The Case of Liberty Cove

The terms were just too seductive.

Dean Stein, a Phoenix anesthesiologist, bought in. So did Gary Leavitt, an Arizona developer. Matt Mickley, a businessman, followed suit.

Another dozen Phoenicians reached for their checkbooks, as did another 200 people from across the United States, Canada and Mexico. Who could say no to 10 percent interest?

The literature and the presentations were compelling. There would be deep discounts on Mexican beachfront lots a few hours’ drive from Arizona. There would be membership, too, in an exclusive, ecologically advanced community built along a Formula 1 racetrack, with yacht and equestrian clubs. The project was so well-thought-out that it included a chic employee village so American retirees wouldn’t have the help living in their midst.

Yes, Mexican investments were notoriously risky, but not this one. This one was guaranteed. First American Title, a household name, stood behind sales. The men behind the project waved a prospectus and mentioned the Securities and Exchange Commission. It sounded fail-safe.

No cash on hand? No worry. American IRAs could be rolled over and used for the investment. The minimum to get in on this opportunity would be $10,000. Many, participating in so-called “accredited investor groups,” wrote checks for $50,000, with some for as much as $250,000.

Management of Rockingham Asset Management LLC, the Los Angeles-based promoter, posted enticing videos and mailed slick newsletters with management posing with celebrities. The principals stood with Al Gore in one photo, and with racecar drivers Davy Jones and Michael Andretti in another. A Saudi prince, Barry Goldwater Jr. and actor Steven Seagal were friends of another executive. In another picture, African orphans flanked a Rockingham executive.

The personal touch was everything. The promoters doted over prospects. Staff members answered phone inquiries around the clock. Most important, the company sent out interest checks.

For a while, at least. Then, one day in 2008, everything suddenly stopped.

The project froze. No interest payments. No newsletters or website updates. No one answered the company’s phone at its Wilshire Boulevard office. There was no one to explain where $21 million raised had gone. And little by little, investors who had not known one another started to become acquainted.

The investors swapped stories on a piecemeal basis. Had they been more familiar with one another, one exchange in particular would have offered a portent.

In a note written at 4:18 a.m. on a day in June 2010, investor Marsha Tibbits, of Beaverton, Ore., asked Craig Ricketts, chief executive officer of Rockingham, for her money back. Tibbits had invested $25,000.

“I cannot sleep. I am sure you can at least come up with the approx. $6,200 … you owe me in back, promised interest,” she said in an email she provided to the Tucson Weekly. “I would just love to get out of the whole thing, but will take the interest payments for now. The interest payment would get my home out of foreclosure. This amount … is probably less than you spend on a bottle of wine when you are entertaining clients. Please dig down into your heart and find your morals.”

Ricketts, virtually incommunicado up until then, according to investors, responded. Tibbits’ letter had moved him, he wrote her, and he had forwarded it to Tucson. He said it would go to the culprits really responsible for undermining the project: octogenarian Tucson developer and philanthropist Donald R. Diamond, and his longtime friend and occasional partner, Morton Freedman.

“You,” he wrote Tibbits, “are one of many investor activists who have contacted me and have provided ideas and are demanding action for me to exert pressure on this situation immediately. We believe (Diamond and Freedman) have violated their numerous ongoing title contractual-stated warranties.”

Ricketts said he had himself recently tried to contact Diamond, but he noted sarcastically that the businessman was “on his private boat fishing for a week commencing about two weeks ago.” Attached to the email was a photo of Diamond, Freedman and their Tucson attorney, Benjamin Bauer, in the seats of a private jet.

An additional 2 1/2 years have elapsed since that correspondence, and now the absence of interest payments is just a footnote to a more profound realization: The principal is gone as well.

The money was spent properly, Ricketts said in interviews. But many of the 200 investors say it was squandered.

Liberty Cove would be no mere coastal development. It was more like a country.

