published Friday, July 22nd, 2011

Bankruptcy, tax tussle entangle Catoosa County neighborhood

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OLD MILL TRACE TIMELINE


2001: Subdivision road work stopped due to a study on a nearby Civil War gravesite. When complete, roads fail to meet Catoosa County specifications.

2004: Developer goes bankrupt, turns neighborhood over to association -- except for playground, pond and nature trail.

2007-2008: No taxes paid on common property

2009: Neighbors notified that common property was to be auctioned off for $6,000 in unpaid taxes. Property sold for $41,000 to Carey Brown of Collaterialized Investment Services.

2010: Neighbors decide to seek $35,000 tax overage to buy back playground and pond.

-- Neighbors informed that Legal Investigations Group, a Dalton, Ga.-based company, has acquired ELJ's rights, and filed a claim for $35,000 tax overage from sale. Catoosa County also files claim for money to pay for road repairs.

2011: Playground and pond owner Collaterialized Investment Services informs neighbors they may buy back land for $50,408.

Old Mill Trace neighborhood residents in Catoosa County say they were surprised to find out they didn't own their pond, playground and nature trails.

An out-of-state company that snapped up the property at a tax sale told neighbors they could have it back -- for more than $50,000.

For 10 years, the neighborhood association says it's been battling to overcome the missteps of bankrupt developer ELJ Properties.

First, the subdivision's roads began buckling and sinking in spots. Neighbors and the county sued to fix the problem, but both the developer and its bonding company went out of business.

Then in October 2009, neighbors received two days' notice that their playground, pond and nature trails were to be auctioned off to pay for the developer's unpaid taxes.

"We had no idea these properties didn't even belong to us," said Henry Benach, president of the neighborhood association. "We had been keeping them up for years."

The neighbors were not able to raise the money in time to win the auction.

Instead, the land went to a company called Collaterialized Investment Services, registered in Nevada by Silver Shield Services, a business specializing in offering "protection from lawsuits, government creditors and state taxes through Nevada's incorporation friendly laws," according to its website.

For $600, Silver Shield Services sets up "everything that you need to prove that you are in fact operating in the state of Nevada," but "without the headaches of payroll taxes," the website says.

Collaterialized Investment Services told homeowners in an email in March that it would sell the property, which it bought for $41,000, back to homeowners with a 20 percent one-year redemption fee, for a total of $50,407.

"They were bidding against me on the property," said Carey Brown, a representative for Collaterialized Investment Services. "They bid at least $40,000. This tells me that they have access to money."

Conflicts of interest?

In an effort to get their playground back, residents have turned to Catoosa County authorities to garnish the $31,000 paid over and above the $6,000 owed by the developer on property taxes.

Their goal was to buy the land back and turn it into a permanent conservation easement.

But they can't catch a break.

The county is pursuing its own claim on the money to pay for the neighborhood's roads, a course of action residents claim is a conflict of interest.

That's because Catoosa County attorney Chad Young, partner at Patty & Young, previously represented the defunct developer on a case regarding the neighborhood's roads.

Clifton Patty, the firm's senior member, is general counsel for Northwest Georgia Bank, which holds most of Catoosa County's bank accounts, according to county financial documents.

"That was part of the reason we couldn't get anything done. They had their sticky fingers in everything," neighborhood association secretary Karen Randall said. "[Young] was the one who actually wrote all that up as an attorney for ELJ."

Patty acknowledged that the firm had done work for the developer but denied that the firm's work for the county is a conflict of interest.

"This is a situation where there was an appearance before the planning commission years ago on a specific issue related to the development," he said.

Buddy Presley, attorney for the association, claims that Patty & Young also helped transfer ELJ's assets to Dalton, Ga.-based Legal Investigations Group, which is claiming the tax overage in the name of nonexistent developer ELJ.

Attempts to reach that company were unsuccessful.

That means the neighborhood is looking at long odds for getting its land back, Presley said, because as far as the court is concerned, the developer is bidding for its own tax overage.

"There appear to be some conflicts of interest going on," said Bobby Winters, Catoosa County Commissioner.

Winters confirmed he's looking into the problem, but wouldn't say more until the full commission had a chance to vote on the matter.

"Let's see what those other commissioners say," he said.

about Ellis Smith...

Ellis Smith joined the Chattanooga Times Free Press in January 2010 as a business reporter. His beat includes the flooring industry, Chattem, Unum, Krystal, the automobile market, real estate and technology. Ellis is from Marietta, Ga., and has a bachelor’s degree in mass communication at the University of West Georgia. He previously worked at UTV-13 News, Carrollton, Ga., as a producer; at the The West Georgian, Carrollton, Ga., as editor; and at the Times-Georgian, Carrollton, ...

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