on the Resort Property, and therefore, no Statement of Record was in effect after service of the notice. 135.

On or about April 23, 2011, notwithstanding the Suspension Notice and the statutory prohibition, 3D Resorts-Bluegrass, through its agents, directly or indirectly, sold Lot Number 955.

137.

3D Resorts-Bluegrass, through its agents, directly or indirectly, made use of means or instruments of transportation or communication in interstate commerce to sell a lot without a Statement of Record in effect. Therefore, 3D Resorts-Bluegrass, through the conduct described in Paragraphs 131 through 136 above, violated 15 U.S.C. § 1703(a)(1)(A). Count XIV: June 5, 2011 Sale of Lot in Violation of Suspension Notice (15 U.S.C. § 1703(a)(1)(A))

138.

Paragraphs 1 through 43 and 133 through 135 are incorporated here by reference. 139.

2013-CFPB-0002 Document 1 Filed 06/14/2013 Page 24 of 29

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140.

On or about June 5, 2011, notwithstanding the Suspension Notice and the statutory prohibition, 3D Resorts-Bluegrass, through its agents, directly or indirectly, sold Lot Number 970.

141.

3D Resorts-Bluegrass, through its agents, directly or indirectly, made use of means or instruments of transportation or communication in interstate commerce to sell a lot without a Statement of Record in effect. Therefore, 3D Resorts-Bluegrass, through the conduct described in Paragraphs 138 through 140 above, violated 15 U.S.C. § 1703(a)(1)(A). Count XV: Additional Sale of Lot in Violation of Suspension Notice (15 U.S.C. § 1703(a)(1)(A))

142.

Paragraphs 1 through 43 and 133 through 135 are incorporated here by reference. 143.

Between about April 19, 2011 and about August 1, 2011, notwithstanding the Suspension Notice and the statutory prohibition, 3D Resorts-Bluegrass, through its agents, directly or indirectly, sold another lot on the Resort Property. 145.

3D Resorts-Bluegrass, through its agents, directly or indirectly, made use of means or instruments of transportation or communication in interstate commerce to sell a lot without a Statement of Record in effect. Therefore, 3D Resorts-Bluegrass, through the conduct described in Paragraphs 142 through 144 above, violated 15 U.S.C. § 1703(a)(1)(A). Count XVI: Failure to Timely File Annual Reports (24 C.F.R. § 1710.310 (12 C.F.R. § 1010.310))

146.

Paragraphs 1 through 43 are incorporated here by reference. 2013-CFPB-0002 Document 1 Filed 06/14/2013 Page 25 of 29

Page 27

147.

On or about February 26, 2009, 3D Resorts filed the initial registration for the Resort Property.

148.

Pursuant to 24 C.F.R. § 1710.310 (now 12 C.F.R. § 1010.310), 3D Resorts- Bluegrass is required to file the annual reports of activity on any initial or consolidated Statement of Record that is not under suspension within thirty days of the annual anniversary of the effective date of the initial Statement of Record. 149.

3D Resorts-Bluegrass failed to timely file the annual reports of activity and pay the corresponding filing fee that was due in March 2010 and March 2011. 150.

Therefore, beginning on or about March 28, 2010, and continuing until April 19, 2011, 3D Resorts-Bluegrass has violated 24 C.F.R. § 1710.310 (now codified at 12 C.F.R. § 1010.310).

Count XVII: Failure to File Financial Statements (24 C.F.R. § 1710.212 (12 C.F.R. § 1010.212))

151.

Paragraphs 1 through 43 are incorporated here by reference. 152.

Each year after the initial effective date, 3D Resorts-Bluegrass must submit a copy of its latest financial statements, and to date, it has failed to timely file annual financial statements, in violation of 24 C.F.R. § 1710.212 (now codified at 12 C.F.R. § 1010.212). 153.

3D Resorts-Bluegrass failed to submit a copy of its financial statements within 120 days after the close of the fiscal year for fiscal years 2009, 2010, 2011, and 2012. 154.

The financial statements for fiscal years 2010, 2011, and 2012 remain outstanding and overdue, and therefore 3D Resorts-Bluegrass has violated 24 C.F.R. § 1710.212 (now codified at 12 C.F.R. § 1010.212), which requires such filings.

2013-CFPB-0002 Document 1 Filed 06/14/2013 Page 26 of 29

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Count XVIII: Failure to Timely File Amendments (24 C.F.R. § 1710.23 (12 C.F.R. § 1010.23))

155.

Paragraphs 1 through 43 are incorporated here by reference. 156.

3D Resorts-Bluegrass and its agents failed to timely file amendments disclosing changes to material facts required to be in the Statement of Record. 157.

The Management Agreement dated October 29, 2010, by and between 3D Resorts and NRMC is a material change required to be disclosed no later than 15 days after the contract was executed, pursuant to 24 C.F.R. § 1710.23 (now codified at 12 C.F.R. § 1010.23), which requires such disclosure.

158.