The master-planned project would be built along 12 miles of virgin beach just north of Puerto Libertad, Sonora. A building frenzy that had reached Rocky Point, Guaymas, Mazatlán and other coastal Mexican cities was heading to the desolate coast about 100 miles south of Rocky Point. (Photos of and details about the project were still available online as of this writing at www.libertycove.com/home.asp.)

It was right for the moment. Puerto Libertad was just a four-hour drive from the Arizona border, and six hours from California. An unused 6,600-foot landing strip at the site would be converted to commercial use. The project was in a zone with no major history of flooding, typhoons, earthquakes or other disasters. Homes, to be built around the race track, would be built in sync with the terrain and would be inexpensive. The small amount of electricity required to heat and cool them would be inexpensive, too. The development would forgo service from Mexico’s electric company in favor of self-generation from wind or tidal power. The claims—made in brochures, on the company’s website and in presentations to groups in the U.S. and Canada—were enticing.

Subordinate Nevada companies JNR Partners LLC and Liberty Cove Resort Holdings LLC, and the Mexican MXC Properties S.De R.L. de C.V., had differing functions, but investors lumped everything into Rockingham, and the three executives at its helm controlled the other entities.

Ricketts, chief executive officer and also a building contractor, pointed to successful, residential mountaintop projects in the L.A. area and elsewhere. Stephan Haah, a real estate investor, was a pillar of L.A.’s Korean community. Chief financial officer Robert Chernick, a Canadian living in Scottsdale, had 30 years of offshore banking and real estate experience. The company’s literature listed offices in Scottsdale, Los Angeles and Hanoi.

Those men and a half-dozen salesmen trotted from one investor gathering to another. One particularly common venue was seminars sponsored by International Living, a Baltimore-based company specializing in retirement-abroad publications.

The pitch was simple, say those in attendance: There was no better place to retire. Similar property in the U.S., if available, would cost four times as much. As tantalizing as an idyllic retirement was the chance, in the meantime, to make excellent returns.

Rockingham already had cash accumulated, investors were told. And just in case revenues lagged, the company had created a “set-aside” account to cover three years of interest payments.

Robert Reach, an investor from Greenwood Lake, N.Y., attended an International Living conference in November 2006. One of the key factors in deciding to invest, Reach said, was “that we were told … three years worth of interest at 10 percent annually would be set aside in a segregated fund for repayment to investors. I knew we were getting our own money back. We received exactly four payments, the first dated March 31, 2007, and the last dated Dec. 31, 2007. Since that time—no additional payments.”

Another benefit meant to induce investors was a 35 percent discount on lots. That was enough to convince many. But to assuage doubts, there was another card to play: the prestige of previous land-owners Diamond and Freedman.

Diamond, who declined several times to comment on this story, is a household name in Tucson and well known outside of the city. In addition to a streak of successful real estate deals, the namesake of Diamond Ventures Inc. has endowed the Diamond Children’s center at the University of Arizona Medical Center and donated generously to a cross-section of Southern Arizona charities. Freedman, president of Nationwide Resources, has been a fixture in Tucson real estate for decades.

Rockingham’s prestige, the credibility of the previous owners and the celebrities somehow peripherally connected to the project provided the allure. But this was still in Mexico, home of prodigious real-estate disputes, and prospective investors would still need a final assurance.

(Disclosure: I worked for Rockingham LLC at intervals from mid-2006 through 2008 in a liaison capacity, setting up meetings between Ricketts and federal officials in Mexico City. I accompanied him on four trips to Mexico City and on a separate trips to Hermosillo, Puerto Libertad and Mexicali. I was paid about $35,000 during that time and was owed $7,500 when Rockingham stopped paying bills.)

Those assurances were provided by First American Title Co., a premier name in the industry. Pronouncements of coverage by First American, in fact, became a mantra of Rockingham principals, and Steve Simkovich of Las Vegas, a primary fundraiser, according to investors. Also raising funds for Rockingham: Joseph Isaac of Temecula, Calif.; Todd Smith of Scottsdale; and Marc Olsen and Allen Weintraub of Phoenix.

