State set to sue over land deals, McDaniel says

Civil case to target developer of resort lots on Spring River

This article was originally pubished on May 20, 2008.

— Attorney General Dustin McDaniel said Monday that he plans to file a lawsuit on behalf of consumers against Sharp County developer Wayne Watkins, whose conduct McDaniel described as "reprehensible."

"We will do all we can to trace the money," McDaniel said. "I cannot guarantee that we will ever recover a dollar for these folks. People have been defrauded and lied to, and I think it's important that we try to do what we can to help them."

Watkins, 59, spent more than two decades developing family and camping resorts along the Spring River. He sold hundreds of small camper lots and 3- to 5-acre lots, mostly to out-of-towners. But many of his customers lost their money and the land they thought they were buying when Watkins defaulted on $2.6 million in loans he obtained by using the land as collateral.

Watkins, who is wanted on a Sharp County warrant for one count of felony theft of property, lives in Mexico, where his attorney said he sells real estate.

On Monday, McDaniel said the decision to pursue a lawsuit was made before the Arkansas Democrat-Gazette published a two-part series Sunday and Monday about Watkins and property buyers who felt cheated.

Watkins customer Pat Mann of Lake City said that after years of getting little satisfaction from state officials, she was pleased McDaniel plans to pursue the developer.

"I'd like to see Wayne Watkins pay for what he's done toall of us," she said. "I'm not going to stop. He stole [our money] and we worked hard for it."

Mann's family paid Watkins $10,000 for hunting land in Cherokee Village, only to learn that Watkins lost the property in foreclosure and that a bank then sold it to someone else.

Her family first filed a complaint about Watkins with the attorney general in September 2006. In February 2007, she said, the office told her their complaint "could not [be] resolved." "It makes you angry they [dragged] their feet so long, but at least it's happening," she said. "Without the attention brought to them by the Arkansas Democrat-Gazette, they wouldn't be paying attention to us right now. They never gave us the time of day."

Since 2003, the attorney general's office has received 22 complaints about Watkins.

Deputy Attorney General Jim DePriest, who also served under McDaniel's predecessor Mike Beebe, said in an April 30 interview with the newspaper that neither Beebe, who is now governor, nor McDaniel had opted to use the office's resources to go after Watkins.

Office spokesman Gabe Holmstrom said Monday that Mc-Daniel decided on April 30 to pursue a lawsuit against Watkins on behalf of consumers.

McDaniel told a reporter he didn't know the newspaper was investigating Watkins. He remembered getting a Blackberry message from DePriest asking how to proceed with the case. His response, he said: "Sue him."

The attorney general has the power to prosecute civil cases on behalf of the public, according to Arkansas Code Annotated 4-88-105. According to the office's Web site, the attorney general could file a lawsuit "when there is a compelling public interest present or when many complaints exist."

In those cases, the office attempts to obtain refunds for consumers and civil penalties up to $10,000 per violation.

But until Monday, the attorney general's primary methodof handling complaints about Watkins has been to ask the developer to respond and to advise his customers to hire an attorney or go to small claims court. Watkins rarely responded to those requests.

McDaniel, who like Watkins is from Jonesboro, said he remembers hearing about the Spring River Beach Club for many years.

"I thought it was just exactly as it was advertised," he said. "I didn't know it was a problem in any way."

McDaniel said he remembers hearing from a "victim of this scam" last summer after which his office started an internal probe. In February, two law clerks conducted some research on the case, he added.

But when a reporter asked in March and in April whether there was an active investigation, a McDaniel spokesman indicated there was not.

Between November and February, a friend of McDaniel's from Sharp County called to tell him that Watkins' associates had been telling people around Hardy that they would be protected from prosecution because Watkins and McDaniel were old friends.

"That made me angry," Mc-Daniel said Monday. "To be clear, I've never met the man, to my recollection. It's very important to me that the people in Sharp County and in my home area don't ever think that I've got any kind of relationship or allegiance to this person."

McDaniel said he does know Carroll Caldwell, Watkins' former business partner, but says he didn't know they were associated. Caldwell donated $250 to McDaniel's campaignin 2006.

The most recent substantial conversation the office had about Watkins was at the end of March, McDaniel said. The Democrat-Gazette began working on its series in February.

"The general consensus within my public protection division was that our resources are strapped, and there's not a lot we can do," he said.

McDaniel said his employees felt it was unlikely that a lawsuit would be very successful.

"Nonetheless, I told them then that I think it's extremely important that we try," he said. "I gave instructions to start preparing lawsuits against Mr. Watkins and any person or business entity that we can trace to be related to the allegations that we have against Mr. Watkins."

The office hasn't decided when and how to file the lawsuit, he said, because it may be difficult, if not impossible, to serve Watkins with legal papers.

While some people who bought property from Watkins have turned to state agencies and law enforcement for help, others have turned to the court system for relief.

Catherine Dean, an Osceola lawyer who bought a lot in Watkins' Riverbend RV park, and several other people who own property there filed a lawsuit in February against Watkins and Riverbend manager Clifton Johnson.

Before Watkins left the country, he transferred all the common properties in the park and about 200 camper lots to Johnson, Dean said. He also gave Johnson the authority to collect the $400 annual assessment plus the $200 yearly dues all property owners paid for use of Spring River Beach Club amenities.

Dean said there are between 1,100 and 1,200 camper lots in the park.

Some of the people who bought property in Riverbend Park, including the president of the property owners association, lost their land in much the same way as Pat Mann.

Those who have a clear title to their property have asked a judge to decide whether Johnson or the property owners association has the authority to collect the assessments.

Some common properties in Riverbend, including a bathhouse, a swimming pool and the parking lot where trailers are moved when the Spring River rises, are included in a foreclosure lawsuit the Bank ofSalem filed against Watkins in March.

"I did my own title search. I was just lucky enough to be a lawyer. My property is free and clear except for my own mortgage," Dean said, adding that she found out about problems with Watkins' properties a week after she closed.

Three weeks ago, she said, the attorney general's office contacted her, and she has since turned over documents she collected in the past year.

Some of the documents, she said, show that Riverbend property owners were being told as late as August 2006 to pay membership dues for the nearby Beach Club, which has been closed and abandoned for more than a year.

Front Section, Pages 1, 5 on 05/20/2008