Hot Springs Developer Faces 22-Count Federal Indictment

by Mark Friedman  on Monday, Sep. 6, 2004 12:00 am  

Hot Springs developer Rodney Myers said he thought he closed the door years ago on his failed development, Burchwood Harbour Apartments.

The 72-unit Hot Springs complex filed for Chapter 11 bankruptcy protection in 1998. And Myers walked away from the property when the U.S. Department of Housing & Urban Development foreclosed on it in 2000. HUD lost $1.63 million when the complex was sold for $2.55 million.

Since Burchwood, Myers said he's had a string of hits, including a $6.5 million Baymont Inn & Suites and a $32 million development on Lake Hamilton that includes condominiums and a hotel.

Until last month, Myers was working on several other projects, including another Baymont Inn in Florida. But those projects have come to a halt.

Myers is scheduled to go to trial in January on a 22-count federal indictment that alleges skimming, money laundering, concealing assets in the Burchwood bankruptcy proceeding, subornation of perjury and perjury for his actions in connection with the Burchwood Harbor Apartments.

Myers "participated in a scheme and artifice to defraud HUD and the bankruptcy court and to obtain money by means of false and fraudulent pretenses, representations, and promises," the indictment said.

The indictment, issued in March, alleges Myers took nearly $90,000 between 1998 and 2000 from Burchwood Harbour Apartments and funneled it into other accounts he controlled.

Myers' attorney, Q. Byrum Hurst of Hot Springs, has denied the allegations.

"It's unfortunate that all this has occurred because people like Rodney Myers that are able to put together projects and developments, they're an important part of the community development," Hurst said.

"His activities of putting these projects together creates a lot of jobs for people, so it's unfortunate when one goes bad like this. But I think when we get to trial, I think we're going to be able to demonstrate that this was not the way he did business."

Lawsuits

While Myers, 42, has put together several deals, he has also been a magnet for numerous lawsuits since the 1990s. Some of the most recent ones involved him not paying mortgages.

Chambers Bank of Danville sued Myers in 2003, saying a $175,000 mortgage was in default.

"It was a misunderstanding," Myers said from his Hot Springs office, where his sparse furnishings include a life-size cardboard standup of President George W. Bush.

Myers said the bill has been paid off.

Also in 2003, Chambers Bank sued The Pointe Condominiums LLC and accused Myers and other investors of defaulting on a $250,000 mortgage.

Myers said it also has been paid off, and he blamed an "inner-partnership dispute" for the late payments.

In March, Moore & Associates Inc. of Hendersonville, Tenn., sued Myers for at least $122,000 for breach of contract. Moore & Associates said in the lawsuit that it was supposed to design and build a 97-unit Hilton Garden Inn and 18 villas in Hot Springs for $700,000.

Myers said there was a misunderstanding about the terms of their agreement, but he hopes it can be worked out. Moore & Associates President Martin Fugardi declined to comment.

Last Wednesday, Myers ended his lawsuit and counterclaims against the owners of the Baymont Inn at Hot Springs.

He said the dispute was about the purchase price for his share, which was settled when he was bought out for an undisclosed sum.

Darrell Allison, owner of Diamond-head Realty in Hot Springs, said he's known Myers for about 15 years and considers him to be a sharp investor.

Myers will buy "first class" properties and then develop and sell them, he said.

"I know he is a straight-up dealer," Allison said. "He is going to negotiate the best price. He has never asked me to do anything under the table."

Of all the projects Myers has done, Burchwood Harbour was his "only hiccup," Allison said.

"I still can't believe that didn't work," he said.

Burchwood Apartments

In 1996, Myers learned through a mortgage company of a non-recourse financing package through a HUD program.

The HUD program was designed to encourage private lenders to enter the housing market and it would provide financing which otherwise might not be available.

Under the program, the owner of a HUD-insured project is not personally liable for repayment of the mortgage. If the project owner defaults, the lender could request that HUD buy the property.

Myers and his business partner, Hal Vanatta of Hot Springs, decided to use the HUD program to build the Burchwood Har-bour Apartments. Vanatta has not been charged in the case.

On May 1, 1996, Myers and Vanatta pledged the property as security to obtain a $3.29 million loan.

Just as the project was getting off the ground, problems developed.

"What happened was the architect had made a very serious error in his calculations as to what it would take to construct this project," said Myers' attorney, Hurst.

And when a tornado hit downtown Arkadelphia in the spring of 1997, most of the area contractors raced to Clark County to do extra work.

"For several weeks, the project just laid there," Hurst said. "The project was sort of doomed not to be successful from the very outset."

The project cost about $1 million more than projected. Myers said he went to Chambers Bank to borrow more than $500,000 to finish the project.

"When the apartment complex started going sideways ... it sent everything into a tizzy," Myers said.