As investors would come to learn, however, there is a vast difference between coverage offered in the U.S. and abroad.

Although title insurance in the U.S. covers improvements such as houses and other buildings on property, policies written in Mexico often cover only the land. In a dispute, therefore, a buyer may be compensated only for the land value, and risks losing the value of a structure upon it. Similarly, title insurance paid by Rockingham on the entire 46,500 acres would cover only the amount paid originally, and not for any appreciation.

In the rush to get in on a good deal, few investors grasped this difference. It was an oversight that would haunt them.

Under the structure devised by Rockingham, investors like Kevin Malone of Port Orchard, Wash., became shareholders in what is called a real estate investment trust, or REIT. Legally, Rockingham could not advertise the REIT, but could make presentations at clubs or networks of so-called “accredited” or “sophisticated” investors. Also under REIT terms, investors are allowed to convert IRAs with no penalty.

Rockingham raised money easily, as investors wrote checks or rolled over their retirement accounts. The investment ranged from as little as $10,000 to as much as $250,000. The first investor, according to records, was William Coburn, a California doctor who wrote a check for $25,000 on June 14, 2004. What is believed to be the largest investment was made by Alejandro González, an executive of Sonora Fields, a Mexican company planning a bio-fuels project next to Liberty Cove, according to records. Though there was no mechanism yet for lot sales, González was verbally assured of a beachfront lot, he said in an interview.

“Everyone had nothing but great things to say about the project,” Malone wrote the Weekly. “Others said they were getting their payments as promised and right on time. (It) seemed like a great time to buy … and I did. But problems soon began!”

The companies that were used to raise funds were also controlled by the Rockingham principals. Westridge Investment Inc., the financial umbrella for the first REIT, started in the summer of 2004 and took in more than $19 million. Warrington Investments Inc., umbrella for the second, raised $2.3 million.

One might suspect that with so much money at stake, investors would be anxious to see or at least glimpse their purchase. However, just a half-dozen investors ever set foot on the property. The job of showing those few around fell to Richard Rendon, a retiree from Tucson who lived part-time in Puerto Libertad. As a consequence, there was little verification of what progress, if any, was occurring.

The public-relations efforts at Rockingham filled that void.

“Liberty Cove is exploding with life and progress on a daily basis,” trumpeted a 2007 newsletter edited by vice president Catherine Miller.

That fall, an ad on a marquee in New York City’s Times Square with a stunning photo of the property announced “Construction Begins on North America’s Largest Resort and Retirement Community.”

The truth was slightly less grandiose, however. There had been no construction progress.

Phoenix investors Stein and Leavitt became worried when promised interest payments didn’t show up for consecutive quarters in 2008, both men said in interviews with the Weekly.

Once, Rockingham staff had courted and pampered them, but now their inquiries were ignored, they said. The Rockingham website offered no clues. When calls were answered, they were handled by assistants and never by Ricketts, Haah or Chernick. Haah, the president, had little involvement in day-to-day activities and was working instead on a pending project in Vietnam, he said in an interview. Ricketts and Chernick were always out of the office, ostensibly working on partnerships and funding, Stein and Leavitt said.

If someone was lucky enough to get through to the company, Carol Ackerman, the marketing director, and assistant Lena Shim were instructed to say that although cash flow was low, this was temporary, and checks were to be sent out shortly, both told the Weekly.

“Communications between the principals and the investors became less and less frequent over time … to the point where you had to actually track them down to get an update,” Malone, the investor from Washington state, recalled. “They would never contact you. The excuse was they didn’t have the staff to keep up communications, which in a world of email was just B.S.”

Concerned investors, including Stein and Leavitt, followed up on scant information, posting letters online and doing their best to contact others, they said. “We didn’t know one another’s identities,” Stein recalled. “We didn’t know who else had invested, nor how many of us there were.”

