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For residents of Down Wind Boulevard in Newport, buying subdivided land off Route 7 has been anything but a step toward realizing the home of their dreams.
Instead, it has turned out to be a financial nightmare.
Owners of 10 lots along the narrow dirt road claim they were ripped off by Canaan real estate developers Bill and Barbara Gourley. They say the Gourleys sold them land in the subdivision and never told them about liens on the properties, even as some of them started clearing trees and building homes on land to which others had better legal claims.
There are 10 subdivisions scattered throughout the rolling hills of western Penobscot County where 68 people bought land from the couple without knowing the properties already had liens on them, according to documents filed in Penobscot County Superior Court. Overall, the documents list the names of 245 people who are considered victims of financial crimes the Gourleys are accused of committing.
“[Bill Gourley] told me and my wife this property was free of all encumbrances,” Down Wind Boulevard resident James Winn said recently. “[Now] we’re being foreclosed on. He just lied and lied and lied.”
Most of the people who live on Down Wind Boulevard are facing foreclosure and could end up being evicted because they cannot afford to pay off the multiple liens on their properties, according to Winn.
As a result of a civil suit brought against the Gourleys by the state Attorney General, the couple has been ordered by a judge to repay $4.5 million to 130 investors in their real estate development business, Bill & Barb Gourley, Inc. Bill Gourley is 62 years old and Barbara Gourley is 52.
According to prosecutors, the couple ran the business like a Ponzi scheme, soliciting investments by promising unusually high rates of return, between 12 and 20 percent, and then paying interest on the investments by recruiting still more investors. Such schemes are illegal because eventually no more participants can be recruited and the money vanishes, leaving recent investors financially high and dry.
The Gourleys have pleaded innocent, however, to criminal indictments brought against them in Penobscot County Superior Court. They also have filed for Chapter 11 bankruptcy protection in federal bankruptcy court in Bangor.
Before the Gourleys sold the parcels in question, investors in the Gourleys’ business, several of whom each contributed more than $100,000, were given liens on the properties in exchange for the money they invested. In the wake of the Gourleys’ bankruptcy filing, investors have been trying to recoup their losses from the land buyers by collecting on the liens, according to people involved in the case.
Deeds that document the land purchases indicate that several people who bought land in 2002 and 2003 from the Gourleys agreed to pay the couple 15 percent interest on mortgages lasting 15 years. At the time, typical 15-year mortgage interest rates were around five and six percent, according to several Web sites that track historical mortgage rate data.
The Gourleys’ attorney, Peter Garcia of Auburn, has declined comment on the allegations against his clients.
“It is not my practice to discuss cases that are pending,” Garcia said last week.
A few days before Christmas in 2002, Winn and his wife, Lois Morong, bought a 1-acre parcel of land on Down Wind Boulevard from the Gourleys for $18,500. Winn, a 52-year-old former construction worker who is taking mental health care classes at the University of Maine at Augusta, estimated he and his wife have spent $34,000 overall on the property, where they live in a mobile home.
Winn said he previously has had title searches done on other land purchases but, this time, Bill Gourley convinced him not to do so. It wasn’t until after Winn and his wife acquired and developed the property that they learned three investors in the Gourleys’ business already had liens on it, he said.
“We sunk every penny we had into this place,” Winn said. “I feel we’re going to end up paying an extra $10,000 [to resolve the liens].”
Winn said he and his wife have put all of her $80,000 in retirement savings at risk by unknowingly taking on the liens on the property. He said he got out of the construction business for physical health reasons and that the stress of the fallout from doing business with the Gourleys has not helped.
“Since this happened, I’ve had a heart attack and my health has deteriorated,” Winn said.
Doug Thompson, a neighbor of Winn’s on Down Wind Boulevard, said recently that he and his wife, Ruth Hallsworth, found out about the liens on their 1-acre property when they received a call from the Maine Attorney General’s office as part of the state’s investigation of the Gourleys. Some of his neighbors already had learned about undisclosed liens on their properties, Thompson said, but kept the information to themselves out of embarrassment.