On or about March 29, 2011, the Management Agreement was finally disclosed in the consolidation and amendment filed to the current Statement of Record. 159.

Therefore, between November 13, 2010, until on or about March 29, 2011, 3D Resorts-Bluegrass failed to file a timely amendment to the Statement of Record, and has violated 24 C.F.R. § 1710.23 (now codified at 12 C.F.R. § 1010.23). Count XIX: Failure to Timely File Amendments (24 C.F.R. § 1710.23 (12 C.F.R. § 1010.23))

160.

Paragraphs 1 through 43 are incorporated here by reference. 161.

3D Resorts-Bluegrass failed to timely file amendments disclosing changes to material facts required to be in the Statement of Record. 162.

On or about February 6, 2010, the General Store located on the Resort Property was destroyed by a fire.

163.

The destruction of this recreational facility constituted a material change required to be disclosed no later than 15 days after the General Store was destroyed, pursuant to 24 C.F.R. § 1710.23 (now codified at 12 C.F.R. § 1010.23), which requires such disclosure. 2013-CFPB-0002 Document 1 Filed 06/14/2013 Page 27 of 29

Page 29

164.

As of the date of the filing of this Notice of Charges, no Amendment has been filed.

165.

Therefore, between February 21, 2010 and the present, 3D Resorts-Bluegrass has failed to timely file amendments to its Statement of Record in violation of 24 C.F.R. § 1710.23 (now codified at 12 C.F.R. § 1010.23).

PRAYER FOR RELIEF

Wherefore, the Bureau, pursuant to Sections 1053 and 1055 of the CFPA, 12 U.S.C. §§ 5563, 5565, respectfully requests an Order granting rescission of contracts and restitution of all monies paid by property owners for the purchase of the lots on the Resort Property from 3D Resorts-Bluegrass and its agents, injunctive relief, civil money penalties for the violations of Federal consumer financial law, recovery of costs in connection prosecuting the instant action, and any other legal or equitable relief deemed appropriate. For purposes of civil money penalties, each sale or offer to sell constitutes a separate violation as to each count. In the case of continuing violations, each day constitutes a separate violation. Each violation set forth within this Notice of Charges is both a knowing and material violation.

TIME AND PLACE OF THE HEARING

The administrative hearing on the above-captioned action shall take place on August 12, 2013, at 9:00 am, at a place to be specified in Louisville, Kentucky, in the Western District of Kentucky, or at a time and place to be otherwise specified by the parties.

2013-CFPB-0002 Document 1 Filed 06/14/2013 Page 28 of 29

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TIME TO FILE AN ANSWER

Within 14 days of service of this notice of charges, the answer must be filed and served in accordance with subpart A of 12 C.F.R. part 1081.

Respectfully submitted,

Kent Markus Enforcement Director

Deborah M. Morris Deputy Enforcement Director

Michael G. Salemi Assistant Litigation Deputy

____/s/_______________________ Gregory C.J. Lisa, Enforcement Attorney

____/s/______________________ Mary E. Olson, Enforcement Attorney Consumer Financial Protection Bureau 1700 G Street, N.W.

Washington, D.C. 20552 Telephone: (202) 435-7615; (202) 435-7544 Facsimile: (202) 435-7722 Email: [email protected]; [email protected];

CFPB 3DResorts [email protected] Attorneys for Petitioner Consumer Financial Protection Bureau 2013-CFPB-0002 Document 1 Filed 06/14/2013 Page 29 of 29

Consent order (Dec. 2013)

PDF of this document (14 pages)

Page 31

UNITED STATES OF AMERICA Before the CONSUMER FINANCIAL PROTECTION BUREAU ADMINISTRATIVE PROCEEDING File No. 2013-CFPB-0002 In the Matter of:

3D Resorts-Bluegrass, LLC CONSENT ORDER The Consumer Financial Protection Bureau (the "Bureau" or "CFPB") filed a Notice of Charges against 30 Resorts-Bluegrass, LLC (the "Respondent" or "30 Resorts-Bluegrass") on June 14, 2013, for violations ofthe Interstate Land Sales Full Disclosure Act ("ILSA"), 15 U .S.C. §§ 1701-1720, and its implementing regulations. The Respondent, by and through Thomas M. Duddy, the Chapter ll Trustee for the bankruptcy estate of 30 Resorts-Bluegrass, LLC, has executed a "Stipulation and Consent to the Issuance of a Consent Order," dated November 29, 2013 (the "Stipulation"), which is incorporated by reference and is accepted by the Bureau. By this Stipulation, Respondent has consented to the issuance of this Consent Order ("Consent Order") by the Bureau under sections 1053 and 1055 ofthe Consumer Financial Protection Act of2010 ("CFPA"), 12 U.S.C. §§ 5563, 5565. Respondent admits the Bureau's jurisdiction over Respondent and the subject matter of this Consent Order.

