March 15 Georgia Land Trust Party Old Home Week For Players in Preserve Saga

The scenic Waterwheel House was the site of a March 15 gala to celebrate the Georgia Land Trust's acquisition of the beautiful Johnson's Crook acreage that was once called The Preserve at Rising Fawn 

March 15 Cocktail Party Old Home Week For Preserve At Rising Fawn Players

By Robin Ford Wallace

The Georgia Land Trust, with local hosts Richard Rothman and Nona Martini, both of Lookout Mountain, threw a bluegrass-and-cocktail shindig at failed development the Preserve at Rising Fawn on March 15 to celebrate its ownership of much of the Preserve acreage.

But though the trust acquired another 40 or so acres in donated Preserve lots at the end of last year, Katherine Eddins, executive director of the conservancy, said the Ides of March gala was intended more to thank all parties involved in the acquisition of the Johnson’s Crook land than to announce anything new in the project.  “We’re exactly where we were,” said Ms. Eddins.

The trust has not yet worked out a conservancy plan for the land, she said, nor completed any arrangement for public access, though anyone wishing to see the Crook may apply by email for permission (katherine@galandtrust.org).

The Georgia Land Trust bought 1200 Preserve acres out of a bankruptcy sale last year, later acquiring more land in donations from banks that had foreclosed on it.  Ms. Eddins said the trust now holds about 1800 acres in all at the Crook and is finalizing the acquisition of 16 more on which it had retained a 120-day option at the time of the sale.  Meanwhile, she said, it continues to solicit additional parcels in donations.

“Once we figure out what we have, then we’ll start the process of figuring out how do we best protect it,” she said.     

Guests were encouraged to show up early to observe the beauty of the land in early spring, but the Ides party was also a good opportunity to observe some of the lead players in the Preserve’s long and convoluted saga. 

The gala was held at the Waterwheel House, once used as a Preserve clubhouse, now a rental property belonging to Debbie Johnson, widow of Eugene Johnson.  It was Eugene Johnson who originally sold the Crook land to developer Southern Group, retaining a mortgage on much of it.  When Dade County in 2009 threatened to seize Preserve land for unpaid taxes, it was Johnson who stepped in and paid the county to protect his investment.  Later, quarreling with the developer, Johnson periodically – and rather publicly – threatened to foreclose. 

Eugene Johnson died in an automobile accident in May 2010.  Now Debbie Johnson, after settling lawsuits brought by Johnson’s adult children as well as by Dade Magistrate Judge Joel McCormick, a former Southern Group employee and investor, owns parcels of Crook real estate including the Waterwheel House, which fronts on a scenic waterfall.  Ms. Johnson rents the site out as a venue for weddings and other special occasions – such as the Ides party.

Ms. Johnson attended the celebration, as did Georgia Land Trust Development Director Bobby Davenport, who in January 2012 spearheaded the conservancy’s first bid for the Crook land.  Dade County, by then attempting to collect another couple of years’ backlog of real estate taxes, had arranged a special auction exclusively for Preserve acreage.  Davenport attended that sale and bought for the conservancy – or thought he had bought – much of the same Preserve acreage the trust acquired last year. 

 That 2012 tax sale was invalidated, and Davenport’s check returned, when it emerged that Southern Group had transferred the land to TAS Properties, a sister corporation with the same ownership, and that TAS had declared bankruptcy a few days before the sale.

John Deffenbaugh, District 1's current member in the Georgia House of Representatives, now up for reelection, talks to party host Richard Rothman.   

 Also attending the party was Rick Jahn, trustee for that TAS bankruptcy case.  TAS had originally sought Chapter 11 reorganization protection, proposing during subsequent court proceedings a transfer of the land to yet another corporate entity.  But that sale was never approved, and after months of delays in which the legality of the Southern Group/TAS land transfer was debated, the case was converted to Chapter 7 bankruptcy, with Preserve assets to be liquidated to repay creditors. 

Thus it was Jahn – incidentally, the second trustee assigned to the case – who did finally arrange the sale of the Crook acreage to the Georgia Land Trust for $1.2 million in 2013, delivering to Dade its half-million dollars in accumulated back taxes and penalties, with the balance going to the three banks that were Southern Group’s other main creditors.

Jahn said he is still in the process of selling off to individual buyers smaller pieces of the Preserve that he retained from the Georgia Land Trust sale.  He said it was his responsibility as trustee to get as much for the property for creditors as he can, and that like an individual landowner he is allowed to spend money on improvements in order to get a better price.  For example, he is installing a septic system to make the old 1990s-built fishing cabins off Newsome Gap Road saleable.

“I’ve got a good bit of money still on hand,” said Jahn.  “I can afford a little septic system.”

