In December 2004, things were going south for self-styled Raleigh entrepreneur James Webb. Dozens of investors, clients and subcontractors of his Alpine Properties real estate venture were pestering him for payments and filing suits in six and seven digits from Greensboro to the coast. At the same time, two state agencies were looking into his business practices.
Eventually, Webb himself went south instead–about 800 miles. He shuttered his Falls of the Neuse Road office and drove his Bentley to new digs in Florida.
What a difference a year and a change of venue make.
In December 2005, Webb took his show to the national stage, appearing on a Fox News’ Hannity & Colmes program bragging about his involvement in an enormous redevelopment project in Riviera Beach, Fla. A 400-acre, $2.4-billion undertaking, the project has garnered a lot of attention as one of the test cases for a controversial Supreme Court ruling on eminent domain last year. Now it looks like his involvement in that project is teetering.
Webb apparently has reinvented his image and his former business model, in which he purported to turn huge profits for investors by using their money to buy and refurbish dilapidated houses and then renting or selling them.
Webb has started a new company, CitiRise, and been featured in various media pieces which, like the Fox interview, make no mention of his myriad legal troubles in North Carolina, his former bankruptcy, or his federal conviction for lying to the U.S. Department of Housing and Urban Development in 1991.
A March 2005 profile in the Triangle Tribune titled “CitiRise redevelopment breathes new life into communities across the southeast” touted Webb’s commitment to low-income communities and praised his business acumen.
A national self-help column called “The Small Business Professor” gave him even wider exposure in July 2005.
“CitiRise focuses on the rejuvenation of both distressed homes and people,” wrote Bruce Freeman, whose column is syndicated by the Scripps Howard New Service and runs in 450 papers across the nation. “It provides first-tier labor jobs, improves neighborhoods, and gives people a chance to live in a nice place near where they work.”
Freeman admits that he took Webb’s word for his successes.
“All my pieces are flattering pieces because they’re features,” Freeman says. “You’re questioning whether I did my homework. You asked me if I fact check. Generally, I have to be honest with you, we don’t.”
Good PR has long been a strong suit of the former N.C. Central University student body president, even though a browse through local court records turns up lots of legal action and a simple Internet search uncoversthe Independent’s 2004 profile of Webb (see “Smooth operator,” Dec. 8, 2004.
Last month, another chapter of Webb’s legal saga began. On Jan. 20, a Charlotte pharmacist and longtime investor filed another multi-million-dollar lawsuit. John Sink alleges that Webb, along with his business associates such as lawyers and property appraisers, cheated him out of at least $400,000 in cash and left Sink and his wife with more than $2 million in debt they didn’t agree to assume.
“Webb would take the money and instead of refurbishing the houses, he would use it for his own purposes,” says Sink’s Raleigh attorney, James N. Jorgensen. In the suit, Jorgensen documented the various transactions involving the 36 houses in which Sink invested with Webb and Alpine Properties. Jorgensen’s paper trails show Webb buying and selling houses under the names of various corporate entities, including Grand Summit, the limited liability company of which Sink owned 75 percent and Webb the other 25 percent. In one example Jorgensen cites, land records show Alpine Properties bought one Bladenboro, N.C., house for just $13,000 on July 1, 2003. Three weeks later, Alpine “gifted” the house to Grand Summit, the partnership between Sink and Webb. In May 2004, land records show, Grand Summit in turn sold the property to John Sink for $67,000.
“Mr. Webb has illegally and fraudulently ‘flipped’ properties onto Mr. and Mrs. Sink, and he did so using grossly inflated appraisals,” says Jorgensen, who also named as defendants attorney Amy Robinson, who did most of Alpine’s legal work, and the two appraisers who provided the estimated values, Shawn Hays of Durham and Larry McDaniel of West Virginia. Hays and McDaniel did not return phone messages.
Webb, who did not return phone calls, continues to solicit new investors in his business model, in which he uses other people’s cash and/or credit to purchase dilapidated houses in North Carolina, Virginia and Tennessee and then claims to turn them around for sale or rent at large profits in just several weeks’ time. The plaintiff in the most recent lawsuit is not alone in his disillusionment with the venture.
“Everyone knows about him and everyone does nothing,” says California businessman Mike Farag, who in November 2004 invested tens of thousands in Webb’s refurbishment of a Memphis, Tenn., apartment building that Webb claimed was worth $5 million but turned out to be worth less than $1 million, Farag says. “What’s it going to take?”
While many former investors interviewed for this article say they’ve spoken with law-enforcement officials, so far neither the U.S. Attorney’s office in Raleigh nor the FBI have gone public with any investigations.
Sink and Farag have plenty of company; dozens of Webb’s current and former investors from across the state and across the nation have contacted the Independent since the December 2004 article. They detail deal after deal in which they say Webb didn’t deliver on his promises.
“Your article was only the tip of the iceberg,” says one former investor who asked not to be identified. “I brought investors to the table for James and when he was not truthful to me, and I figured out he was not doing what he said he would, I went back to the investors I’d brought and told them to get out.”
Alpine Properties’ tenants in eastern N.C. towns such as Rocky Mount and Lumberton have also called to tell stories of living in rental homes where sewage regularly backs up in showers, ceilings collapse, floors sink and rent checks are returned from the former Alpine office stamped “no such addressee.”
“All they did was throw these houses together and stuck people in them and four or five months later they’re all falling apart,” says one Lumberton tenant.
Yet Webb remains, apparently, unaffected.
“It’s been frustrating to all the investors that he continues to do this,” says Jorgensen. “If someone walks into a convenience store and robs it, they would be prosecuted. Yet here’s someone who has defrauded many people out of millions of dollars and no law enforcement agency that we know of has called on him to account for himself.”
Jorgensen points out that the civil court system can go only so far in demanding amends for wronged parties.
Prior to the Sink case, Webb’s other two large North Carolina civil lawsuits–one with a group of Alpine investors in Raleigh and the other with a coalition of clients from his earlier enterprise building upscale homes around the Triangle–settled privately last year.
In the two regulatory matters, the N.C. Real Estate Commission maintains an open investigation into Webb’s business practices, with no repercussions so far. The N.C. State Bar merely issued him a “letter of caution” in April 2005 for practicing law without a license. In that matter, Webb was represented by prominent lawyer and former U.S. Attorney and Judge Sam Currin, who was also known to accompany Webb on sales pitches and whose words appear in a hearty endorsement on the Web site of CitiRise.
Headquartered in Weston, Fla., CitiRise seemed headed for national fame two months ago, when Webb appeared on Fox News touting his role in the Riviera Beach project.
The controversial redevelopment has drawn ire from residents and property-rights advocates who protest the city’s proposal to acquire land by eminent domain–a plan made possible by a U.S. Supreme Court ruling in a New England case last year.
In a typically combative conversation with the hosts of Hannity & Colmes on Dec. 6, Webb bragged about being chosen for the project and cited his experience at rehabbing 500 properties in the last four years.
“I was brought into the project with the massive developer to create affordable housing and opportunity for economic empowerment,” Webb said.
But last week, the lead developer chosen by the city to oversee the massive project distanced himself from Webb and CitiRise, saying Webb had not been contracted for the job and that Webb’s national television interview came about through contacts with city officials, not his firm.
“We’re likely not to use James,” says Ian Meredith, the CEO of Portfolio Group and one of the key decision-makers. “We’ve had a little trouble pinning him down on financial matters . . . and where there’s smoke, there’s usually fire.”