The CFPB hereby issues, pursuant to 12 U.S.C. §§ 5563 and 5565, this Consent Order. 2013-CFPB-0002 Document 33 Filed 12/03/2013 Page 1 of 14

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CFPB CHARGES The CFPB filed its Notice of Charges in this proceeding asserting the following: I.

The CFPB has jurisdiction over this matter pursuant to Sections I 053 and I 055 of the CFPA, 12 U.S.C. §§ 5563, 5565.

The Respondent is a limited-liability company organized under the laws of Kentucky.

Respondent is the owner and operator of property located in the Commonwealth of Kentucky commonly known as the Green Farm Resort or The Falls Resort & Golf Club (the ''Resort Property"), a golf and recreation faci lity with hundreds of individual lots spread over several different development phases.

The Respondent is, and at all times relevant to this proceeding has been, a "developer," as that term is defined under ILSA, 15 U.S.C. § 1701(5), because it directly or indirectly sold, offered to sell, or advertised for sale lots on the Resort Property. 5.

The Resort Property is, and at all times relevant to this proceeding has been, a ''subdivision,'' as that term is defined under ILSA, 15 U.S.C. § 1701(3). 6.

Each lot sold and offered for sale on the Res01t Property constituted a " lof' within the meaning of the regulations implementing ILSA, 12 C.F.R. § I 010.1 (b), and was not exempt under 15 U.S.C. § 1702 or any subsection thereunder. 7.

On November 16, 20 II , the Respondent filed a Chapter 7 bankruptcy petition in the United States Bankruptcy Court for the Western District of Texas. 8.

On December 8, 20 II , the United States Bankruptcy Court for the Western District of Texas entered an order converting the case to a Chapter II bankruptcy, and 2013-CFPB-0002 Document 33 Filed 12/03/2013 Page 2 of 14

Page 33

transferring the case to the United States Bankruptcy Court for the Western District of Kentucky. On January II , 2012, Thomas M. Duddy was appointed to be the Chapter 11 Trustee for the bankruptcy estate of the Respondent, and continues to serve as the trustee of the Respondent's bankruptcy estate.

The Respondent is the debtor in a bankruptcy currently pending in the United States Bankruptcy Court in the Western District of Kentucky (the "Bankruptcy Court"), In re 3D Resorts-Bluegrass, LLC, Case Number 11-41599.

I 0.

Since late 2008, 3D Resorts-Bluegrass has been engaged in the development of the Resort Property, and by February 2009, 3D Resorts-Bluegrass was marketing and selling lots on the Resort Property.

11 .

There were four sections in which lots were available for purchase, identified as Sections I, 2, 3, and 4. Lots were marketed as properties on which purchasers could build "vacation homes'· and enjoy the golf course and other amenities of the Resort Property. 12.

3D Resorts-Bluegrass, directly and through its agents, also engaged in the origination of mortgages by providing financing for the sales of lots on the Resort Property and serviced such mortgages. Additionally, 3D Resorts-Bluegrass collected debts on the notes, including allegedly delinquent notes.

13.

2013-CFPB-0002 Document 33 Filed 12/03/2013 Page 3 of 14

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14.

3D Resorts-Bluegrass, directly or indirectly, used the mail, newspaper advertisements, and the internet; participated in trade shows; hosted promotional dinners or other events; made phone call solicitations; and used other instruments of transportation and communication in interstate commerce and the mails w ith respect to the sale of lots and offers to sell lots on the Resort Property, and such activity constitutes "use of any means or instruments of transportation or communication in interstate commerce, or of the mails'' under 15 U.S.C. § 1703(a).

15.

On or about October 29, 20 I 0, 3D Resotts-Biuegrass entered into a Management Agreement with National Resort Marketing Corp. (''NRMC'') pursuant to which NRMC, as an agent of 3D Resorts-Bluegrass, became involved in the marketing and sale of lots on the Resort Pro petty, as well as the operation and development of the Resort Property. 16.

In marketing the Resort Property, 3D Resotts-Biuegrass, directly and through its agents, made material misrepresentations and material omissions in the Property Reports distributed to purchasers and prospective purchasers.

17.

On or about January 29, 2009, 3D Resotts-Biuegrass filed with the United States Department of Housing and Urban Development ("'HUD"'), as part of its Statement of Record, a Property Repott dated February 26, 2009 ("February 26, 2009 Propetty Report"). 3D Resorts- Bluegrass distributed the February 26, 2009 Propetty Report to purchasers and prospective purchasers. The February 26, 2009 Property Report contains nlllnerous untrue statements of material fact or omits material facts, which are set forth in the Notice of Charges. 18.

In or about January 20 I 0. 3D Resorts-Bluegrass filed with HUD. as part of its consolidated and amended Statement of Record, a Propetty Report dated January 13, 20 I 0 ('"January 13, 20 I 0 Property Reporf'). 3D Resorts-Bluegrass distributed the January 13, 20 I 0 2013-CFPB-0002 Document 33 Filed 12/03/2013 Page 4 of 14

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Property Report to purchasers and prospective purchasers. The January 13, 20 I 0 Property Report also contains untrue statements of material fact or omits material facts, which are set forth in the Notice of Charges.

