Are there any consequences when someone sells property and makes False Statements about its condition, which could be Fraud, to someone who wants to use the property to start a new business?

The Business Plan:

In June of 2007 Mac and Monica and their company entered into a purchase agreement to purchase a remote 722+ Acre Gold Mining Property located at Slate Creek for close to $500,000.00 with $80,000.00 up front money which they intended to use as a Gold Mining Adventure business for tourists as well as for Alaskans.

Then they began looking for a suitable airstrip location to use as a base for their customers that they could build on. In late 2007 Mac and Monica decided to buy a 40 acre property that was for sale with an airstrip near the community of Slana Alaska and only 30 minutes by air from Slate Creek and it was located on the main highway. The sellers’ description of the property made it sound like it would work and they could modify their business plan to fit the property. This property would be used to fly customers to and from the airstrip from other cities in Alaska and to and from the Gold Camp at Slate Creek and as a staging and parking area.

The Gold Mining Adventure consisted of one day, two day, three day, weekly, or, monthly Adventures and the customers could keep the gold they found. After promotions and advertising Mac and Monica communicated with over 100 people who wanted to participate in the summer of 2008. The Weekly Adventures cost each participant at least $1,395.00 per week plus costs for the bush plane to fly them to the Gold Camp and back.

Because of the size and location of the property in Slana the business plan was modified to include the Gold Mining Adventure business plus an RV Park, a number of cabins, a fuel station and convenience store, an auto service garage and towing, a camp ground and in time a shopping center for local entrepreneurs who might want to open their own business such as: a grocery store, a gift shop, hardware store, car and truck wash, on site gold panning, flight seeing business, tours, trail rides on ATV’s, a pawn shop, a barber shop, a beauty shop, a bank branch and more. Each one of these would create new jobs in the area.

However, the information about the property and the advertising to sell the property, which convinced Mac and Monica that the property was suitable as a location for starting this new business, WAS FALSE. Mac and Monica bought the property because of the convincing false statements and promises by the sellers but since they were false – THIS BUSINESS NEVER GOT STARTED.

The False Statements by the Sellers:

1. The sellers said the property had diesel generators for electricity – there weren’t any! In fact according to State records the generators had been removed years before they sold the property to Mac and Monica.

2. The sellers said there were “water wells” on the property “100 feet deep” but they neglected to disclose that they ran out of water and that water would have to be hauled in and stored, the well had failed testing in the past, could possibly be contaminated and according to state records was only 43 feet deep.

3. The sellers said there was a wood stove in the cabin for heat – there wasn’t any heat in the cabin!

Mac and Monica were told that there were generators for electricity and a wood stove for heat so they brought their daughter, some fuel for the generators and some fire wood and moved to the property in early April 2008 while the temperature was still near zero degrees at night but initially they couldn’t live there because there was not any generators for electricity or heat in the cabin.

Thank God for some of the local neighbors who loaned Mac and Monica a small wood stove, a small propane heater, a small gas generator and even brought some fire wood for the stove.

More False Statements:

4. The sellers said the property had electric along the highway and since it is commercial property that it could be connected and used commercially – not true!

Upon arriving in Alaska Mac called the power company to get electricity ran to the property but was told that the sellers had been informed years ago that they could not get a commercial hookup and could not get a grant for a free hookup to power because of contamination and because the property was NOT DEC Approved. Mac and Monica were refused commercial electricity for the same reason. Arrangements were made to get residential power for the cabin, but not for commercial use, which cost $13,000.00.

5. The sellers said the property was DEC (Dept. of Environmental Conservation) Approved – it wasn’t!

According to State Records the property had been out of compliance with the laws for years, since 2001, and the State had been notifying the sellers that “enforcement action would be taken against them” if they didn’t correct the DEC problems on the property. The sellers had even refused to accept mail from DEC.

6. To be DEC Approved property cannot be contaminated. Mac and Monica were told the property was not contaminated – it was contaminated!

Within a few months, after moving on the property, Mac and Monica received a telephone call from DEC and the gentleman stated that he had sent the prior owners, the sellers, several notices and a demand letter and they had called him recently and told him not to bother them any more because they were not the owners and they gave him the telephone number for Mac and Monica.

DEC informed Mac and Monica that the property had been out of compliance for years and that the sellers have known this since 2001 and that DEC has been sending them demand letters for years and that one Certified Letter had been marked “Refused” and returned to DEC. He also said, as the new owners, Mac and Monica and their company, had to do an inspection, bring the system up to standards for DEC Compliance and if contamination was found that, as the new owners, they would have to pay the costs to cleanup any contamination if the sellers refused to do it. Arrangements were made for an inspection and the inspector found the property was contaminated, the fuel system had been leaking for a long time and they knew about it because he found cleanup rags in the manhole and had cut and coiled the wires to the monitoring system which would give false readings, which he documented, photographed and submitted to DEC. DEC then sent the sellers a letter notifying them of their potential liability.

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