"From 1957 until last year, Lake View sold fewer than 300 of the 570 lots in the development around the two miniature man-made lakes. "Lake View Land Co. was originally headed by Kenneth W. Rice, a Meadville attorney. "John V. Pepicelli, Meadville city solicitor, became president of the company in 1962 when Rice died. "As disclosed in yesterday's Plain Dealer, Pepicelli, as a private lawyer, still collects mortgage payments from Lakeshore and releases individual lot deeds. He is retained by Smith for this purpose. "In a deed, dated June 4, 1964, Lake View turned over the unsold lots, two lakes and recreation area to Lakeshore for $35,000. "Under an agreement with Lake View, however, Lakeshore agents had started selling lots several months before the land actually changed hands. "After disposing of the remaining lots in the original 75-acre allotment, Lakeshore obtained a 100-acre farm about three miles away and sliced it into another 465 lots. Only a few lots remain unsold. "Commenting on Lakeshore's quick disposal of the property, Smith observed: "It seems to me that it was pretty well handled. They sold the land. What are you going to do?" " a. Writers of the articles say that cottages may not be built on many of the sites at Shenango Lake because of poor drainage conditions. Did buyers fully understand this problem when they bought? How many cottages have been built at Shenango thus far? b. Some of the roads are described as impassable. Your letter stipulates that you do not provide fully paved city streets, but the Plain Dealer article suggests that many buyers thought you would provide gravel roadways. What is the cause of this apparent confusion? c. Your letter says that property owners are required to establish an association and pay $8 dollars annually for maintenance of roads and improvements. How many members are in the Association at Shenango Lake? What sums have been paid for maintenance of roads? What is the address of the association? May we have similar information for other of your developments, including Harris Park Lakeshore near Bailey, Colorado? According to the Plain Dealer article of August 8, only a few houses, cabins or shacks are now at the Colorado site. d. The article of August 5 says that Better Business Bureau officials are critical of the wording in circulars sent to prospective purchasers on the grounds that it tends to give the impression that the recipient has been selected to receive a free lot. What is your comment in response to this criticism? e. The same article also gives the results of interviews with more than 50 lot owners, who apparently believe they were misinformed about terms of their purchase agreement. May we have your comments on each point raised? f. We will also welcome your comments on any of the other matters discussed in the Plain Dealer articles. TWO: ACTION BY THE STATE OF WASHINGTON Also enclosed are copies of a letter from Mr. Art Hansen, Assistant Attorney General of the State of Washington; a copy of literature distributed in connection with the sale of sites at Black Lake Shores in Idaho; a copy of a complaint made by Mr. Hansen in the Superior Court of Washington in connection with sale of Black Shore Estates on October 13, 1965; and a bulletin from the National Better Business Bureau commenting on the complaint. "Hon. HARRISON A. WILLIAMS, Jr., "STATE OF WASHINGTON, "OFFICE OF ATTORNEY GENERAL, "Spokane, Wash., July 7, 1966. "DEAR SIR: As per your request, I am enclosing material on Black Lake Shores and a number of other land promotions that have come to our state from another state. "Your letter did not arrive until after the 4th of July holiday and I did not have sufficient time to prepare a comprehensive statement on our experiences with land sales over the years. "Black Lake Shores promotion is a typical land promotion and is difficult for a state to control. In this particular case, Black Lake Shores, was in Idaho, and tens of thousands of letters were sent into the State of Washington. At no time did an agent of Black Lake Shores come into the State of Washington that we were aware of. I did file a petition seeking an injunction but because personal service could not be had on the defendant corporation, no effective injunction could be obtained from our courts. However, in this particular case, the publicity attendant to the filing of a petition for injunction effectively stopped the promotion. "For the past ten years, I have been working in the Consumer Protection field; five years as a Deputy Prosecutor, and for the past five years as an Assistant Attorney General to John J. O'Connell, the Attorney General for the State of Washington. John J. O'Connell was instrumental in the passage of a Washington State Consumer Protection Act in 1961. I have been his assistant handling Consumer Protection matters for the eastern half of the State of Washington since 1961. "It has been my experience through the years that state officials are frustrated in their attempts to stop a promotion from out of a state, wherein the use of the mails alone are used and it is my humble opinion that no state law could be passed which could give sufficient authority to state officials to handle such problems. I, therefore, wholeheartedly support S. 2672, not only for the purpose of imposing sanctions on the phony sellers of sand but also to make it possible for legitimate real estate promotions to operate effectively. "I am sorry that a more extensive statement could not be assembled for you at this time but I felt that it would be better to get this small amount off immediately. "Very truly yours, "ART HANSEN, "Assistant Attorney General." "NATIONAL LAKESHORE CORP., "St. Maries, Idaho, September 7, 1965. "DEAR FRIENDS: We are pleased to inform you that in conjunction with our advertising campaign and in the pre-development Opening of our newest Lake Property, you have been selected from your district to receive an Allotment of a full-size cabin site at Black Lake Shores, located on beautiful Black Lake in Idaho. “Instead of spending all of our money in