UNITEDSTATEDDISTRICTCOURT MIDDLEDISTRICTOFFLORIDA...

Case 2:07-cv-00343- S- C Document 205 Filed 10/31/2008 of 49

UNITED STATED DISTRICT COURTMIDDLE DISTRICT OF FLORIDA

RANDOLPH SEWELL, DAPHNE SEWELLMOSES ESHKENAZI, THERESEESHKENAZI, and HENRIETTEESHKENAZI, individually and on behalf Case No. 2:07-cv-00343-FTM-29SPCof all others similarly situated,

Plaintiffs,

V.

D'ALESSANDRO & WOODYARD,INC., a Florida for-profit corporation;GATES, D'ALESSANDRO & WOODYARD,LLC, a Florida limited liability company;K. HOVNANIAN FIRST HOMES, L.L.C.,a Florida limited liability company,FIRST HOME BUILDERS OF FLORIDA,a Florida general partnership; FIRST HOMEBUILDERS OF FLORIDA I, LLC, a Floridalimited liability company; JAN BAILLARGEON,as Personal Representative of the ESTATE OFFRANK D'ALESSANDRO, Deceased;SAMIR CABRERA, an individual;HONORA KREITNER, an individual,BRUCE A. ROBB, an individual, andPATRICK LOGUE, an individual,

Defendants.

SECOND AMENDED CLASS ACTION COMPLAINT

Plaintiffs, RANDOLPH SEWELL, DAPHNE SEWELL, MOSES ESHKENAZI,

THERESE ESHKENAZI, HENRIETTE ESHKENAZI, and all others similarly situated, hereby sue

Defendants , D'ALESSANDRO & WOODYARD, INC., GATES, D'ALESSANDRO &

WOODYARD, LLC, K. HOVNANIAN FIRST HOMES, LLC, FIRST HOME BUILDERS OF

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BECKER & POLIAKOFF, P.A. • 3111 STIRLING ROAD • FT. LAUDERDALE, FLORIDA 33312TELEPHONE (954) 987-7550


FLORIDA, FIRST HOME BUILDERS OF FLORIDA I, LLC, JAN BAILLARGEON, as Personal

Representative of the ESTATE OF FRANK D'ALESSANDRO, SAMIR CABRERA, HONORA

KREITNER, BRUCE A. ROBB , and PATRICK LOGUE, for, inter alia , violations of the Securities

Act of 1933 (" Securities Act"), the Securities Exchange Act of 1934 ("Exchange Act"), the

Interstate Land Sales Full Disclosure Act, ("ILSA" ), and Florida's Deceptive and Unfair Trade

Practices Act, in connection with the offering and sale of real estate investment opportunities in

Lee County, Florida, and allege as follows:

JURISDICTION AND VENUE

1. This Court has jurisdiction over this action pursuant to 15 U.S.C. § 77v(a) [with

respect to all Securities Act claims], 15 U.S.C. § 78aa [with respect to all Exchange Act claims],

and 15 U.S.C. § 1719 [with respect to all ILSA claims]. This Court also has subject matter

jurisdiction pursuant to 28 U.S.C. § 1332(d)(2), as this matter is a class action with an amount in

controversy that exceeds $5,000,000.00. This Court has supplemental jurisdiction over all other

claims, including the state law claims, in accordance with the provisions of 28 U.S.C. § 1367.

2. Venue is proper in this district pursuant to 28 U.S.C. § 1391(a)(1) and (b)(1) as the

defendants' principal place of business (in the case of the corporate defendants) or principal

residence (in the case of the individual defendants) is in this District and defendants are otherwise

subject to personal jurisdiction here. Venue is also proper in this district because

defendants' acts and omissions constituting violations of the federal securities laws occurred here.

3. The Defendants, directly and indirectly, have made use of the means and

instrumentalities of interstate commerce, the means and instruments of transportation and

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communication in interstate commerce, and the mails, in connection with the acts and practices, and

courses of business set forth in this Second Amended Complaint.

4. Plaintiffs demand a trial by jury on each and every one of their claims as pled

herein.

5. All conditions precedent to the initiation and maintenance of this action have been

performed or have occurred.

THE PARTIES

6. Plaintiffs, RANDOLPH SEWELL and DAPHNE SEWELL (the "Sewells), are

married to each other and reside in Broward County, Florida.

