This is an archived article that was published on sltrib.com in 2014, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.
In the frenetic market of the mid-2000s, new subdivisions in the Utah County town of Saratoga Springs were popping up like mushrooms after a rain.
But now it's the more sober days of 2014, and Kimberly Bowen, once a successful real estate agent, is facing criminal charges that largely boil down to one thing — a lack of water.
Bowen is accused of fraud for neglecting to tell buyers of lots in a Saratoga Springs development called Fox Hollow that there was no water available, and that the city was not issuing building permits until facilities were done. Buyers were blind-sided and some were foreclosed on; some went broke and some lost a lot of money.
Scheduled to testify against Bowen at a 3rd District Court trial in January are a former city official and the developer of Fox Hollow.
Yet, a review of documents and interviews shows it was the city and the developer, Richard Wolper, who cooperated to allow Wolper to sell lots without water and with what appears to be inadequate written warning in at least several sales.
No water, no building permits.
Wolper filed for bankruptcy; city officials called the bond; Bowen faces potential prison time.
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A silent plat • Fox Hollow lies west of Utah Lake off Redwood Road (State Route 68). Parts of it were once owned or controlled by Marc Sessions Jenson, now jailed for real estate fraud and facing trial in another case. He is also at the center of criminal charges pending against former Utah Attorney General Mark Shurtleff.
By 2006, Wolper had taken control of Neighborhoods 3 and 6 and perhaps other areas. By July he had a deal with Saratoga Springs: He would build systems for culinary and irrigation water and the city would reimburse him through fees when lots were sold.
But, the agreement said, water must be available before the plat would be recorded with the county, the step that allows individual lots to be sold.
In September, the final plats for Neighborhoods 3 and 6 were approved by the City Council — on the condition that streets, utilities and other items were finished.
But within weeks, Wolper sought permission to start selling lots sooner, to raise the funds to complete Neighborhood 3.
About six weeks after the September approval, City Attorney Timothy Taylor said the city would agree. The city would record the plat, he wrote to Tim Smith of Wolper's Deer Canyon Development, but it would not issue building permits until "water facilities are completed."
The recorded plat, however, did not note the absence of water.
Taylor, in an interview, acknowledged that if there were "some sort of impediment to going forward, that there should be probably something recorded on the plat."
About a month later, Wolper's Fox Hollow Saratoga company secured a $45.2 million loan from ANB Financial to complete the development. And two weeks after that, his Saratoga Expansion LLC secured $23 million in financing from SOF Investments for a related development.
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Sales begin • Despite that financing, city officials agreed to put up $327,084 to buy pumps that would feed a water tank located on a hill. Wolper would contribute $100,000, with the understanding his company would install the pumps and repay the city.
The plat for Neighborhood 3 was recorded on March 27, and sales began.
Less than a month later, on April 23, a warranty deed was recorded transferring lot 3101 to Scott Kahn, a city councilman who had voted, along with others, to approve the final plats.
Kahn later told state investigator Rex Ashdown he paid a price between the upper $90,000s and the lower $100,000s, then sold the lot in July for a profit, though he denied he got a special deal from Wolper.
"At the time of the purchase, he believed all improvements had been completed and he could get a building permit," Ashdown wrote. "Kahn was never told otherwise."
The day after recording the plat, Wolper signed a disclosure with Re/Max Associates that said water was provided by the city.
In 2007, Bowen worked as an agent for Re/Max Advantage, and in October 2006, she put more than $80,000 in a new company headed by Sandy Chapple — Empire Custom Homes, which planned to build houses on the lots. There were eager buyers.
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An agent accused • Bowen faces 10 criminal charges — nine second-degree felonies of communication fraud and one of engaging in a pattern of unlawful activity. The counts are chiefly based on her allegedly intentional failure to inform buyers that water was not available and that their lots weren't eligible for building permits.
She also is alleged to have failed to disclose an interest in Empire Homes.
Bowen is angry that she's been the subject of a criminal prosecution for lots she sold in 2007 when, she said, Wolper failed to live up to his agreements and city officials never have explained their dealings with him.
"I have lost six years because not one person told me there was a problem with the water," Bowen said in a written statement.
Wolper kept telling her and others the project would be done "any minute, any minute, two weeks, two weeks after that," she told Ashdown.
"So basically it was a whole big circle," Bowen said. "He needed the money to finish it but we couldn't [get] the money unless it was finished."
Wolper, a key witness against Bowen, told the state investigator and has testified under oath that when he met with Bowen and Chapple in late 2006 or early 2007, he informed them there was no water.
The Utah Attorney General's Office, which is prosecuting Bowen, cited her pending trial in declining to comment.
Reached by phone, Wolper also declined to comment because he is scheduled to be a witness in the trial. Asked about his signature on disclosure agreements indicating water was available, Wolper hung up.
Chapple was charged with 19 counts of communications fraud, forgery and engaging in a pattern of unlawful activity. She recently pleaded guilty to two lower-level communications fraud charges and was ordered to spend 365 days in jail.
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"Developer has not completed improvements" • As Bowen began selling lots, as early as April 2007, Empire Custom Homes started submitting applications for building permits.
But in August, City Manager Ken Leetham warned Wolper that work had to be completed before permits would be issued. By then, Leetham later told the City Council, staff realized Deer Canyon Development was not paying contractors and would not repay the city for the pumps.
An Oct. 1 deadline passed for having the culinary water system in place.
Still, Wolper continued to sell lots. On Nov. 23, he signed a disclosure in which one question read: "Is there a culinary source in place for the property." The "yes" box is checked. It was about this time that the city staff, apparently in desperation, opened the door for building permits.
