She wanted a piece of paradise a tropical retirement home where the temperature is warm, the air is clean and the crowds and stress of South Florida are far, far away.
Along with hundreds of other people nationwide, Davie resident Lorraine Fox entrusted that dream to Hollywood-based Paragon Properties of Costa Rica. Four years and $115,000 later, the 55-year-old real estate agent has nothing to show for it.
A lawsuit filed in federal court alleges Paragon Properties was "a Ponzi-type scheme," targeting people near or at retirement age. More than 900 Paragon Properties customers put down deposits for about 2,500 parcels of land in Costa Rica within the last six years, yet much of the land remains untouched and not a single customer has had a home built, according to court records.
Paragon Properties' chairman has said the company's 16 planned communities, primarily on the Central American country's Pacific coast, stalled because of a poor economy and difficulties in obtaining local building permits. As of last fall, the company had been waiting for months for financing to come through, chairman and owner Bill Gale said in an October deposition in an earlier lawsuit against Paragon Properties.
"We don't have the funds," he said. "They are not there, but we continue to work for [Paragon Properties' clients]."
But desperate customers told the Sun Sentinel they haven't been able reach anyone at Paragon Properties for weeks. The front door at the company's Harding Street office is locked. Anyone calling the office phone number is greeted by an automatic message saying the company is pursuing funding to move forward with its development projects.
"Paragon, like the paradise it purports to sell, is a myth," wrote Matthew Sarelson, the Miami-based attorney spearheading the federal lawsuit filed against the company. So far, 27 Paragon Properties customers with deposits totaling more than $1.7 million have signed on to the court action filed in Miami.
The lawsuit names 32 people or companies Sarelson says were involved in the Costa Rican land offer. Among them is Stephen Tashman, a South Florida businessman who has been sanctioned by federal judges in the past for three other business ventures that were ordered to pay more than $40 million in restitution and fines for misrepresentations to investors.
Customers' outrage over Paragon Properties has been steadily building. The company has been the target of 37 complaints filed with the state Attorney General's Office as well as 15 lawsuits in state and federal court. The Better Business Bureau of Southeast Florida gave Paragon Properties an "F" grade.
Lawyers suing the company say it meets the definition of a Ponzi scheme.
"They were using new money to pay off the old money," said attorney Richard Schurr, who is representing a Hollywood man who handed over $300,000 in deposits to purchase 22 acres. "It wasn't run in a way that it was ever going to be successful."
Gale, 66, said in his October deposition that his company has refunded $16 million in deposits to unhappy customers. When asked if money from new sales had been used to refund old customers, Gale said, "Yes."
"We have been trying for the longest time to obviously obtain the necessary funds to complete the projects, but as you are aware credit markets have become a nightmare, and particularly when it's offshore," Gale said. "We are waiting for the loans. We sit in the office and wait for the calls."