Detroit Police and Fire Retirement System Sues Over Alleged Paramount Ponzi Scheme
Action taken to recover funds and keep Detroiters in homes
DETROIT, May 19, 2011 — /PRNewswire/ — The Police and Fire Retirement System of the City of Detroit (Retirement System) today filed suit against Paramount Limited, LLC (Paramount) in Wayne County Circuit Court to not only recover funds owed from a defaulted $9.9 million loan, but also have the court appoint a receiver to protect the interests of the Retirement System as well as the many Detroiters who purchased homes from Paramount.
The lawsuit alleges that rather than maintain, rehabilitate and/or properly market more than 1,900 properties that were purchased with funding from the Retirement System’s loan, Paramount and 17 related defendants, conspired to defraud the Retirement System, grossly mismanaged the inventory and failed to maintain the properties or pay required real property taxes. Over 1,400 of the properties are in Wayne County, Michigan with most in the city of Detroit.
The complaint further alleges that Paramount falsely represented to the Retirement System that their operations were profitable. However, the company was actually operating at a loss and making loan payments to the Retirement System with money originally loaned to Paramount — a classic ponzi scheme.
The request for a court-appointed receiver is intended to stop this illegal activity and protect and properly manage the Loan Collateral pledged to the Retirement System. If this request is granted, the Retirement System will work with the receiver to protect these assets and seek creative alternatives to salvage the properties through committed local community development groups, land banking officials and City and County authorities. The ultimate goal is to maximize value to recover the loan, create more owner-occupied homes and assist with efforts to reinvigorate city neighborhoods.