By LEDEDRA MARCHE

Senior FN Reporter

lededra@nasguard.com

While construction is under way for its $4.9 billion mega-mix resort in West End, The Ginn Company is facing allegations of fraud, one of many claims cited in a class-action lawsuit filed in Michigan.

The suit names 99 plaintiffs from four of Ginn's affiliates and was filed in the United States District Court for the Eastern District of Michigan nearly five weeks ago.

The Ginn Company, one of the largest privately-held real estate development and management firms in the Southeast, signed a deal with the government in December 2005 to develop the mega-mix Gin Sur Mer Resort on nearly 2,000 acres in West End.

Ginn Sur Mer is the largest single investment in the region and involves 870 single family residential home sites, two championship ocean-front golf courses and clubhouses, 4,400 condominium hotel units two large marinas, 130,000 square-foot casino, swimming pools and water park facilities, tennis complexes, beach clubs and spas and a private airport.

The Ginn Company also currently has land under development in Florida, South Carolina, North Carolina, Vermont, Colorado and St. Thomas in the U.S. Virgin Islands.

The lawsuit cites a number of Ginn's properties, namely Bella Collina, Reunion, Tesoro and Hammock Beach, and alleges Ginn has breached agreements and violated several laws including the Interstate Land Sales Full Disclosure Act and the Securities and Exchange Act of 1934.

The Ginn Company, Ginn Real Estate Company, LLC, Cameron, Davis, & Gonzalez, Suntrust Bank, Ginn-LA Wilderness Ltd. LLLP, Ginn-LA Hammock Beach Ltd., LLLP, Ginn-LA Gi Orlando Ltd., LLP, and Ginn-LA Pine Island Ltd., LLP are the named plaintiffs in the suit.

The lot owners — who are being represented by Mekani, Orow, Mekani, Dhallal, Hakin & Hindo, P.C. out of Southfield, Michigan — say they have been defrauded. And, they say they are entitled to and they are demanding rescission of the contracts and that Ginn repurchase the properties and reimburse them for all carrying costs.

The suit also explains that the complaint is primarily due to the defendants' alleged use of the means and instrumentalities of interstate and foreign commerce, including the United States' mail, under 15 United States Codes.

The group is alleging that Ginn solicited plaintiffs in Michigan to purchase vacant residential lots in Florida, sent brochures and marketing materials advertising the lots and the opportunity to own lots in one more of the following: Ginn-LA Wilderness Ltd.

It is further being alleged that the defendants sent a pricing list for the lots to plaintiffs via federal express mail in Michigan and other states; hosted seminars in Michigan regarding purchasing Florida property in the Ginn Developments, one which was held as recently as March 2007.

The plaintiffs believe all Ginn affiliated entities were set up and run for the exclusive purpose of raising money from unsuspecting purchasers, like plaintiffs, for the benefit of Ginn and its affiliates.

The suit further alleges that Ginn created a complicated maze of companies to be used in marketing, soliciting and promoting properties to potential purchaser in order to avoid scrutiny of U.S. regulators.

According to the suit, Ginn, at the same time, perpetuated a "ponzi scheme" in which returns to investors were not financed through the success of the underlying business venture, but were taken from principal sums of newly attracted purchasers such as plaintiffs.

The plaintiffs were allegedly promised large returns for their investment and they say initial purchasers were actually paid the promised returns which attracted additional purchasers such as the plaintiffs.

According to the claims, while it was set up as a regularly operating business, the suit alleges that Ginn's purpose was to lure plaintiffs into the scheme knowing that the units being sold were never worth the purchase price paid by the plaintiffs.

In all, the suit is alleging nine counts namely violation of Interstate of Interstate Land Sales Act failure to provide property report; violation of the interstate Land Sales Act Fraud and Deceit upon purchasers; violation of securities and exchange rules registration, reporting and disclosure requirement; false representation under Securities Exchange Act of 1934; "Ponzi Scheme" and violation of section 10(b) of the Securities and Exchange Act; violation of State Securities laws; fraudulent misrepresentation; innocent representation; and violation of Racketeer Influenced and Corrupt Organizations Act.

The plaintiffs, among other things, are requesting they be granted judgment against all defendants in the total amount of all damages suffered by it as a result of Ginn's alleged wrongful acts and, they are demanding a trial by jury.

The Ginn Company offered no comment yesterday on the class action suit.