The apartment complex was finally completed in late 1997 but was already in financial trouble. On Jan. 30, 1998, the HUD-insured loan was converted to a 40-year permanent loan, which added another $400,000 to the debt, bringing the total to $3.63 million. Within a month, Myers and Vanatta had defaulted on the loan.

In June 1998, HUD paid off the mortgage and became the lender. HUD started foreclosure proceedings, but that stopped when Myers filed a Chapter 11 petition for the complex in November 1998. Myers listed $4.4 million in debt and $2.47 million in assets.

(Earlier in 1998, Myers had filed for Chapter 11 himself, listing $3.23 million in debt and $1.96 million in assets. He had the filing dismissed in October 1998. Myers said he now owes less than $100,000.)

After filing bankruptcy for the apartment complex, Myers began operating Burchwood Harbour as a debtor-in-possession. And the U.S. Attorney's Office in Fort Smith said that's when Myers began his alleged schemes.

The indictment said Myers opened three new bank accounts at Regions Bank, as required by the bankruptcy court. The court ordered, among other things, that Myers pay the apartments' bills and give what was left from rent income to HUD.

The indictment said Myers diverted nearly $90,000 through multiple transactions. He allegedly used cashier's checks and counter checks to "conceal the diversions of the Burchwood Harbour rents, income and other funds."

Myers is also accused of having submitted false monthly reports to HUD and the bankruptcy court to hide the funds that were diverted. The indictment also alleges that he coached his contractors to perjure themselves in bankruptcy hearings.

Myers also ordered others to create fake invoices to conceal his crimes, the indictment said.

In February 1999, Myers had a contractor named Kevin Rice, address unknown, "commit perjury by testifying falsely" about money he received, the indictment said.

Rice testified in bankruptcy proceedings that he received $5,000 in cash when he really received $2,000-$2,500, the indictment said.

Rice could not be reached for comment and has not been charged in connection with the case.

Myers is "absolutely not guilty of that [perjury]," Hurst said. "He did not ask anybody to tell anything but the truth throughout the course of this."

Growing Up

Clarence Myers of Magnolia, Texas, Rodney Myers' father, said his son was always ambitious and motivated by money. In high school, Myers threw parties and charged admission, said Myers' sister, Pamela Mabry of Houston.

Mabry said her younger brother was popular in high school.

"He was kind of a leader," she said. And he was "always wheeling and dealing. He always thinks it's possible, [even] when other people think he's nuts," Mabry said.

But there was another side to Myers.

The Myers family moved all over the world because Clarence Myers was a colonel in the Air Force. The frequent moves meant Rodney was constantly having to establish himself with a new set of peers, and "with it comes a lot of conflict," Rodney Myers said.

Myers said he was getting into fights, which he said he didn't start.

In the mid-1980s — when he was in his mid-20s — he leased a jet and took six friends to New Orleans. At a restaurant there, he ran up a bill of $1,800. But when he attempted to pay with a check, the cashier wouldn't accept it. He got into a fight with the maitre d', which landed Myers in jail, according to documents filed in a 1986 DWI case against Myers.

"I was very irresponsible," Myers said of his younger years.

In addition to the fights, Myers drank and drove.

In 1986, he was charged in Pulaski County with his fourth DWI, a felony. He was acquitted in 1988 when the prosecution didn't subpoena the person in charge of the Breathalyzer machine, according to a report in the Arkansas Gazette.

Myers said his reputation as a street fighter fed on itself; when he would go into bars, other patrons would challenge him and he would grant their requests. But Myers said he changed for the better when he met his wife and resumed practicing his Catholic faith in the early 1990s.

Now, he said, "I try to avoid the places where there might be some type of conflict."

Developer

Myers' interest in becoming a big-time developer began when he was in high school at Austin, Texas. The father of a school friend was a developer, which seems to have inspired Myers.

"I think he has some kind of inner drive to be successful," Myers' sister said.

With no intention of graduating college, Myers took several finance courses until he felt like he had enough knowledge to launch his own career.

"I never intended to work for anybody," he said.

When he was finished with school, "I started to try and put some deals together."

One of Myers' first projects was a deal that would have built a subdivision in Saline County near the Pulaski County line. He planned to build 2,100 single-family homes on 1,600 acres. Myers also had an agreement with an Arnold Palmer subsidiary, the Palmer Course Design Co., to create a golf course good enough to be on the PGA tour.

He had everything lined up except the water.

The Little Rock Board of Directors didn't want to supply the water unless the children in the subdivision attended schools in the Little Rock School District.

Myers and the other investors eventually lost a federal case against the city of Little Rock.

"It would have been a gold mine," Myers said. "I knew on the front end that the utilities might be an issue ... That's what the gamble was."

Even though he lost, "I learned a lot. Even though the project didn't get under construction, the assembling of everything was a vast level of experience," he said.

 

 

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