Stein, Leavitt and dozens of others queried Rockingham management, but there was no response.

It was clear that money had been spent—but where? There was no physical infrastructure. Rockingham had hired lawyers, architects, urban planners and a project manager. But even if they had been contracted at exorbitant costs, it was hard to imagine sums that would approach $21 million.

It was not until June 2010 that Stein and Leavitt made genuine inroads in learning identities of other investors.

The two organized a conference call with a dozen participants that led to a second call with several dozen. Rockingham’s continued lack of a response prompted a number of theories, the men said.

The investors shared tidbits in conversations that I monitored. Those courted had been told during presentations that the company would provide a lien to protect them on all eight of the project’s parcels; that funds from investors would pay off the original sellers, Diamond and Freedman, for the $2.4 million purchase; and that the “set-aside” account for dividend payments was funded.

None of this occurred, they said.

Rockingham officials had been deceitful, Leavitt said. “There is risk in any investment, and I don’t have any problem losing money on a deal that has been executed honestly,” he said. “This wasn’t. Ricketts gave us no information about where the money has gone. And then, one day, he tells us that the fine print actually allowed them to avoid any of their promises.”

Added Stein: “If Rockingham had leveled with us and explained themselves, I’d have been the first to say, ‘I apologize (for insinuating fraud).’ I lose my $150,000, lick my wounds and move on. But they had never been forthcoming.”

In interviews and emails, Ricketts said management fulfilled its commitments. Language in the REITs gave the company “flexibility” and the option not to establish the set-aside fund, he said. A lien was required on only a single parcel, and it had been recorded as promised, he said.

As for an accounting of the $21 million? Ricketts said he could not reveal that information because of the danger of lawsuits.

How could there be such a discrepancy between what investors had been told and what had happened? Rockingham management could not vouch for what its salesmen, most of whom were independent contractors and not employees, had offered, Ricketts explained. The written word was paramount.

“When we put together this private placement memorandum,” Ricketts said, “the attorneys warned us from the get-go that there is no way to control who says what.” Law firms Greenberg Traurig LLP of New York and Squire, Sanders and Dempsey of Phoenix approved the REIT language, Ricketts said.

Those who attended presentations say that Rockingham fundraisers routinely touted the set-aside fund. I heard the same assertions, but never a word about any written disclaimers.

Moreover, in company literature, the pitch was just as compelling. A letter from Steve Simkovich, initially an independent fundraiser and then a Liberty Cove vice president of sales, alluded to “triple security” for investors.

“First, three years’ worth of interest on your investment is set aside in a reserve account to guarantee your payments,” he wrote. “Second, the REIT has a first mortgage position on the phase-one land, with a title policy issued by USA-based First American Title, so the title position is clear. And third, as sales are made, the REIT investors will be exchanging their first mortgage on unsold land for title to the loans made on sold land … .”

There would be plenty of reasons in 2008 for Liberty Cove to founder. The drastic fall in the world’s economy was top among them.

But what investors did not know was that there had actually been plenty of reason to worry well before. At issue: Did the Tucsonans who sold the property to Rockingham actually have the standing to do so?

The 46,500 acres that were to make up Liberty Cove are a fusion of eight parcels known as the Santa Maria Ranch. The properties were supposedly acquired by Diamond and Freedman in the 1980s and 1990s from the eight parcel-holders, residents of Caborca and Pitiquito, Sonora. Several of the original owners, called “colonists,” had died, and so the Tucson men and their attorneys had also dealt with a group of heirs. (For a full chronology, see the accompanying timeline.)

The link between the Tucson investors and the parcel owners was Porfirio Gastelum Lemus, a Caborca businessman who had assisted the eight in applying for the parcels. (Gastelum could not be located for comment.) And when those eight parcels were sold to Rockingham in 2004, no one expressed doubt about the legitimacy of the sale.