7. Plaintiff, HENRIETTE ESHKENAZI, is a resident of Broward County, Florida.

8. Plaintiffs, MOSES ESHKENAZI and THERESE ESHKENAZI, are married to each

other and reside in Broward County, Florida.

9. Defendant , D'ALESSANDRO & WOODYARD, INC. ("D&W") is a Florida

corporation with its principal place of business in Fort Myers , Florida. Defendant , GATES,

D'ALESSANDRO & WOODYARD, LLC. ("GDW"), is the successor-in-interest to D&W by

virtue of a July 28, 2006 transaction, the effect of which was to create a merger and/or a de facto

merger between D&W and another prominent real estate firm, Gates McVey, to form a new

entity called "Gates, D'Alessandro & Woodyard, LLC," referred to herein as "GDW". In the

press release announcing the merger, GDW stated that the "the merger is believed to be the

largest of its kind in Southwest Florida history." (See Exhibit "A" to Plaintiff's Response to

GDW's Motion for Sanctions in Accordance with Fed. A. Civ. P. 11 [D . E. 64]). According to

GDW's own press release, "the merger combine[d] Florida's leading commercial construction,

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development and real estate services company with Southwest Florida's largest commercial

realtor, resulting in combined transaction values of $1 million, based on 2006 projections ." (Id.).

In another press release that same day, entitled "Southwest Florida Growth Goliath Created--$]

Billion Yearly Revenue Expected After Merger," GDW again describes the transaction between

Gates McVey and D&W as a "merger." (Id., Ex. B). D&W's principal, Frank D'Alessandro, is

also quoted in the July 28th press release as stating that "[w]e have merged two companies that

offered different services to the same clientele." (Id.). Further, in a joint press release issued by

Gates McVey and D&W on July 27, 2006, the transaction between the companies is described as

a "merger." (Id., Ex. C, at p. 1 ["We are excited about the merger . ... Basically, we merged to

meet the needs of our clients in this fast changing real estate industry."]). In addition, in reports

on file with the Florida Division of Corporations, both GDW and D&W list the same address--

7051 Cypress Terrace, Suite 110, Fort Myers, Florida, 33907--and the same two individuals--

D'Alessandro and Michelle Harrison--are listed as officers of both companies. Further, many of

D&W's former employees became employees of GDW. The continuity of management,

personnel and physical address, coupled with GDW's and D&W's own statements that a merger

had occurred between the companies--supports a finding of a de facto merger under Florida law.

10. Defendant, FIRST HOME BUILDERS OF FLORIDA, is a Florida general

partnership with its principal place of business in Lee County, Florida.

11. Defendant, FIRST HOME BUILDERS OF FLORIDA I, LLC, is a Florida limited

liability company with its principal place of business in Lee County, Florida. (Defendants First

Home Builders of Florida and First Home Builders of Florida I, LLC are collectively referred to

herein as FIRST HOME BUILDERS).

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12. Defendant , K. HOVNANIAN FIRST HOMES, L.L.C. ("Hovnanian "), a Florida

limited liability company, is the successor to FIRST HOME BUILDERS under principles of

successor liability. In or about August 2005, HOVNANIAN, a wholly-subsidiary of Hovnanian

Enterprises, Inc (a leading national homebuilder and a publicly-traded company) purchased the

assets (and assumed certain of the liabilities) of FIRST HOME BUILDERS. Among the assets

purchased (and liabilities assumed) by HOVNANIAN were the purchase agreements covering

the various investment properties sold by FIRST HOME BUILDERS to Plaintiffs and other class

members. HOVNANIAN replaced FIRST HOME BUILDERS as the "seller/builder" with

respect to each subject agreement, and took over the performance of all remaining contractual

obligations.2 By virtue of acquiring the contract rights associated with the various investment

properties and performing the obligations thereunder , HOVNANIAN either expressly or

implicitly assumed the liabilities associated with those purchase agreements. In addition,

HOVNANIAN is liable as the successor to FIRST HOME BUILDERS under a "de facto

merger" theory. HOVNANIAN was formed on July 20, 2005 , at or around the same time that it

acquired the assets and assumed certain of the liabilities of FIRST HOME BUILDERS. In the

press release announcing the transaction, Patrick Logue, the managing partner of FIRST HOME

