The Detroit Police and Fire Retirement System filed a lawsuit against Paramount Limited LLC for committing a Ponzi scheme that defrauded millions of dollars from the system.
The system is looking to recover funds from a defaulted $9.9 million loan and have the Wayne County Circuit Court appoint a receiver to protect the interests of the retirement system and any Detroit resident who purchased homes from Paramount.
The lawsuit alleges that rather than maintaining, rehabilitating and properly marketing more than 1,900 properties that were purchased with funding from the retirement system’s loan, Paramount and 17 related defendants conspired to defraud the retirement system. The company allegedly mismanaged the inventory and failed to maintain the properties or pay required real property taxes.
Over 1,400 of the properties are located in Wayne County, with the majority of the homes in Detroit.
Paramount also allegedly misrepresented to the retirement system that their operations were profitable. However, the company was actually operating at a loss and making loan payments to the retirement system with money originally loaned to Paramount.
Racine & Associates of Detroit, which is defending the retirement system in its complaint, said the request for a court-appointed receiver is intended to stop this illegal activity and protect and properly manage the loan collateral pledged to the retirement system.
If the court grants the request from the plaintiffs, the retirement system plans to work with the receiver to protect these assets and seek creative alternatives to salvage the properties through committed local community development groups, land banking officials and city and county authorities.
By filing this lawsuit and asking for the court request, the retirement system hopes to maximize value to recover the loan, create more owner-occupied homes in Detroit and assist with efforts to reinvigorate city neighborhoods.
