An Alabama bank is suing University of Michigan football coach Rich Rodriguez for defaulting on a real estate loan — but his adviser claims that the coach was the victim of a Ponzi scheme.
Nexity Bank filed suit Aug. 13 in the U.S. District Court for the District of South Carolina, charging Mr. Rodriguez with defaulting on a loan made to him and his partners for the construction of a condominium community called The Legends of Blacksburg, which is near Virginia Tech's Lane Stadium.
The bank alleges that Mr. Rodriguez and his partners owe $3.9 million, including interest and penalties, on the loan.
But his financial adviser is arguing otherwise.
“Coach Rodriguez is the victim of a [type of] fraudulent real estate Ponzi scheme that has unfortunately affected many Americans,” Mike Wilcox, chief executive of Wilcox Financial Inc. of Toledo, Ohio, said in a statement.
Mr. Wilcox said that he has been the coach's adviser since 2007.
“As Coach Rodriguez's financial adviser, I and his legal counsel will be handling this matter moving forward. We are evaluating legal actions and solutions since the promoter of the scheme is currently awaiting trial on criminal charges,” Mr. Wilcox said in the statement.
Nexity filed the suit as a successor to Banc Capital and Financial Services Inc. of Spartanburg, S.C.
According to the court filings, The Legends of Blacksburg LLC executed a loan promissory note to Banc Capital in 2007 in the amount of $26.1 million for the project.
The note was modified in September 2008, reducing the principal balance to $3.5 million, which has been accruing interest since.
“The victim, if anybody is Nexity Bank,” said Wesley Few, partner in the law firm of Elis Lawhorne & Sims PA of Columbia, S.C., which is representing the Birmingham bank.
“Mr. Rodriguez's company owns the property that was purchased with the money we gave him. As soon as they pay off the loan the so-called "victim' will own the project free and clear.”
In a typical Ponzi scheme, the victim is the one who is supposed to receive something for his or her investment but does not receive anything or only receives a small dividend paid with money brought in from new investors, Mr. Few said.
“That's not what happened here,” he said.
The loan, which was modified, matured in March.
“But they said they needed more time and were going to get someone else in to pay off the note,” Mr Few said.
The bank renewed the note for two months and they still defaulted.
A spokesman for University of Michigan declined to comment.
E-mail Sue Asci at email@example.com.