BUILDERS, stated that the effect of the transaction was to "combine" our operations with

HOVNANIAN so that "we can take our vertical integration efforts to the next level and expand

our product offering. This partnership will provide us with the capital we need to continue our

1 A copy of the August 8, 2005 press release announcing the transaction is annexed hereto as Exhibit "D."2 This is evidenced by, inter alia, an October 31, 2006 letter sent by HOVNANIAN to Daphne Sewell, in whichHOVANIAN (not FIRST HOME BUILDERS) declared Ms. Sewell in default of her purchase agreement withFIRST HOME BUILDERS because she had not yet obtained an "end-loan. That letter (attached hereto as Exhibit"E") is signed by Christine Castillo on behalf of "K Hovnanian First Homes L.L.C. d/b/a First Builders of Florida."

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growth and remain one of the dominant homebuilders in the Fort Myers-Cape Coral market. ,3

HOVNANIAN was formed by Hovnanian Enterprises, Inc. in July 2005 for the purpose of

continuing the business of FIRST HOME BUILDERS. It had no independent existence prior to

July 2005. By virtue of the August 2005 transaction, HOVNANIAN replaced FIRST HOME

BUILDERS as the "seller/builder" with respect to each subject purchase agreement, and has

taken over the full performance thereof.4 Moreover, since the August 2005 transaction, FIRST

HOME BUILDERS has ceased all homebuilding activities. In other words, HOVNANIAN has

completely taken over the business operations of FIRST HOME BUILDERS. It has the same

name, albeit, with the qualifier "a K. Hovnanian Company." Further, several of FIRST HOME

BUILDERS' officers--including Fred Hermann (the President) and Bruce Robb (the Chief

Operating Officer)-- are now officers of HOVNANIAN, and many of the employees of FIRST

HOME BUILDERS became employees of HOVNANIAN. In addition , HOVNANIAN has the

same physical location and website as FIRST HOME BUILDERS, and is in the same business as

its predecessor--i.e., the construction of single-family homes. In essence, the business of FIRST

HOME BUILDERS has been absorbed by HOVNANIAN. By virtue of the foregoing , there has

been a clear relay-style passing of the baton from FIRST HOME BUILDERS to HOVNANIAN

sufficient to support the successor liability of HOVNANIAN under a "de facto merger" theory.

13. Defendant , JAN BAILLARGEON, is sued in her capacity as Personal

Representative of the ESTATE OF FRANK D'ALESSANDRO, Deceased ("D'ALESSANDRO"),

and a resident of Lee County, Florida. D'ALESSANDRO was a shareholder and officer of D&W.

3 See Exhibit "D" hereto (August 8, 2005 press release by Hovnanian Enterprises, Inc.)4 See, e.g., Exhibit "E" hereto (October 31, 2006 letter from Hovnanian to Plaintiff Daphne Sewell).

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14. Defendant, SAMIR CABRERA ("CABRERA"), is an individual and resident of

Lee County, Florida upon information and belief, CABRERA is an employee and officer of D&W

and GDW.

15. Defendant, HONORA KREITNER ("KREITNER") is an individual and resident of

Lee County, Florida. At all relevant times hereto, KREITNER was an employee of D&W and acted

as an agent of FIRST HOME BUILDERS with respect to the transactions described herein.

16. Defendant, BRUCE A. ROBB ("ROBB"), is a resident of Lee County, Florida. At

all material times hereto, ROBB is the Chief Operating Officer of FIRST HOME BUILDERS.

17. Defendant, PATRICK LOGUE ("LOGUE"), is a resident of Lee County, Florida.

Prior to the acquisition of FIRST HOMES by HOVNANIAN in August 2005, and at all times

material hereto, LOGUE was the President and General Partner of FIRST HOME BUILDERS.