19.

On or before March 22, 2010, 3D Resorts-Bluegrass made several material changes to the January 13, 2010 Property Report, but this Propet1y Report retained the January 13, 20 I 0 date on its cover (the "March 22, 20 l 0 Property Report"). 3D Resorts-Bluegrass did not file this Property Report with HUD, but did distribute it to purchasers and prospective purchasers from on or about March 22, 20 10 forward as the effective property report for the Resort Property. The March 22, 2010 Property Report contains untrue statements of material fact or omitted material facts, which are set forth in the Notice of Charges. 20.

Further, the March 22, 20 I 0 Property Report was provided to purchasers and prospective purchasers with the false implication that it was the official Property Repot1 that had been filed with HUD and was effective, despite 3D Resot1s-Biuegrass never fi ling this document with HUD.

2 1.

3D Resorts-Bluegrass sold lots on the Resort Property after providing the February 26, 2009 Property Report, the January 13, 2010 Propet1y Report, and the March 22, 20 I 0 Property Report, which contained untrue statements of material fact or omitted material facts required to be stated therein pursuant to 15 U .S.C. §§ 1704-1707 or the regulations implementing ILSA. 3D Resorts-Bluegrass, therefore, violated 15 U.S.C. § 1703(a)( I )(C). Those violations were knowing and material.

22.

The March 22, 2010 Property Report was provided to purchasers and prospective purchasers with the false implication that it was the official Propet1y Report that had been filed with HUD and was effective, despite 3D Resorts-Bluegrass never filing this document with 2013-CFPB-0002 Document 33 Filed 12/03/2013 Page 5 of 14

Page 36

HUO. 30 Resorts-Bluegrass, therefore, violated 15 U.S.C. §§ 1703(a)( l)(B) and 1707(b). Those violations were knowing and material.

23.

3D Resorts-Bluegrass, directly and indirectly through its agents, made material misrepresentations to purchasers and potential purchasers in advertisements, marketing materials, sales pitches, oral communications, demonstratives, and other promotional materials pertaining to the infrastructure and amenities available to the lot or on the Resort Property to induce consumers to purchase lots on the Resort Property. These material misrepresentations are set forth in the Notice of Charges.

24.

In making these misrepresentations, 30 Resorts-Bluegrass and its agents employed devices, schemes, or attifices to defraud, and obtained money by means of untrue statements of material fact, and by means of omissions of material facts necessary to make the statements not misleading. Additionally, in making these representations and omissions, 30 Resorts-Bluegrass engaged in a transaction, practice, or course of business which would operate as a fraud or deceit upon purchasers. These misrepresentations were material and had a natural tendency to influence, and were capable of influencing, the decisions of purchasers and prospective purchasers. 30 Resorts-Bluegrass, therefore, violated 15 U.S.C. § 1703(a)(2)(A), (B), and (C). Those violations were knowing and material. 25.

On or about April 19, 2011 , HUO served a suspension notice (the "Suspension Notice") on 3D Resorts-Bluegrass and its agents, pursuant to 15 U.S.C. § 1706(b) and its implementing regulations. The Suspension Notice advised that HUO had conducted a review of 30 Resorts-Bluegrass' consolidation and amendment to the filed Statement of Record, including the January 13, 20 I 0 Property Report, and found it deficient in certain material respects. 2013-CFPB-0002 Document 33 Filed 12/03/2013 Page 6 of 14

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26.

Based upon these deficiencies and the denial of the consolidation and amendment to the Statement of Record, the Suspension Notice provided that the Statement of Record for the Resot1 Property was considered suspended until such time that HUD granted 3D Resorts- Bluegrass an effective date for the Statement of Record, and that the sale of lots on the Resort Property, unless exempt, would violate ILSA and potentially subject 3D Resorts-Bluegrass and others to penalties.

27.

The Suspension Notice prohibited 3D Resorts-Bluegrass and its agents from selling or leasing any lot until the Statement of Record was amended and the Suspension Notice was lifted. Neither 3D Res011s-Biuegrass nor others have taken the appropriate corrective actions with respect to the deficiencies cited in the Suspension Notice, which remains in effect. 28.

As a result of the Suspension Notice, there was no longer an effective Statement of Record for the Resot1 Property, and under such circumstances, ILSA prohibits the sale of any lot on the Resort Property pursuant to 15 U.S.C. § 1703(a)(l )(A). 29.

From approximately April22, 2011 through approximately August 1, 2011 , notwithstanding the Suspension Notice and the statutory prohibition, 30 Resorts-Bluegrass and its agents conducted twenty-eight tours of the Resort Property (and scheduled an additional fiftyfive such tours); marketed the Resort Property and the lots to prospective purchasers through interstate mailers; engaged in the same marketing and solicitation activities as it had prior to the suspension date; and sold two lots on the Resort Property. In selling and offering to sell such lots, 3D Resorts-Bluegrass falsely claimed that the subdivision was registered with HUD, and failed to disclose that its effective date and registration in fact had been suspended as of April I 9, 201 I. 3D Resorts-Bluegrass, therefore, violated 15 U.S.C. § 1703(a)(2)(A), (B), and (C). Those violations were knowing and material.