Thompson, 50, said that by negotiating directly with lien holders rather than through attorneys, he has been able to resolve the claims on his land. He said it wasn’t easy, however, and the settlement has cost him and his wife several thousand dollars more than the $18,500 sale price they paid the Gourleys in September 2002.
Thompson said he took Bill Gourley at his word when Gourley told him the property he and Hallsworth wanted to buy had clear title. He considered paying an attorney to conduct a title search, which would have revealed the liens on the land, but at Gourley’s encouragement, he decided it was unnecessary, he said.
“People are still buying property on a handshake,” Thompson said. “We’ll never do that again.”
Thompson acknowledged that some investors in the Gourleys’ business have lost more money than anyone paid the couple for land. He and his wife own property elsewhere, but others who bought land from the Gourleys do not own other property to which they can relocate, he said. For Thompson, the people who may be forced off the only land they have face the worst possible scenario.
“At the end of the day, they [the investors] have a home to go home to, and we may not,” Thompson said.
Michael Colleran, an assistant attorney general with the state, recently declined to comment on specific allegations against the Gourleys.
Speaking in general terms, however, Colleran said sellers of property in Maine are required by law to disclose any liens they know of on the land they are selling, regardless of whether they own the property or are selling it as a licensed agent for someone else.
There is a hierarchy of lien holders on any given property, according to Colleran. The primary lien holder, under the law, is first in line to cash in on their investment. If someone lives on a property but purchased a stake in it after one or more other people invested in it, they still will be lower in the hierarchy of ownership than the earlier investors, he said.
For Al Violette, Jr., who bought a parcel of land on Stetson Road in Exeter from the Gourleys in fall 2003, this raises an issue of tax payments. Violette said he and his wife Barbara Violette paid $23,000 for the 5-acre property.
“If the property’s not mine, who’s going to pay the taxes?” Violette said recently while standing outside his unfinished home. Violette, 53, spoke while taking a break from hauling logs out of the woods behind his house with an all-terrain vehicle.
“I’m not going to pay the taxes if I don’t own it,” Violette said.
The Gourleys’ offer to finance the sale at a low rate was appealing, Violette said, because he didn’t have a lot of money, and he didn’t want to incur a 30-year mortgage that most banks require for buying land and building homes. He said he does not own other property to which he and his family could move if they are evicted.
“He took advantage of people who were low-income people,” Violette said. “This guy screwed people out of $4.5 million, and he’s out walking the streets.”
The Gourleys were released on personal recognizance bail on July 22 after they entered not guilty pleas in Penobscot County Superior Court.
According to Carol Leighton, director of the Maine Real Estate Commission, people who lack financial resources often forgo seemingly unnecessary steps such as conducting title searches in order to keep their costs down.
“This unfortunately happens over and over again,” Leighton said recently of after-the-fact lien disclosures. “Why anyone would buy property without doing a title search is beyond my understanding.”
Leighton said the state agency she directs can assist consumers and licensed real estate brokers if questions about title arise during property purchases. She also said prospective buyers should go to the local municipal office where they are buying property to find out if there are development restrictions on the parcel they hope to buy.
Judd Esty-Kendall, an attorney with Pine Tree Legal Assistance, said recently the legal services agency has had five inquiries from people who bought land from the Gourleys and need help resolving lien issues. He declined to discuss the specific inquiries, but said much of the information the buyers should have known about beforehand is on file at the Penobscot County Registry of Deeds.
Hiring an attorney to go through the complicated title search process, he said, and buying title insurance are two things that every prospective property buyer should do.
According to Violette, he thought about having a title search done on the property but didn’t pursue it because Bill Gourley was a reputable businessman who had ads in the local newspaper. He said Gourley told him he had an attorney who already had done the title work and that it didn’t need to be done a second time.
Violette estimated that to pay off all the liens on the property would cost him $70,000, more than what the land and building are worth. He said the discovery of the multiple liens a year and a half after he and his wife bought the property has caused him to stop working on their house.
“I think we’re going to end up losing the property,” Violette said. “Now it’s just a waiting game.”
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