At the height of the real estate boom last year, a group of investment promoters crisscrossed California, touting a plan to build rental duplexes in distant states.
Mile High Capital Group's scheme generated so much interest that its executives said they were interested only in buyers who were willing to take a risk. And after investors handed over a $16,500 down payment for each duplex, Mile High founder Rick Dryer warned: "It's no longer your money. It's our money."
That turned out to be all too true for hundreds of Mile High buyers, who fear they will never see the money again.
The Denver company filed for bankruptcy protection last month and is all but defunct. It collected deposits on nearly 1,200 duplexes but finished building only 55 of them. Regulators say the company's files are in such disarray that it will be a long time before they know exactly what happened and who was responsible.
Allegations of real estate fraud have tripled in the last two years, the FBI says. As a hot housing market becomes tepid, economists and other observers warn that many of those who bought speculative properties could wind up losing a bundle -- some because of the market downturn, others because of frauds coming undone.
Mile High Capital stands as a vivid example of the latter. A court-appointed receiver says the company's books provide indications of "fraudulent and deceptive conduct by one or more of the company's current or former officers, directors, shareholders or employees."
The 57-year-old Dryer, celebrated at Mile High's sales seminars as a millionaire home builder and author of a book on real estate investing, turned out to have a record of securities fraud stretching back a quarter of a century.
His book didn't exist either, despite the fact that it was pictured on promotional materials at the seminars.
Dryer's lawyer said in an interview that his client was being made a scapegoat for the problems at Mile High and that the person to blame for any fraud was Andy McFaul, the former chief operating officer who, the attorney said, had control of the firm's day-to-day operations.
McFaul joined Mile High in late 2004, a few weeks after he pleaded guilty to felony theft for stealing more than $10,000 of tools from the workers building his house.
McFaul's lawyer said the 41-year-old executive left Mile High last summer after realizing that "he and many others had been the victims of an enormous scam orchestrated by Mr. Dryer and Mr. Dryer alone."