2013-CFPB-0002 Document 33 Filed 12/03/2013 Page 7 of 14

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30.

After service of the Suspension Notice, 30 Resorts-Bluegrass, through its agents, directly or indirectly, sold Lot Number 955 and Lot Number 970, and each sale was a violation of 15 U.S.C. § 1703(a)(l )(A). Those violations were knowing and material. 31.

30 Res01ts-Bluegrass and its agents also failed to comply with several registration and filing requirements mandated by ILSA and its implementing regulations. 32.

Pursuant to 24 C.F.R. § 1710.310 (now 12 C.F.R. § I 0 I 0.31 0), 30 ResOits- Bluegrass is required to file the annual reports of activity on any initial or consolidated Statement of Record that is not under suspension within thirty days of the annual anniversary of the effective date of the initial Statement of Record. The effective date for the initial Statement of Record was February 26, 2009. 30 Resorts-Bluegrass failed to timely file the annual reports of activity and pay the corresponding filing fee that was due in March 20 I 0 and March 20 II. Beginning on or about March 28, 20 I 0, and continuing until April 19, 20 II , 30 Resorts- Bluegrass violated 24 C.F.R. § 1710.310 (now codified at 12 C.F.R. § 1010.310). These violations were knowing and material.

33.

Each year after the initial effective date, 30 Resorts-Bluegrass must submit a copy of its latest financial statements, and to date, it has failed to timely file annual financial statements, in violation of24 C.F.R. § 1710.212 (now codified at 12 C.F.R. § 1010.212). 3D Resorts-Bluegrass failed to submit a copy of its financial statements for fiscal years 20 I 0, 20 II , and 2012, which remain outstanding and overdue. 30 Resorts-Bluegrass, therefore, violated 24 C.F.R. § 1710.212 (now codified at 12 C.F.R. § I 0 I 0.212). These violations were knowing and material.

34.

3D Resorts-Bluegrass and its agents failed to timely file amendments disclosing changes to material facts required to be in the Statement of Record. The Management Agreement 2013-CFPB-0002 Document 33 Filed 12/03/2013 Page 8 of 14

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dated October 29, 2010, by and between 3D Resotts and NRMC is a material change required to be disclosed no later than 15 days after the contract was executed. Fwther, on February 6, 20 I 0, the General Store located on the Resort Property was destroyed in a fire. The destruction of the General Store constituted a material change required to be disclosed no later than I 5 days after the General Store was destroyed. In both instances, 3D Resorts-Bluegrass failed to file a timely amendment to the Statement of Record, and violated 24 C.F.R. § 1710.23 (now codified at I 2 C.F.R. § 101 0.23). These violations were knowing and material. 35.

The CFPB alleges, by and through the conduct set forth above, 3D Resotts- Biuegrass harmed purchasers of lots on the Resort Property. Purchasers affected by the conduct of 3D Res01ts-Biuegrass and its agents are any individuals or entities-and their successors who acquired a lot by inheritance, divorce, annulment, succession, or trust transfer-that purchased one or more lots on the Resort Property from 3D Resorts-Bluegrass or its agents, including but not limited to NRMC and Double Diamond, Inc. ("Affected Purchasers"). 36.

The CFPB further alleges, the harm incurred by any such Affected Purchaser includes amounts that the Affected Purchaser, or someone on the Affected Purchaser's behalf, paid to 3D Resorts-Bluegrass or its agents towards the purchase of a lot or other charges imposed by the real estate sales contract, and amounts that the Affected Purchaser has paid or is obligated to pay towards any loan that 3D Resorts-Bluegrass or its agents provided the Affected Purchaser to finance the purchase of a lot, minus the value of the lot. These amounts include: (I) the purchase price of the lot, including down payments and principal mortgage payments that the Affected Purchaser has paid, as well as remaining principal mortgage balances that the Affected Purchaser is obligated to pay; (2) mortgage interest paid under any loan originated by 3D Resorts-Bluegrass or its agents; (3) utility or infrastructure connection fees required by the real 2013-CFPB-0002 Document 33 Filed 12/03/2013 Page 9 of 14

Page 40

estate sales contract; and (4) any other payments or fees paid to 3D Resorts-Bluegrass or its agents required by the real estate sales contract. (Collectively, such harm shall be referred to as ''Affected Purchaser Harm.") II.

ORDER TO CEASE AND DESIST, PAY CIVIL MONEY PENALTIES, AND TO TAKE OTHER AFFIRMATIVE ACTION IT IS ORDERED, pursuant to sections I 053 and I 055 of the CFPA, 12 U.S.C. §§ 5563 and 5565, that:

37.

