John Jennings of Jennings Construction of Granby is entering this year's construction season out $48,000. The concrete and roofing subcontractor says he worked for ADS Builders Inc. of Broomfield on 17 homes in Rocky Mountain Estates - also known as Colorado Anglers' Club - a 288-lot subdivision on a gentle slope with views of Lake Granby.When ADS quit paying Jennings back in November after about five months of work, Jennings said he tried to get answers by calling ADS as often as he could."Occasionally I'd get someone to tell me something, but it was always just a bunch of B.S.," he said.Jennings paid his six employees and all his suppliers but is still waiting for reimbursement from ADS. He is not alone. To date, 130 liens have been filed against ADS by subcontractors who worked in Rocky Mountain Estates during summer/fall 2007."I've talked to a lot of other contractors," Jennings said. "They're out money; suppliers are out money. Everyone got screwed over false promises."Last week, Grand County Sheriff's Office Investigator Leo Piechocki executed a search warrant at the ADS office in Broomfield. Seven boxes of documents were seized to decipher whether "money taken on construction draws has been used to pay contractors," Piechocki said. The sheriff's office has been aware of possible problems in Rocky Mountain Estates since last summer, according to Piechocki. Prompted by a red flag from a review of appraisals, the Federal Bureau of Investigation has been involved. The sheriff's office began its investigation in mid-February as individual property owners complained about homes not being completed as promised.Three attempts to contact ADS for comments Friday and Saturday were unsuccessful.Low clearanceAs many as 16 built and partially built homes and three foundations devoid of houses now sit abandoned in Rocky Mountain Estates, while other homes not associated with ADS are being built. Some ADS homes have open garage doors, open windows or open entryways, as if workers left quickly. A few deck and entry roofs rest on 2-by-four temporary braces, and some garage entrances lack the proper height."You can't get an SUV in them," said real estate agent Marv Pinckert, owner of Trailhead Properties, Grand Lake. Trailhead has formulated a policy, like a few other real estate companies in the area, such as Grand Lake's ERA Realty, to not take listings in the development."I'm 6'4" and I hit my head on the roof of the garage when I walk through the door. The roof is level with my forehead," he said.Although some of the homes are about 60 to 90 percent complete, others have sat neglected for most of the past winter, many making themselves available to fox, raccoons and other wildlife. Once part of a quickly growing neighborhood, the homes were built in a 40-lot sub-community purchased by Upstreet Developments LLC of Fort Collins. Principals Mike Hawthorne and Jon Thompson hold principles based on "standards of hard work, clear communication and strong ethics," according to the company's corporate profile.The profile lists Lance Gutersohn, a Winter Park real estate agent who sold them the Rocky Mountain Estate lots, as a company reference. But Gutersohn says he distanced himself from Upstreet's project when he "started to hear what people who bought properties were promised, such as making money in appreciation," he said, "which I didn't agree with."Gutersohn said Upstreet sought him out via Internet to broker the lots. At the time, he "didn't have reason to think twice about who they were and what they were doing," he said.In the investigation under way, Piechocki also is looking into the "relationship between Upstreet and ADS on the sale of those lots," he said. Upstreet also bought properties in Granby's Innsbrook-Val Moritz and Granby Ranch filings 3, 6 and 8, and the Grand Lake condominium complex Grand View Villas, according to public records. Construction lagsIn literature about Rocky Mountain Estates, buyers were provided "reliable, but not guaranteed" (in fine print) information that the purchase of pre-construction lots in the development promised instant "$60,000 equity" (large print) that could increase by another $30,000 when construction was completed.According to deeds of trust, some, if not all, the individual owners of each of the 39 lots sold by Upstreet applied for zero-down loans with construction/permanent riders, meaning the land purchase and the house construction were all wrapped up in one neatly packaged loan. The loan included an interest reserve account that would satisfy loan payments for a set amount of time, such as 6 to 12 months, before homebuyers would be responsible for monthly payments. It also included closing costs.The majority of buyers were asked to pay a reservation fee of $5,000.ADS was the builder that would draw on the construction loans and build investors' houses.Most of the homeowners would never actually visit Grand County to check on the progress of their investment homes. Ideally, by the time the houses were complete, owners would be due to make their first scheduled payments on the loans, and many would try to resell their mountain getaways to pocket a profit.But something happened. When homeowners were due to make the first scheduled payment on their loans, they had homes that weren't completely built and a builder telling them "personnel issues, inadequate due diligence, and county bureaucracy" had contributed to delays, according to a letter addressed to homeowners from ADS Project Coordinator Mark Hohlen, dated Jan. 4. "We believe it is in the best interest of the investor and our business to attempt a total buyout of the lots yet to be built upon, and potentially those that have had vertical progress ... We will do all that we can to facilitate information to your lender regarding this exit strategy."From signing on the dotted line in the summer and fall of 2006, homeowners now face monthly payments for uncompleted homes plus, according to county documents, thousands of dollars in liens filed against them for subcontractors' unpaid bills.Loans being carried range from about $334,000 to $410,000 for homes 2,260 to 3,190 square feet, which included lots sold for around $120,000.Did ADS miscalculate the cost to build in Grand County? "From the numbers I've heard, they should have been able to build (those homes)," Jennings said.One homebuyer's reserve account was depleted in September of 2007."ADS assured us that they would make the payments on the construction