An investment in the proposed Legends of Blacksburg condominium development has resulted in a lawsuit for University of Michigan football coach Rich Rodriguez.
Related: PDF of the lawsuit against Rodriguez
Alabama-based Nexity Bank filed suit against Rodriguez in the South Carolina U.S. District Court last month for failing to repay a loan that he was a guarantor on.
Wesley Few, a South Carolina-based attorney representing Nexity Bank, said Rodriguez signed a guaranty for Legends of Blacksburg, LLC, obligating him to repay lenders such as Nexity.
Rodriguez is the only guarantor named in the suit. Few said the loan, originally in the amount of $26.1 million, was not used completely, and Rodriguez only owes the amount used.
"It was a construction loan," Few said. "The only advance ever made was the initial advance to buy the property."
Nexity is seeking $3.63 million, which Few said is only reimbursement for the amount paid by the bank.
Legends of Blacksburg is a proposed condominium development at the end of Warren Street near Lane Stadium.
Bill Gearhart, president and principal broker of Coldwell Banker, said Coldwell Banker handled marketing for the project.
However, he said marketing has dwindled since late 2007, and the original owners are selling the project.
"It is our understanding that there is a developer that has a contract on the project," Gearhart said.
Mike Wilcox, Rodriguez's financial adviser, said Rodriguez had been the victim of a Ponzi scheme in a statement to the press issued Tuesday.
A Ponzi scheme is a form of fraud in which the fraudster pays off old investors with money from new investors, creating the illusion of reliable, quick returns.
Few said Nexity was the victim.
"My client is the one that has put money into the deal," Few said.
He said it seemed like a problem between Rodriguez and Legends of Blacksburg, LLC.
"The people he chose to become business partners with didn't run the business in the way he expected them to," Few said.
Few disputed the claim that the project was a Ponzi scheme, saying Rodriguez and his business partners intentionally invested in the project to make money.
"They knew what they were getting into," Few said. "They were trying to make money."
While Nexity will no longer handle financing for the project, the property will belong to Legends of Blacksburg, LLC once the debt is paid.
"Once they pay off the loan, they're going to own that property," Few said.
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