3D Resorts-Bluegrass shall permanently cease and desist from engaging in interstate land sales and any other activity governed by ILSA. 38.

A judgment for equitable monetary relief is hereby entered in favor of the Bureau and against 3D Resorts-Bluegrass, and 3D Resorts-Bluegrass is ordered to fully compensate Affected Purchasers for the Affected Purchaser Harm identified in paragraph 36 of this Consent Order; provided, however, that in consideration of 3D Resorts-Bluegrass' demonstrated inability to pay and its status as a debtor in bankruptcy, full payment ofthisjudgment for equitable. monetary relief shall be suspended upon satisfaction ofthe obligations set forth in paragraph 40 of this Consent Order and paragraphs lll.l.d. i - III.I.d. vii of the Settlement Agreement and Release entered into by and between the Bureau, the Respondent, PlainsCapital Bank, PCB- ARC, Inc., and the Office of the Attorney General for the Commonwealth of Kentucky (the "Settlement Agreement").

39.

Pursuant to section I 055(c) of the CFPA, 12 U.S.C. § 5565(c), by reason of the violations of law alleged in the Notice of Charges, and taking into account the factors set forth in 12 U.S.C. § 5565(c)(3), including 3D Resorts-Bluegrass· demonstrated inability to pay a higher amount, 3D Resorts-Bluegrass shall also pay $ 1 in civil money penalties. The civil money 2013-CFPB-0002 Document 33 Filed 12/03/2013 Page 10 of 14

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penalty paid pursuant to this Consent Order shall be deposited in the Civil Penalty Fund of the Bureau in accordance with 12 U.S.C. § 5497(d).

40.

Within three (3) days of the Effective Date, 3D Resorts-Bluegrass shall withdraw its objection to the CFPB 's proof of claim in In re Resorts-Bluegrass, LLC, Bankr. No. 11-41599 (Bankr. W.D. Ky. filed Nov. 16, 2011), and shall allow an unsecured claim in the amount of $500,000, subject to the pro rata basis distribution made in accordance with the Bankruptcy Code, to be paid towards satisfying the judgment for equitable monetary relief imposed in paragraph 38 and the judgment for a civil money penalty imposed in paragraph 39, provided that such claim will receive distributions pursuant to the Bankruptcy Code and Bankruptcy Rules until such time as $50,000 of distributions have been made on account of such claim, at which point no more distributions will be made.

41.

Any funds, aside from $1 paid in satisfaction of the judgment for civil money penalties, received by the Bureau in satisfaction of the proof of claim described in paragraph 39 of this Consent Order shall be deposited into a fund or funds administered by the Bureau or its agent in accordance with applicable statutes and regulations to provide the redress described in paragraph 38 of this Consent Order, and for any attendant expenses for the administration of any such redress.

42.

ffthe CFPB determines, in its sole discretion, that providing redress to consumers is wholly or partially impracticable or otherwise inappropriate, or if funds remain after the administration of redress is completed, the CFPB may apply any remaining funds for such other equitable relief (including consumer information remedies) as determined to be reasonably related to the violations described in Section 1 of this Consent Order. Any funds not used for such equitable relief shall be deposited in the U.S. Treasury as disgorgement. Respondent sha ll ] 1 2013-CFPB-0002 Document 33 Filed 12/03/2013 Page 11 of 14

Page 42

have no right to challenge the CFPB's choice of remedies under this Section, and shall have no right to contest the manner of distribution chosen by the CFPB. 43.

Redress provided under this Consent Order shall not limit Affected Purchasers' rights in any way.

44.

With regard to the equitable monetary relief and civil money penalty paid by 30 Resorts-Bluegrass, 30 Resorts-Bluegrass may neither seek nor receive, directly or indirectly, any reimbursement or indemnification from any insurance policy, and shall treat such payments for such equitable monetary relief in the ordinary course for tax purposes and may claim lawful deductions but shall not seek any extraordinary tax credit or other treatment. 45.

30 Resorts-Bluegrass shall relinquish all dominion, control, and title to the funds paid to the fullest extent permitted by law, and no part of the funds shall be returned to the Respondent.

III.

COOPERATION IT IS FURTHER ORDERED that:

46.

Within 30 days after the entry of this Consent Order, 30 Resorts-Bluegrass shall provide to the CFPB information in its or its agents' possession, custody, or control regarding the identity and location of, and the amount of injury sustained by, each Affected Purchaser. IV.

ADMINISTRATIVE PROVISIONS 47.

In accordance with 31 U.S.C. § 7701 , Respondent, unless it already has done so, shall furnish to the CFPB its taxpayer identifying numbers, which shall be used for purposes of collecting and reporting on any delinquent amount arising out of this Consent Order. 48.

Unless otherwise directed in writing by a CFPB representative, all submissions, requests, communications, consents or other documents relating to this Order shall be in writing 2013-CFPB-0002 Document 33 Filed 12/03/2013 Page 12 of 14

Page 43

and shall be sent by overnight courier (not the U.S. Postal Service), as follows: Enforcement Director Consumer Financial Protection Bureau ATTENTION: Office of Enforcement 1700 G Street, N.W.