loan after the account was empty," he said. (Because of pending litigation and his attorney's advice, the homebuyer's name is being withheld.) "They made one in October then went into 'the check's in the mail' routine until January, when they sent a letter stating they would no longer make those payments." The ADS letter from Hohlen to investors, dated Jan. 17, states: "We have not yet had any word regarding the buyout. Many are asking about interest payments, property taxes, and other miscellaneous fees. Anything that you would have to pay if your home was built is your responsibility We will take care of the interest due, however, I strongly recommend that you cover the payment and submit to ADS for reimbursement. This is the only way to guarantee that your payment will be made on time." "They stopped all contact with us after that," the buyer stated. The way wheels have been turning, many fear the community could become a breeding ground for foreclosures. Six are in motion, according to the Grand County Public Trustee. What the sheriff's office is investigating is the money drawn from construction loans by ADS Builders and the reason homes aren't completely built. "We've got a lot of work ahead of us," Piechocki said.Upstreet land values singled out"It's unfortunate they (ADS) haven't built per their contract," Upstreet's Jon Thompson said Friday. The builder, ADS, offered a price to build the homes and buyers ultimately agreed to it, he said.Upstreet lots were bought from an LLC made up of Morris King of Grand Lake and Ralph Chiarella of Evergreen, according to county records, then in some cases sold less than a month later for more than double the purchase price. Most of the Upstreet lots were resold to out-of-county and out-of-state investors within a two-month period.County Assessor Tom Weydert said that in the 2007 land valuations for tax assessments, Rocky Mountain Estates was excluded for statistical purposes."It was too big of a jump too quick," Weydert said. "The market didn't justify that type of increase. There was something else going on rather than straight market sales to justify that increase."That "something else" may be the notion that homebuyers were not just purchasing vacant land, but buying land with the complete construction of a new home, Chiarella said. He had understood this was the case from representatives of Upstreet.Upstreet's Thompson declined comment Friday about lot prices in the development.Community issueThe 39 lots in question make up a large chunk of the 100 lots that were offered in the first of three phases of Rocky Mountain Estates, originally developed by landowners Chiarella and King, who have since dissolved the LLC and have split remaining properties among them. During a Rocky Mountain Estates homeowners association meeting Saturday, the association's new president, local builder Jonathan Payne, announced that assuming there are sufficient funds remaining on construction loans, he would be willing to finish homes for property owners. Another local builder has stepped up to finish homes as well, King said.Only one of the ADS-built homebuyers from out of state was present at the meeting.Chiarella has offered to help buy properties from two of the loan-affected homeowners, he said, and is willing to make offers to more of the investors who are in trouble to assist them. It's in his interest because such housing problems could have negative effects on the rest of the community, he said. "I don't know if anything was done fraudulently," Chiarella continued.He said he had talked to ADS President Jim Barnett three weeks ago and was told that the homes already started would be completed. Chiarella said he understood that ADS had a later start on the building project than expected, and that delay may have been costly to the project."A delay in construction can often cause a major problem," he speculated. "Delays can increase the carrying costs and reduce profits."He explained the entire real estate market across the U.S. has changed from two years ago when the buyers originally decided to build homes.Both he and King say they had no financial or legal tie-in with the builder or Upstreet after the 40 lots were sold."We bought the land and sold the land," Chiarella said. Asked if he'd sell more lots to Upstreet if approached, he said he couldn't yet see why he wouldn't."People are innocent until proven guilty," he said. "A buyer is a buyer."Chiarella can't help but question whether investors properly managed their investments."Owners ultimately have the responsibility to manage progress and projects," he said. "The investors are the ones that knew the risk they were taking, signed for the bank loans and released funds based on the completion of their homes."King also is hoping to help homeowners, which would serve to help clean up the unbuilt homes in the community. "We're trying to do what ever we can to help them out," he said.Homeowners begin litigationMarion Keyes, a Summit County attorney with Keyes, Michel & Pummel, represents five clients, property owners of Upstreet lots who "have been victimized." His firm focuses on business, real estate, and construction law. His clients are joining together to file suits in Grand County District Court before the end of next week, the attorney said Friday. Their complaints may involve "fraud and civil conspiracy," Keyes said, and he is also looking into "a violation of the Colorado Consumer Protection Act."His clients "were told they would have houses built for them, and all they have is a construction site that is abandoned and lenders going after them," Keyes said.The firm is in the process of analyzing all persons associated with the development, he said.The lenders may equally be at fault, Keyes alleges, for dispersing funds negligently and relying "on appraisals out of skew with reality."According to the book "Protect Yourself from Real Estate and Mortgage Fraud," co-written by Ralph Roberts and Rachel Dollar, any misrepresentation in a real estate transaction, such as artificially inflated values, could be fodder for fraud.Keyes has been communicating with other attorneys representing other Rocky Mountain Estate clients and says there is the potential for a grand total of 160 plaintiffs."It's not just a case about money," he said. "It's a case about people's dreams being turned into nightmares."What people did to my clients is truly shocking."- Tonya Bina can be reached at 887-3334 ext. 19603 or e-mail email@example.com.