Jahn said he has sold some lots and houses but still has three of those five older cabins for sale.

 Another chore Jahn is tidying up is replacing the Preserve’s property owners association (POA).  An older POA had thrown a further plot twist into the Preserve story by sending out letters in 2011 and 2012 demanding years of back membership fees assessed on individual lots – many of which were by now long-foreclosed and in the possession of banks – and by filing liens on the lots for nonpayment. 

Another politician who attended the Preserve party was Lamar Lowery (center), a once and would-be future Dade County commissioner.  Lowery is shown here with wife Kathy and, on the left, New Salem Fire Department and Friends of Cloudland Canyon volunteer Tom Pounds, who was clearly fascinated by the speeches.

Jahn explained that though that POA now seems to have subsided into history, and that in any case buying from an official bankruptcy sale erases many title and lien problems, he and the land trust still feel it prudent to address the POA issue.  “It’s been inactive, but theoretically the lots that have been platted could be assessed a fee every month even though nothing’s ever happened,” he said.

Jahn said the process would involve calling a meeting of the present owners, electing officers for a new POA and formally unseating any old ones.

Among those current owners, and also present at the Ides party, were representatives of the Southeastern Cave Conservancy Incorporated (SCCI), on hand to give attendees tours of the caves in Johnson’s Crook.  The SCCI is now the owner of one such cave, Lost Canyon Cave, and is partnering with the land trust toward comprehensive conservation of the Crook area.

It was cavers’ concern for the environmental impact development would have on the cave-riddled Crook land, together with the stack of liens for unpaid taxes at the county courthouse, that in 2009 drew the interest of a local newspaper reporter – who was also present at the gala – to the Preserve.  An Atlanta couple attending the Ides party said they had invested early in the Preserve, lost contact with the Southern Group as the financial situation went south, but managed to keep up with developments there through the years via the local newspaper’s investigation. 

The Federal Bureau of Investigation and the Internal Revenue Service later made their own investigation, resulting in the May 2012 arrest of two Preserve principals, Southern Group partner Josh Dobson and bank loan masseur Paul Gott III.  Dobson and Gott were found guilty on federal wire fraud and money-laundering charges at a Chattanooga trial last April and are scheduled for sentencing at the end of this month after a long series of continuances.

At issue in the trial was the Southern Group’s Ponzi-esque no-money-down, no-monthly payment scheme for selling Preserve lots.  Prosecutors said Gott and Dobson, by slipping down payment money up front to “straw buyers” who in many cases never saw the lots, and certainly never planned to build on them, deceived banks into parting with $45 million in loans. 

The loans were secured only by the lots, mostly two to three acres and often without access to roads, electricity or public water, which had nevertheless been valued at $100,000 to $250,000.

In exchange for allowing the developer to arrange loans in their names, lot “buyers” were promised exponential profits when the developer bought the lots back.   Meanwhile, the developer promised to make monthly loan payments.

But when the housing market collapsed over the 2008-2009 period, lot sales stalled, income sagged, Southern Group stopped making the payments and the straw buyers were on the hook themselves.  Several testified at the trial that they had met financial and personal ruin as a result.

Lending officers also testified about the millions lost by their banks in the Preserve scheme.

Sentencing for Dobson and Gott is scheduled for 10 a.m. on April 29 at the federal courthouse in Chattanooga.  Court papers filed by Summers & Wyatt, the law firm retained by Dobson for the post-verdict phase of proceedings, refer to a sentencing guideline for the applicable counts as 188 to 235 months, which is to say up to 19 ½ years.

But the court papers were filed in support of Summers & Wyatt’s request for a “downward variance” of the guideline because:  “It does not differentiate between an individual running a Ponzi scheme and an individual like the defendant who was a land developer and trying to keep his business afloat while reinvesting the money he was earning back into the land.”

The pleading asserts:  “Dobson relied on others in the mortgage, banking, and real estate industries and did not set out with an intention of defrauding anyone.”

Dobson and Gott have remained free pending sentencing.

Neither at the 2013 trial nor in subsequent proceedings have either prosecutors or defense attorneys mentioned the two previous projects – Long Island Overlook in Alabama and The Cumberlands at Sewanee in Tennessee – in which Southern Group sold lots via a similar program, for developments that similarly did not materialize. 

robinfordwallace@tvn.net

Recreators in brightly-colored plastic boats enjoy the lake at the former Preserve.  Bankruptcy trustee Rick Jahn says that he's sold off some of the Preserve's existing cabins, which were not included in the land trust's acquisition, but that others remain up for grabs  Jahn says buying from a bankruptcy sale erases most of the title and lien problems that may have discouraged earlier attempts to market the properties.