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County wants funds held in escrow by defunct man camp

Posted 4/26/16 (Tue)

By Amy Robinson
Farmer Staff Writer

It’s been almost a year since over 100 individuals and families were displaced from the Great American Lodge, west of Watford City, when the housing complex was suddenly closed.
And there’s been one big question lingering in everyone’s mind - what’s going to happen to the Great American Lodge? And if it doesn’t reopen, who is responsible to clean up the property? Which is why the McKenzie County Commissioners are in the process of making sure they have access to the $157,148.48 that the developers put into an escrow account.
On Jan. 22, 2014, the McKenzie County Board of Commissioners approved the Conditional Use Permit (CUP) request for the Great American Lodge. Part of the conditions listed within their permit included posting a bond in an amount equivalent to 150 percent of an engineer’s estimate to reclaim the property to its natural state. North Dakota Developments, LLC put $157,148.48 into an escrow account, adhering to that specific permit requirement. However, the money they put into the escrow account was to then purchase a bond.
“Part of their CUP requirements involved posting a remediation bond,” stated McKenzie County State’s Attorney Jake Rodenbiker. “So around the time they got their CUP, they put that cash into an escrow account to use to purchase a bond. That was never posted. So incidentally, that escrow account has been held and is currently being held by a law firm in Bismarck. And they are ready to wipe their hands of it.”
A Bismarck legal firm has been doing a lot of the legal work since the two developers’ assets were seized and frozen.
Once their Ponzi scheme came to light and North Dakota Securities Commissioner Karen Tyler ordered North Dakota Developments LLC, to Cease and Desist from engaging in fraudulent practices in connection with the offer and sale of investments in man camp housing developments in the Bakken oil field region of North Dakota and Montana, the Great American Lodge property was ordered into receivership.    
A receivership is an individual appointed by the court who manages the assets of a company which has been frozen and seized.
“The question became, what is going to happen to this money in the escrow account?” explained Rodenbiker. “While the receivership is in place, we would have to have the court and receivership’s permission to do anything with the money or the property. And action can’t be taken against the property while it is under receivership. The other big piece of this situation is that the law firm that holds the escrow account is reorganizing itself and they don’t want to keep this money in escrow.”
So, Rodenbiker and the receivership have looked at alternatives for the betterment of the county - where the interest at least comes back to the county.
“The receivership is trying to maximize all of the assets and value of the property,” Rodenbiker stated. “The receivership is not intended to be long-term. It’s temporary and only exists until it looks like the victims are made as whole again as possible.”
According to Rodenbiker, the receivership has several options including selling the property, trying to reorganize it, or utilizing it. Although this is a decision that has not come to fruition yet, it’s a decision the receivership will eventually have to make.
“I think they’d look at it from a business perspective of what is the best way to maximize this property,” Rodenbiker explained.
Rodenbiker and the McKenzie County Commissioners have recently decided that it would be in the best interest of the county to move the escrow money into an escrow account held by the county. That way, until decisions are made with regard to the Great American Lodge property, the county could make money from the interest of the money held in the escrow account.
“I think the receiver is receptive to that and I think the Bismarck law firm wants to move forward as easily as possible,” said Rodenbiker. “The county would hold this money in an account and would benefit as long as the receivership is in place. We would have to go to the courts or the receivership to get permission to get any disbursement from the principal.
Investors from 66 countries who were promised high returns on their investment in the development of man camps in the Bakken oil field region of North Dakota and Montana were bilked of millions of dollars by Robert L. Gavin and Daniel J. Hogan of North Dakota Developments, LLC.
The Securities and Exchange Commission took action, filing in the U.S. District Court for the State of North Dakota a Complaint and Emergency Motion for a Temporary Restraining Order.
The Securities Department’s Order alleged that North Dakota Developments, LLC, Gavin and Hogan violated NDCC 10-04-15(2) by engaging in material misstatements of fact and material omissions of fact in selling securities to investors, and also engaged in misappropriation of investor funds and Ponzi-like activity.
North Dakota Developments, LLC, Gavin and Hogan also violated NDCC 10-04-04 and NDCC 10-04-10 in selling unregistered securities, acting as an unregistered broker-dealer and engaging in unregistered agent activity.
Investigative records indicate 980 investors from 66 countries invested over $62 million through Gavin, Hogan, and sales agents located in the United States and several other countries.