Though the Tucsonans had ostensibly been buying the parcels, none of the eight could actually be sold under Mexican law unless a series of rigid protocols were followed, according to two legal experts, Carlos Ruink, of Ruink y Asociados, and Marco Antonio Encinas Cajigas, an expert on agrarian law at the University of Sonora, both in Hermosillo.

The original eight owners had all attested to being farmers or ranchers whose land had been granted by the Secretaría de la Reforma Agraria, or SRA. The parcels, thus, could only be sold to others intending to use the land for farming or grazing—and even then, only after filing a notice of “previa autorización” (prior authorization) to change ownership. This had never taken place, the experts said.

Instead, each of the eight parcel-owners, or their heirs, signed powers of attorney in 1986 to Gastelum, who in turn provided the powers to Eduardo Estrella Acedo and a partner, Pedro Gorozpe Lopez, of Ciudad Obregón.

Gorozpe had attempted a novel approach—the use of a bank trust. But it, too, was questionable, the experts said, because of a clause in the Mexican Constitution.

Under Article 27, a foreigner acquiring property within 62 miles of the border or 31 miles from a coast must purchase the land through a trust. This means that property-owners sell to a bank, which, in turn, has an irrevocable contract with the foreigner. Banks earn around 3 percent to 5 percent of the purchase price through this arrangement.

In 1990, Gorozpe put the parcels in a single trust with Banco del Atlántico, a local bank. While placing parcels into a trust might have made sense for private property, these parcels were “colony” properties, considered social property under Mexico’s Constitution, and there was no provision for placing them in a trust in order to transfer title, according to the experts. (Unexpectedly, in 1992, Mexican President Carlos Salinas announced reforms that could be used to transfer social property to private property, but these reforms were not retroactive and, according to agrarian lawyers, could not be applied to bank trusts.)

This was the foggy status of the parcels when their “sale” to Rockingham was first considered in 2003. At that time, a contract was prepared calling for Rockingham to pay $2.4 million for all eight parcels. In that contract, Diamond and Freedman made a number of personal warranties about the property, according to a copy provided to the Weekly by Ricketts. The sale would be “fee simple” and “marketable.”

The contract was not executed until 2004, however, because of a boundary dispute, according to Ricketts. When the sale did occur, the same $25,000 held in an escrow account the year before was used.

At that time, the buyers and sellers may have thought they had cleanly transferred title. They had not.

It would be a year before Rockingham became aware there might be something awry with its 46,500 acres. When that moment came, Ricketts said, it was more by fluke than design, and it presented the company with a dilemma.

In preparation for development, Rockingham had hired as project manager W.L. Bouchard and Associates Inc., a Scottsdale firm. Its namesake, Walter Bouchard, had worked for two decades for Arizona Public Service Co., the Phoenix electric power company, where he dealt with permitting, logistics and site-preparation issues. Bouchard became the face of the project to the government of Sonora, representing the company at gatherings and handling correspondence with then-Gov. Eduardo Bours and his staff.

It was at those gatherings that Sonora leaders privately expressed doubts about the title to Bouchard, Sonora officials told the Weekly. Among those dubious about the project: Ricardo Platt, then Sonora’s secretary of economy, who had been on the Rockingham payroll, and Ricardo Bours, brother of the governor.

Bouchard, reportedly without permission from Rockingham, followed up by hiring Ruink to undertake a study at $15,000. The study, a compendium of agrarian and commercial law, took six months and was completed on Oct. 6, 2005.

Its stunning conclusion: “Because of flaws in the prior transactions, civil and agrarian, we must conclude that the title currently held by MXC Properties de R.L. (the Rockingham Mexican affiliate) is not a clean title.”

The report is 10 pages long, with two dozen addendums and lists of parcel owners and heirs. It explains in detail how a stream of Mexican lawyers and lawyers with special fiduciary responsibilities known as “Notaries Public” had taken one step after another to sell the colony properties, but, in the end, had never met requirements established by the half-century-old law that governed transfers.