newspaper and radio advertising, we have set aside an allotment of full size lots with Beach privileges, and are allotting them to people in several sections. We think as a result of your acquiring a cabin site here, your friends will also purchase lots at Black Lake Shores. We are making these allotments because we feel that word of mouth is the best form of advertising we can devise and a plan from which we both benefit. This is not a free lot plan. This is a special advertising plan and you are not required to purchase an extra lot as all lots are full size. You may build on this lot or sell or hold. "Black Lake Shores is entirely wooded and is located on beautiful, virgin Black Lake. From Black Lake, navigable by all boats, you will be able to boat into Coeur D'Alene Lake, plus 5 or 6 lakes on the way, resulting in miles and miles of boating pleasure. This area abounds in fishing and wildlife such as duck and goose hunting. Property owners at Black Lake Shores will enjoy their own beach area with docks, picnic tables, barbecue pits, and swings, slides, etc., for the children. Truly a summer paradise for the entire family. "Present this letter at the Property Office of Black Lake Shores, not later than Sunday. You will then receive full information regarding location of the lot set aside for you, consideration required and the privileges granted. "A courteous salesman will escort you to your Allotment. "Your Allotment expires at 7:00 P.M. Sunday. "You may acquire the Allotment Friday, Saturday or Sunday, 9:00 A.M. to 7:00 P.M. "Very sincerely yours, "E. L. PARKER." "IN THE SUPERIOR COURT FOR THE STATE OF WASHINGTON, IN AND FOR THE COUNTY OF SPOKANE No. 179712 COMPLAINT "State of Washington, Plaintiff, vs. National Lakeshore Corp., a Foreign Corporation, dba Black Lake Shores, and E. L. Parker, Defendants "Comes now the plaintiff, State of Washington, by and through its attorneys, John J. O'Connell, Attorney General, and Art Hansen, Assistant Attorney General, and in bringing this cause of action against the defendants, complains and alleges as follows: "JURISDICTION AND VENUE "(1) This complaint is filed and these proceedings are instituted pursuant to Chapter 189, Laws of 1961. "(2) The alleged violations hereinafter described have been and are being carried out in whole or in part in the County of Spokane, State of Washington, by the defendants named herein. "DEFENDANTS "The defendant, National Lakeshore Corp., is a foreign corporation, incorporated in the State of Florida, and conducts its business in the State of Washington, under the name of Black Lake Shores, with offices in St. Maries, Idaho. "CONDUCT AND NATURE OF VIOLATIONS "The defendants are engaged in the business of promoting and selling properties owned by the defendants adjacent to and near the Black Lake in St. Maries, Idaho. That to induce sales of these lots to the public, the defendants have sent out tens of thousands of letters to residents of the County of Spokane and to residents of other counties in the State of Washington. That a copy of said letter, marked Exhibit 1, is attached hereto and made a part of this pleading. That said letter is false, deceptive or misleading within the meaning of the statute in the following particulars: "(1) The recipient of said letter is led to believe that he has been especially selected in his specific geographic district or area to receive special consideration from the defendants. Whereas in fact, the identical letter was sent out to thousands of other people in the same area as the recipient. "(2) The recipient of said letter is led to believe that they have in fact received an allotment of a full sized cabin site on Black Lake Shores. Whereas in truth and in fact, no such allotment is made to the recipient, but upon answering the inquiry and going to the defendant's agents they are advised that they may purchase said lot. "(3) Said letter represents to the recipients that a lot has been set aside for the recipient. This representation is obviously false because this same letter marked Exhibit 1, was sent to tens of thousands of people in the State of Washington, and the defendants do not have tens of thousands of lots for sale. "(4) That the said letter marked Exhibit 1, represents that the recipient is offered a special advertising plan where the recipient has been selected over and above the general public to receive a lot at a less price for the lot; whereas in fact this is the only means used by the defendants to sell their properties, and the price offered to the recipient of the letter is not a special advertising price or a promotional price for the said lot. "In its entirety Exhibit 1 is a cleverly worded letter, well calculated to mislead recipients into believing that they have been especially selected or chosen to receive something of value over and above what is offered to the general public. That this deception is the bait used to entice the recipient to go to the defendant's property in Idaho, where they are then told that the property set aside for them is not on Black Lake as depicted in the letter marked Exhibit 1, but is in fact a mile from the lake on a hill side hidden from view of the lake, and a lot 60 x 100feet will cost them $309.85, and a lot 100 x 120 feet will cost them $600.00, if the recipient is interested in obtaining lake shore property, the defendants happen to have one or two lots left on the lake, and they would only cost $3500.00 to $4000.00 if the recipient were to purchase immediately. "Wherefore, Plaintiff prays: "PRAYER FOR RELIEF "(1) That the Court adjudge and decree that Exhibit 1 is a false misleading or deceptive advertisement in violation of R. C. W. 9.04.050. "(2) That the defendants, their officers, directors, agents, employees, representatives, members and all persons or associations or corporations acting or claiming to act under the direction or on behalf of the defendants, be permanently enjoined and restrained from continuing such advertising. "(3) For such other relief as the Court deems proper to fully and effectively dissipate