Leetham wrote to Wolper's project manager, Fred Swain: "The city, in good faith, and in an effort to assist you in the successful development of the project, has authorized the issuance of permits within the [water system for the ] Zone 3 area prior to construction of the necessary water facilities."
But in another letter dated that same day, he noted that Wolper's companies had $23 million in loans past due, and he demanded that the city be repaid for the pumps. Wolper continued to sell lots. A November disclosure to Coldwell-Banker Cottonwood asked if culinary water was available. "Yes" was checked. It asked the location of the nearest water line and in handwritten words the reply was "stubbed to lot."
Finally, the form asked, "Is there anything you should disclose to Buyer because it may materially or adversely affect the value or desirability of the property." "None" was the handwritten reply.
On the last day of 2007, the city denied a request for a permit, signalling that whatever door had been open had closed. And unlike previous denials, this one gave the reason: "developer has not completed improvements."
All the lot sales for which Bowen was charged took place in 2007.
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Dream house denied • Suzanne Peterson and her husband Brian closed on a lot for their "dream" house in January 2008, a site next to a park and with a great view looking across Utah Lake to Mt. Timpanogos. Wolper had signed a disclosure again saying water was "stubbed to lot."
After hearing rumors that building permits were not available, Suzanne Peterson went to City Hall. She also called various times but couldn't get answers.
"I think the city absolutely knew they weren't buildable and didn't tell us, hoping they would get water to the area," she said. The couple ended up losing $60,000.
In March the city allowed Wolper to plat Neighborhood 6, putting about 170 more lots up for sale. Neighborhood 6 also had no water.
Joel Kester, a developer himself, was a member of a group that bought 10 lots in Neighborhood 6 from Wolper's Fox Hollow Saratoga LLC. Kester said he discussed the water situation with Wolper, who told him all development was bonded and completion of facilities was "guaranteed."
A letter from Meridian Title Co. to the city says $8,333 from the sale of each lot to the Kester group went to the city for partial payment for the pumps, while $7,641 per lot went to the city for water rights.
"We never got our pump or our water," said Kester, who said he told a city official "you took my money, you have a bond from the developer, you accepted the recording of the subdivision, you have an obligation to give me a building permit."
The group is still waiting, he said.
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"Property owners ... will sue" • On June 23, 2008, Wolper Construction, the company that was working on the subdivisions, filed for bankruptcy and sought to reorganize.
The next day, Leetham gave the City Council a memo recommending it approve a one-time exception to the building permit policy for Fox Hollow. Some of the lot owners who were desperate for building permits attended the meeting.
"I think that they need some relief and have been sort of the victims of some non-performance here on the developer's part and the city allowing the plat to be recorded, which in hindsight we would not let happen again," he said, according to a recording of the meeting.
He said the problem could be solved by a new water line from a different area that would cost $56,000 to install. Wolper's project manager, Swain, told the council the project would be completed within 10 working days.
The issue was postponed until the council's next meeting on July 1, when members asked Leetham to explain what had happened.
Leetham, now with the city of North Salt Lake, declined an interview request, citing his pending role as a witness in Bowen's trial. But he told the council the city had violated the agreement it had with Wolper, and violated its own practices when it allowed him to record the plats without water available.
Mia Love, who served six years on the council before becoming mayor in 2010, asked the city's attorney about the city's possible liability.
"Do we feel like we are not obligated or we are even entertaining this because we have some fault, some responsibility for what has happened to the people who have bought lots?" asked Love, today the Republican candidate for Congress in Utah's 4th District.
Attorney Todd Godfrey told Love he didn't believe there were legal liabilities, but added, "Property owners, I think, will sue you. I don't know if there's any way around that."
The council unanimously voted for the exception. But it said the developer had to complete the proposed $56,000 pipeline.
That never happened.
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Ending up in court • Bowen argues Saratoga Springs "violate[d] its own policies and the laws, and turned its back on the people it hurt."
Love, through her campaign manager, declined to answer questions about the city's role in the debacle. Former City Councilwoman Denise Kelly, who served with Love in 2008, said she had only "vague memories" of what transpired, and suggested talking to Love. Former Mayor Timothy Parker also said he couldn't remember a lot about what had occurred.
On Dec. 12, 2008, Wolper Construction filed a lawsuit in state court against his own Fox Hollow Saratoga. He wanted to enforce a $36.5 million lien the construction company supposedly had on the lots because Fox Hollow Saratoga had failed to repay building costs.
Affinity Bank, which had taken over ANB Financial's $43 million loan, objected to Wolper's attempt to enforce a lien on property that already was securing its loan.
"In other words, Mr. Wolper is effectively suing himself for not paying himself and using the resources of the [bankruptcy] estate to do so," Affinity Bank said in a court filing.
Joe Thomas, the former mayor of Spanish Fork, said in an interview that his Asset Development Group also had loaned about $25 million to Wolper Construction to pay for the same construction costs that Wolper was contending had not been paid.
"We deposited [funds] directly in the accounts of Wolper Construction," he said. "So Wolper Construction got paid." Thomas said he lost "everything," as did others who had participated with him.
On the last day of 2008, Wolper filed for personal bankruptcy. About a month later, Bowen and Chapple were charged with fraud and forgery. Jury selection in Bowen's trial is set for Jan. 26.
Saratoga Springs eventually called the bond on Fox Hollow and in 2011 received $1.4 million from the insurance company. In November 2012, the city signed an agreement with a new developer.
Today, cement trucks ply the streets and the sound of nail guns punctuates the air as construction goes full bore in parts of Fox Hollow that now have water. But empty lots of dirt and weeds remain, still waiting.