Washington, D.C. 20552 Provided, however, that Respondent may send such reports or notifications by first-class mail, but only if Respondent contemporaneously sends an electronic version of such report or notification to Enforcement_ [email protected].

49.

This Consent Order is intended to be, and shall be construed to be, a final order issued pursuant to 12 U.S.C. § 5563(b).

50.

Date").

51.

This Consent Order shall be effective on the date of issuance (the "Effective The provisions of this Consent Order shall be binding upon 3D Resorts-Bluegrass, and, until their discharge by the Bankruptcy Court, upon the Chapter 11 Trustee or any subsequent Chapter 7 trustee that may be appointed in the Respondent's bankruptcy case. This Consent Order shall remain in full force and effect notwithstanding any dismissal or conversion ofthe Respondent's bankruptcy case.

52.

Calculation of time limitations shall be based on calendar days, unless otherwise noted.

53.

The provisions of this Consent Order shall be enfo rceable by the Bureau. Any violation of this Consent Order may result in the imposition by the Bureau of the maximum 2013-CFPB-0002 Document 33 Filed 12/03/2013 Page 13 of 14

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amount of civil money penalties allowed under section 1055(c) ofthe CFPA, 12 U.S.C. § 5565(c).

54.

This Consent Order and the accompanying Stipulation and the Settlement Agreement contain the complete agreement between the Bureau and 3D Resorts-Bluegrass. No promises, representations, or warranties other than those set forth in this Consent Order and the accompanying Stipulation have been made by and between the Bureau and 3D Resorts- Bluegrass. This Consent Order and the accompanying Stipulation and the Settlement Agreement supersede all prior communications, discussions, or understandings, if any, of the Bureau and 3D Resorts-Bluegrass, whether oral or in writing.

55.

Nothing in this Consent Order or the accompanying Stipulation shall be construed as allowing the Respondent, officers, or employees to violate any law, rule, or regulation. IT IS SO ORDERED, this J_. fi\J day of ~013.

~~ Richard Cordray Director Consumer Financial Protection Bureau 2013-CFPB-0002 Document 33 Filed 12/03/2013 Page 14 of 14

Stipulation (Dec. 2013)

PDF of this document (5 pages)

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2013-CFPB-0002 Document 34 _ Filed 12/03/2013 Page 1of5

Case 11-41599-acs Doc 423-2 Filed Lo/oaas Entered 10/04/13 12:20:07 Page 19 a) EXHIBIT F UNITED STATIS OF AMERICA

Before the CONSUMER FINANCIAL PROTECTION BUREAU

ADMINISTRATIVE PROCEEDING File No, 2013-CRPB-0002

In the Mattor off STIPULATION AND

CONSENT TO ISSUANCK 3D Rosorts-Bluegrass, LLC OF A CONSENT ORDER

‘The Consumer Finanolal Protection Bureau (“CEPB” or “Buroau”) tattlated an administrative proceeding against 3D Resorts-Bluegrass, LLC “Respondent” or “3D Resorts- Bluegrass”), pursuant to [2 U.S.C, §§ 5563 and 5565, for violations of the Interstate Land Sales Full Disolosuro Act (“ILSA”), 15 U.S.C, 88 1701-1720, and Its implementing regulattons.

In the Interest of compliance and resolution of the matter, 3D Resorts-Bluegrass, by and through Thonias M, Duddy, the Chapter 11 Trustee for the bankruptey estate of 3D Resorts- Bluegrass (the “Lrustee”), hereby stipulates and consents to the issuance of the Consent Order (“Consent Order”) to which this Sipulation and Consent to the Issuance of a Consont Ordlor fs attached, and which Is Incorporated herein by reference,

In consideration of the above premises, and {n constdoratlon of the Settlement Agreement and Release by and between PlalnsCapttal Bank and PCB-ARC, Ine,, the Trustee, 3) Resorts-Bluegrass, the Bureau, and the Office of the Adorney General for the Commonwealth of Kontuoky dated , 2013 (the “Settlement Agreoment”), whioh ts attached hereto as Exhibit 1 and incorporafed herein by reference, the Director of the CPPB, through his

authorized representative, and Respondent, through the Trustes, stipulate and agree to the

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2013-CFPB-0002 Document 34 _ Filed 12/03/2013 Page 2of5 Case 11-41599-acs Doc 423-2 Filed 10/04/43 Entered 10/04/13 12:20:07 Page 20

followlng:

Juisdictlon

1, Tho CEPB has Jurisdiction over this matter pursuant fo Seotlons 1053 and (055 of the Consumer Finanolal Protection Act (“CEPA”), 12 U.S.C. §§ 5563 and 5565,

Consont

2, Rospondont agreos fo the Issuanes of the Consent Order, Respondent admits the CFPB?s Jurisdiction over Respondent and the subject mattor of this actlon,