The finding blindsided Ricketts, he said, and he requested a meeting with Diamond, Freedman and their attorney at the time, Mark Raven.

The meeting took place at Diamond Ventures’ office in Tucson, where Ruink explained that the title was tainted, said a witness who did not want to be identified. Powers of attorney had been exercised illegally, Ruink said. Miguel Angel Tapia, the Mexican attorney for Diamond and Freedman, had asserted that four of the colonists he represented were alive when, in fact, they had died years before, Ruink noted. And no one had filed, as required, the “prior authorization” with the Secretary of the Agrarian Reform. Among the scenarios Ruink posited was this: All eight parcels could yet wind up back with the original colonists or their heirs.

Tapia, contacted in Hermosillo, refused to comment for this story.

Immediately after Ruink and Bouchard spoke, they were “criticized and derided, and told they had no idea of what they were doing,” the witness said. Diamond, Freedman and Raven left the room to confer, and a meeting that had no set time limit was suddenly terminated, according to the witness.

Ricketts, now aware that Rockingham’s ownership was in doubt, did not tell investors—or stop development plans—for two reasons, he said.

Diamond and Freedman had offered their own “personal warranties” in the sale and would personally be responsible for any damages, he said. Moreover, title to the land was backed by First American Title, Latin America. “Either way, I felt we were covered,” he said.

Raven, who now practices in Tucson, declined to comment on the record; so did Bauer, their current lawyer and Bouchard. After an initial interview, Ruink would not consent to additional questions.

Another attorney familiar with the project, Ben Aguilera, of Phoenix, would not speak to the Weekly.

Why stop promoting a project just because there might be doubts about ownership?

The project’s land alone was worth an astonishing $605 million, Ricketts and others told prospective investors. The figure, assigned by Tucson appraiser Bruce Greenberg in an appraisal obtained by the Weekly, was based on what is called an “as if” developed basis. That detail was omitted from Ricketts’ presentation, however.

The newsletter enthusiasm persisted. “So much growth occurs between each newsletter edition and it is our goal to keep you apprised of all these exciting breakthroughs,” one entry read.

The optimistic promotion of Liberty Cove continued after the Ruink study and until the company missed its interest payments in 2008. When the payments stopped, Rockingham, in its sporadic communication, told investors that a bailout was pending.

Over the last three years, however, the investors have become almost a subplot as Rockingham and the sellers engaged in a legal, two-country slugfest that today favors Diamond and Freedman.

The most recent venue for the conflict was Pima County Superior Court in Tucson, and it was centered on the issue of liens.

Under the terms of the REIT, Rockingham committed in 2004 to placing a lien in favor of investors on at least one of the eight parcels. In 2007, Ricketts acted on that pledge, but was hindered because his companies had never paid in full the $2.4 million purchase price.

Ricketts approached Diamond and Freedman and explained his need for the lien, but the two were unsympathetic, Ricketts said. They would “release” the southernmost parcel to permit filing of a lien in exchange for new promissory notes of $2 million apiece.

Said Ricketts: “I agreed to arbitrary $2 million notes, or otherwise, they would not allow me to comply with the REIT investors’ security. I had to do what I said I was going to do. I complied—at the price of a $4 million extortion.”

In October 2007, Jorge Gómez Unger, Ricketts’ Hermosillo lawyer, placed a $25 million lien on the parcel most likely to be developed first. Ricketts agreed to make a first payment of $1.52 million on the notes by July 1, 2009.

Before that date arrived, however, there was a twist: Lawyers for three living colonists, and for five sets of heirs of the others, filed an action in Sonora courts contending that the properties should revert to their clients. The lawyers, Pedro Murillo Garcia of Caborca, and Edgardo Ortega of Hermosillo, named as defendants Diamond, Freedman, Ricketts and the Mexican entities controlled by Rockingham.

To Ricketts, the suit was proof that the title issues were real and insurmountable, he said. When the July 1, 2009, payment came due, he refused to pay, declaring that Diamond and Freedman had sold land to which they had never held proper title.

