The Federal Trade Commission said that it's looking to shut down the "largest overseas real estate investment scam" it has ever encountered: an unfinished luxury development in Belize whose owners and management, the agency alleged, bilked people out of more than $100 million.
The scheme's perpetrators were based in Irvine, Calif., the FTC said in a complaint filed in U.S. District Court in Maryland. It alleged that the development — called Sanctuary Belize, the Reserve or Sanctuary Bay — was advertised on national television and that telemarketers made false claims to lure American retirees to buy lots.
The commission alleged false claims that included telling consumers the development would be finished within two to five years and that their investments would quickly double or triple in value, with all money collected from the lots being plowed back into the development.
"Unfortunately, these claims were all false," said James Kohm, assistant director of the FTC's division of enforcement.
In its complaint, the FTC said that the development is nowhere near completion "after 12 years of promises" and that lot "funds are used for personal expenses or otherwise funneled to people, companies and projects unrelated to Sanctuary Belize." In all, the FTC said developers collected more than $100 million from more than 1,000 consumers.
The defendants "lured people with the deceptive pitch that they could build their dream home," Kohm said. "But instead of getting their dream home, buyers found themselves in a nightmare."
The commission filed its complaint against multiple people and companies it said were affiliated with Sanctuary Belize, including Andris Pukke of Newport Beach. In 2006, Pukke agreed to settle a separate case in which the FTC alleged his now-defunct firm AmeriDebt engaged in deceptive credit counseling practices.
As part of that case, Pukke was required to give up his interest in the Belize land, but he continued to control the development through an office on Michelson Drive in Irvine, the FTC alleged. Associates also falsely told consumers Pukke was no longer involved, and Pukke in the "early days of the scam" spoke to investors using an alias, the complaint alleged.
The FTC said a federal judge recently granted a temporary restraining order that froze the assets of the Belize defendants, including Pukke, and prohibited them from traveling outside the United States.
An attorney who had represented Pukke did not respond to requests for comment. A message left with an employee at the development's Irvine office was also not returned. Neither was a message left at a telephone number associated with another defendant, Peter Baker, whom the FTC characterized as a longtime friend of Pukke's.
Last year, Pukke's attorney, Kristin McGough, told the Wall Street Journal her client was not involved in the development besides sometimes providing marketing consulting. Although Baker, who owns the development company, told the paper that construction was delayed by a vocal homeowners group that drew negative attention and slow sales.
The Journal also reported the developers won a libel case in Belize court against the homeowner group for critical statements made online.
The developer's website for the property, now known as the Reserve, includes a two-minute-plus video that features images of turquoise waters and white sand beaches — an encouragement to sign up for a $1,500-per-couple tour.
The "boots on the ground" experience, the website says, is designed to give "a better understanding as to why our development is the most secure investment opportunity in Belize."
The FTC said potential buyers were promised "all the amenities of an American luxury resort community, including a hospital, hotels, a golf course, a spa, a casino, high-end boutiques, cafes, restaurants, and an 'American-style' supermarket."
The pitch started before the tour began, the FTC alleged, with some consumers putting down substantial deposits before arriving in Belize.
While there, the FTC said, consumers sometimes encountered "plants" — people paid by the developer to act as enthusiastic consumers. Sales presentations were held, repeating false claims made by telemarketers, including that the development would finish quickly and lots would soar in value, the FTC said.
To seal the deal, the complaint alleged, workers whisked consumers away to a small private island, where -- in a thatch-roofed gazebo suspended above the water -- they negotiated over lots that typically went for $150,000 to $500,000.
Today, more than 10 years after sales started, the FTC said most of the Manhattan-sized development is unfinished, including the hospital, hotels, golf course and casino. Only part of the marina and about 12 homes are completed, many of which are occupied by people with ties to the development, the FTC said.
Consumers were supposed to hire a builder to construct their home or use a developer-tied company, but many probably didn't because they saw the overall property was far from completion and their lot values were not soaring, the FTC said.
As time went by, some investors sold their lots back to the developer at a loss, while others stopped making payments, according to the FTC.
At times, consumers tried to unload the lots themselves but found a developer-tied brokerage did not operate in "good faith" and many local real estate agents refused to list homes at Sanctuary Belize, according to the FTC.
Frank Balluff said he and his wife purchased a lot at the development in 2012, impressed by the marketing pitch. In a sworn declaration, he said the developers improperly foreclosed on him, and he's lost more than $310,000. At a news conference in Washington, D.C., Balluff said others experienced much worse.
"There are people who have literally died waiting for this to get completed," he said.