3, Respondent agrees that the Consent Order shall be deemed an “order issued with the consent of fhe person concerned” under 12 ULS.C. § 5563(b)(4), and agrees that the Consent Order shall become a final order, effective upon Issuance, and shall be fully enforceable by the CRPB under 12 U.S.C, §§ 5563)(D and 33565,

4, Respondent enters Info (his Spulation and Consent to the Issuance of a Consont Order voluntarily,

5, Bxeept as set forth In the Settlement Agreement and the rolease by the CRPB In connection therewith, Respondent acknowledges that no promiso or representation has been made by the CFPB or any momber, officor, employee, agont, or representative of the CFPB, with regard to any criminal [ability or civil Hablilty outside of (his action that may have arisen or may atise from the frets underlying this action or immunity fiom any such orlmtnal Habiiity,

6, The Consent Order shall be given collateral estoppel offeot against Respondent, without harthor proof, in any proceeding before (he CFPB or in any subsequent civil fugatlon by the CFPB to enforee the Consent Order or ifs tights to any payment or monetary Judgment under the Consent Order,

7, The terns and provisions of this Supulation and the Consont Order shall be binding upon,

atid Inure fo the benefit of, the parties hereto and their successors in Interost, Nothing in this y

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Case 11-41599-acs Doe 423-2 Filed 10/04/13 Entered 10/04/13 12:20:07 Page 21

of 34

Stipulation ot the Consent Order, express or implied, shall give to any person or entity,

other than the partlos hereto, and thelu successors horounder, any benofit or any legal or

equitable tight, remedy, or claim under this Stipulatlon or the Consent Order,

§, Respondent agrees that the CFPB may present the Consent Order to tho CFPB Director for

signature and entry without firther notice,

Waivers

9, Respondent, by consenting fo this Stipulation, hereby walves:

Any right to service of the Consent Order, and agrees that issuance of tie Consent Order will consti{ute notlee to the Respondent of Its torms and conditions;

Any objection to the jurisdiction of the CFPB, including, without limltatlon, yndor seotlon 1053 of the Dadd-Frank Act;

All hearlngs under the statutory provisions under whioh the proceeding has been instituted; the filing of proposed findings of fact and conclustons of law; proceedings before, and a recommended devision by, a hearing officer; all posthearlng procedures; and any other procedural right available undor 12 U,8,C,

§ $563 or 12 CFR Part (081;

The right (o seck any administrative or Judiclal rovlew of the Consent Order;

Any clalm for fees, costs or expenses against the CFPB, of any of Its agonts of employees, and any other governmontal ontlty, related In any way to this enforcement matter or te Consent Order, whether arlsing under common law of undor the forms of any statute, including, but not fimited to the Equal Access to

Justice Act and the Small Business Regulatory Bnforcoment Falrness Act of 19965

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Case 11-41599-acs Doc 423-2 Filed LO/OAAS Entered 10/04/13 12:20:07 Page 22 of 31.

for thoso purposos, Respondent ngrees that Respondent is not the provatlfog parly in this actlon because tho parties have reached a good falth sottlement;

f Any other right to oballonge or contest the valldity of the Consont Ordory

g. Such provisions of the CEPB's rules or other requirements of ln as may be consitued to prevent any CEPB employee fiom participating in the preparalfon of, ov advishig the Director as (0, any order, ophiton, finding of fal, or conclusion of law to be entered In conncoiton with this Stipulatton ot the Consent Orders and

fh, Any right to olalm bias or profidgmont by the Director based on the consideration

of or discussions concerning settlement of all or any part of the procecding.

CONSUMER FINANCIAL PROTECTION BURBAU

Date: Byt.

Printed Namo:

Title: pk cu

THOMAS M, DUDDY, TRUSTRE OF 3D RESORTS-BLUEGRASS, LLC

a, uf why 5 .

L ee f

; Printed Nene: Lo oes ee

Page 49

for these purposes, Respondent agrees that Respondent is not the prevailing pmty in this action because the parties have reached a good faith settlement; f.

Any other right to challenge or contest the validity of the Consent Order; g. Such provisions of the CFPB's rules or other requirements of law as may be construed to prevent any CFPB employee from participating in the preparation of, or advising the Director as to, any order, opinion, finding of fact, or conclusion of law to be entered in connection with this Stipulation or the Consent Order; and h. Any right to claim bias or prejudgment by the Director based on the consideration of or discussions concerning settlement of all or any part of the proceeding. Date: 11w~ U .l-D l~ , Date: ___________ _ CONSUMER FINANCIAL PROTECTION BUREAU By: 1<~~ Printed Name:

Ru:J..dd C,.J,NM( Title:

'Dtl'.uf.,t, cffJB THOMAS M. DUDDY, TRUSTEE OF 30 RESORTS-BLUEGRASS, LLC By: ______________ _ Printed Name: ____________ _ Title: ---------------- 2013-CFPB-0002 Document 34 Filed 12/03/2013 Page 5 of 5