A series of vitriolic letters from Ricketts to Diamond and Freedman followed. In copies of the correspondence obtained by the Weekly, Ricketts accused the Tucsonans of bad faith, wire fraud and breach of contract. The Tucsonans were responsible for bringing the project to a stop, he said. Ricketts also accused Fennemore Craig P.C., attorneys in Tucson, of “perpetuating a fraud” by continuing to represent the two while aware that the original sale was fraudulent. The firm responded to Ricketts that his complaint had no merit.

Diamond and Freedman refused to comment on the particulars of Ricketts’ accusations, but, in August 2010, Diamond said they were unfounded. The two men had owned the properties for more than 20 years before agreeing to sell them to Ricketts and his two partners, Diamond wrote. “The bottom line is the buyers defaulted twice during the five-year pay period, so the sellers (D&F) are foreclosing—properly and legally. The buyers are making unsubstantiated accusations in an attempt to divert attention from themselves and their responsibilities to their investors.”

Ricketts’ accusations made no difference in Pima County Superior Court, where Diamond and Freedman sued him for defaulting on the two $2 million notes from 2007.

In a May 26, 2011, decision, Judge Kenneth Lee found in favor DF-MX Holdings LLC, wholly owned by the Tucsonans. The court ruled that shares held by Rockingham’s Mexican affiliates be transferred to the Tucsonans.

That stock transfer and return of the land is being contested in Mexican courts, Ricketts said.

Most Liberty Cove investors have abandoned hope—and few are familiar with any of the legal machinations of the last seven years.

Yet as information about the conflict has emerged, Ricketts has actually found some supporters. Ricketts maintains that he is a victim, not a perpetrator. Rockingham dealt with Diamond and Freedman in “good faith,” he said, while the Tucsonans’ sale of the property had been uncertain at best, and a sham, at worst.

“There is no greater victim in this case than my family and myself,” he said. “We are the ones who have invested the most in this project. I believe, too, that most all (investors) will end up appreciating me for hanging in there to protect them.”

Matt Mickley, the Phoenix-area businessman who was one of the few investors to visit the project site, had been an unconditional supporter of Ricketts. Mickley shot himself to death in April of last year, apparently a casualty of the strains from his losses, acquaintances said.

“I would talk to Matt three times a week,” Ricketts recalled. “Whenever I spoke with him, he was upbeat and said he was great. The last time, he just said he was ‘OK.’ When I shared with him the status of the litigation, he became despondent.”

Who will wind up with the property is far from certain. In addition to the competing claims, there are now additional lawsuits from people who provided professional services at the property. What does appear certain is that, barring high-level intervention, nothing definitive will happen for years.

There is no civil or criminal investigation in either country. In an interview last year, Abel Murrieta, then the Sonora attorney general, said the state was aware of “the controversy surrounding Americans who have lost money,” but had received no formal request to intervene. His office, lest it be accused of favoritism, would not start any action unless it received a formal complaint, Murrieta said. The attorney general’s successor, Carlos Navarro Sugich, has not looked into any wrongdoing, said Tatiana Gómez, a spokesperson.

Still, the legal free-for-all continues to eclipse the wrenching stories of the 200-plus people whose investments are most likely gone.

Included in that group is Terrie Little Sr., of Delafield, Wis., who invested $170,000.

“We were all initially filled with lofty promises and dreams of an affordable seaside retirement,” Little said. “Few of us investors were acquainted with each other, so in the beginning, and individually, we could only patiently await the development of the real estate investment that had been promised us. (We were seduced) by glossy, magazine-like reports filled with enticing photographs and progress reports, boasting of high-level meetings and new developments that had taken our investments to an even higher level. We perused the plot maps with a dream of locating the perfect retirement spot. What we are left with now is an understanding that our nest egg’s gone.”

This article appears in Jan 3-9, 2013.