the effects of the acts and practices herein complained of or may otherwise seem proper to the Court. "Dated this 13th day of October, 1965. "JOHN J. O'CONNELL, "Attorney General. "ART HANSEN, "Assistant Attorney General.” "State of Washington, County of Spokane, ss: "Art Hansen, being first duly sworn on oath, deposes and says: That he is an Assistant Attorney General of the State of Washington and authorized to sign pleadings in its behalf. That he has read the foregoing Complaint, knows the contents thereof, and believes the same to be true. "(S) ART HANSEN. "Subscribed and sworn to before me this 13th day of October, 1965. As you can see, the complaint says that your sales letter is "a cleverly worded letter, well calculated to mislead recipients into believing that they have been especially selected or chosen to receive something of value over and above what is offered to the general public." The complaint also says that the land so offered is not on Black Lake, but a mile away. a. What are your responses to these allegations? b. What is the present population of Black Lake Shores? How many lots have been sold? What improvements have been made? THREE ACTION BY THE STATE OF VERMONT I have also enclosed several letters provided by Mrs. Georgia M. Armstrong, Executive Secretary of the Vermont Real Estate Board. She describes her requests for changes in the wording of your sales literature. She also sent actions taken by the Vermont State Health Board to assure sewage control in developments. "Hon. HARRISON A. WILLIAMS, Jr., "U.S. Senate, "Washington, D.C. "STATE OF VERMONT, "VERMONT REAL ESTATE BOARD, "Montpelier, July 7, 1966. "DEAR SENATOR WILLIAMS: Thank you for your courteous letter dated July 1, 1966, relative to S. 2672 as amended, together with your photocopy concerning The Lakeshore Corp., E. L. Parker, President, Miami Beach, Florida. "In reference to S. 2672, the Vermont Real Estate Board is completely in accord with Federal legislation which will exercise control over 'subdividers' and 'developers' promoting the sale of out-of-state land here in Vermont and the several states. "At the present time, Vermont does not have a subdivision law. We are looking forward to such a law being introduced into the next General Session commencing in January, 1967 which will include a requirement for real estate license (s) for subdividers and agents, as well as definite standards for advertis ing in order to eliminate possible false or misleading advertising as it relates to subdivisions. "The Florida Lakeshore Corp. is registered with the office of the Secretary of State, and authorized to do business in Vermont. I am enclosing photocopies of correspondence to and from this office in connection with this company. These represent a portion of letters received, but I believe they are sufficient for your needs. For the past several months, we have not received any further inquiries or complaints from persons investing in this company. "We sincerely appreciate your interest in this matter and feel certain that a State and Federal law controlling the sale of out-of-state land will result in the elimination of similar problems, and so ultimately protect the general public against dealing with occasional unscrupulous outfits, preying upon the unprotected public. "Please accept my apologies in the lateness of this reply. I have been out of the office on official business for the past week. "Sincerely, "(Mrs.) GEORGIA M. ARMSTRONG, "VERMONT REAL ESTATE BOARD, "Re Lake Champlain Estates, Grand Isle, Vt. "GENTLEMEN: Many letters of inquiry have come to the attention of the Vermont Real Estate Board relative to the above caption. "Upon checking our files we do not find that your corporation or its subsidiaries hold a Vermont real estate broker's license. "However, the Vermont Real Estate License Law does not require that owners of property be licensed in order to sell, rent or lease such property. "At the present time there does not appear to be a recording of the purchase of property in Grand Isle by your company. Also to date, we do not find where you have filed corporation papers with the Secretary of State which would allow your company to do business in the state of Vermont. "In order to clarify this situation we must request that you furnish the Real Estate Board with photostatic copies of the sales agreement in connection with the purchase of land located in Grand Isle, Vermont, known as the Lake Champlain Estates, together with any additional papers pertinent to this transaction. "Your early attention to this request will be appreciated. "Sincerely yours, "(Mrs.) GEORGIA M. ARMSTRONG, "NATIONAL LAKESHORE CORP., "LAKE CHAMPLAIN ESTATES, "DEAR FRIENDS: We are pleased to inform you that in conjunction with our advertising campaign and in the pre-development Opening of our newest Lake Property, you have been selected from your district to receive an Allotment of a full-size cabin site at Lake Champlain Estates located on beautiful Lake Champlain in the town of South Hero, Vermont. "Instead of spending all of our money in newspaper and radio advertising, we have set aside an allotment of full size lots with Beach privileges, and are alloting them to people in several sections. We think as a result of your acquiring a cabin site here, your friends will also purchase lots at Lake Champlain Estates. We are making these allotments because we feel that word of mouth is the best form of advertising we can devise and a plan from which we both benefit. This is not a free lot plan. This is a special advertising plan and you are not required to purchase an extra lot as all lots are full size. You may build on this lot or sell or hold. "Lake Champlain Estates is located on beautiful Lake Champlain which is 136 miles long and the sixth largest Lake in the United States. Lake Champlain Estates offers the finest in boating, swimming and fishing. Property Owners will enjoy their own Beach Area, boat docks, Private Clubhouse, swings, slides, picnic tables, barbecue pits and private swimming pool. There are motel units |