Golf, anyone? Market limited for house in fraud case

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08/08/2011

For sale: House in Vero Beach, Fla. Priced to sell at $1.49 million (it was valued earlier this year at $1.7 million to $1.9 million). Must like golf.

Under a judge’s order, the house is up for sale to benefit investors defrauded of more than $80 million in a Ponzi scheme allegedly run by security alarm industry investors Timothy McGinn and David L. Smith. Smith and his wife bought the home 10 years ago.

But the property on Orchid Point Way is proving difficult to sell, partly because it’s in an exclusive gated community for golfers, according to a court filing this month.

McGinn and Smith were principals of McGinn, Smith & Co., an Albany, N.Y.-based investment firm that conducted investment dealings in the alarm industry. The U.S. Securities and Exchange Commission filed charges against them last year, contending that from 2003 to 2009, the pair diverted funds into financially troubled entities and also into their own pockets, and for such expenses as paying for exotic dancers on McGinn’s You Only Live Once cruise ship business. The pair’s assets have been frozen and a receiver appointed.

A judge this February ordered the Smiths’ vacation home be sold. But the receiver wrote to the judge on Aug. 4, saying there’s a water leak in the garage and the pool is not functional. The receiver said the Smiths haven’t paid their homeowners or floor insurance premiums for the house, so he recently bought new policies that cost $10,000 per year.

Also, receiver William J. Brown wrote: “While the broker has worked hard to sell the home, and we have looked at a number of creative ways of trying to sell the home, it is a difficult market in a gated golfing community which is very expensive to reside in and appears to appeal to only the most avid golfers as a general rule.”

Brown said he is going to continue to evaluate the equity in the property.