FACTUAL ALLEGATIONS COMMON TO ALL COUNTS

A. The Investment Scheme Concocted by First Home Builders and D&W

18. FIRST HOME BUILDERS designs, builds and sells single-family homes, with an

emphasis on the "first-time" home-buying segment. It also provides mortgage financing, title

and settlement services to its homebuyers. In August 2005, Hovnanian Enterprises, Inc., a

leading national homebuilder and a publicly-traded company, purchased the assets (and assumed

certain liabilities ) of FIRST HOME BUILDERS , and formed HOVNANIAN for the purpose of

continuing the business of FIRST HOME BUILDERS. At the time of the acquisition, FIRST

HOME BUILDERS was the leading residential homebuilder in Lee County. FIRST HOME

BUILDERS presently holds itself out in written materials as "a K. Hovnanian Company."5

s See Exhibit "E" hereto.

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19. D&W is one of the largest real estate brokerage firms in Lee County. It offers a

variety of residential and commercial real estate brokerage services, including a "Lease To Own"

program for prospective home buyers with insufficient income and/or poor credit histories. A

"Lease To Own" house purchase is a lease combined with an option to purchase the property

within a specified period of time, usually three years or less, at an agreed-upon price. The buyer

pays an option fee, typically 1% to 5% of the price, which is then credited to the purchase price.

20. In 2003 , FIRST HOME BUILDERS and D&W (together with ROBB , LOGUE,

D'ALESSANDRO and CABRERA) devised a scheme--which was publicly touted by D&W as

being "the first and only one of its kind in Southwest Florida"--under which the two companies

would sell "pre-leased" new houses (to be constructed by FIRST HOME BUILDERS) in Cape

Coral and Lehigh Acres to low-to middle income persons eager for "double-digit" returns, which

these companies and their representatives later represented (both orally and in written materials)

would exceed 14% annually. The scheme was described in an article published in a Southwest

Florida real estate magazine. As described in the 2003 edition of Suite Life Magazine:

The concept involves selling leased-up, new houses to investorseager for double-digit returns, which D'Alessandro says couldexceed 16 percent annually. Here's how it works: Each year, FirstHomes gets tens of thousands of potential homebuyer leads throughits model centers, of which several thousand cannot qualify for amortgage. Those applicants will be recruited to rent homes built byFirst Homes and sold to investors through the D'Alessandro team.With prices of the turn-key homes starting at around $120,000,investors may opt to buy homes in packages of 5, 10, or 15. "Mostinvestors will put down 20% and mortgage the rest," saidD'Alessandro, noting that most returns will be tax-free because ofIRS-allowed depreciation. "That makes it a very nice investment forthem."

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21. In a October 2005 article published in Builder, a homebuilding trade publication,

Defendant ROBB (a former officer of FIRST HOME BUILDERS and current employee of

HOVANIAN) acknowledged the joint efforts of FIRST HOME BUILDERS and HOVNANIAN:

[First Home Builders], which was bought in August by HovnanianEnterprises, Inc, has partnered with investors to serve its first-tinehome-buyer market, says COO Bruce Robb.... As part of the effort,First Home Builders teamed up with a local real estate office tocreate an updated version of a lease-to-own program . Under thearrangement, the builder's investor clients have a buyer who willpurchase the home 12 or 24 months after closing, at a predeterminedprice. Or the investor can put the unit in a rental pool for customerswho want to buy but aren't quite ready because of credit issues.

(Emphasis supplied).

22. The above-described investment scheme began with the recruitment of potential

investors. During the Class Period, D&W, D'ALESSANDRO, and CABRERA scoured the

eastern seaboard of the United States looking for prospects, and put on "road shows" in several

states. The targeted investors were low-to-middle-income persons. The typical sales pitch made

by D&W, D'ALESSANDRO, and CABRERA was that a "ready-made" tenant procured through

the sole efforts of FIRST HOME BUILDERS and D&W would occupy a house built by FIRST

HOME BUILDERS immediately upon its completion, and would then rent and ultimately

purchase it outright from the investor, resulting in the promised 14% rate of return. The investor

would only be required to make a small down payment, and enter into a construction loan

agreement wherein FIRST HOME BUILDERS would pay interest on the loan until such time as

the house was completed. Once the house was completed, the investor, if qualified, would be

required to convert the interim construction financing to permanent financing. The investor was

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Case 2:07-cv-00343-JES- C Document 205 Filed 10/31/2008 of 49

assured that a tenant would be in place by the time the house was built and that other than the

minimal down payment for each house, he or she would not incur any other costs or expenses.

23. Defendants laid out the particulars of their scheme in an offering document given

to prospective investors in-person, at "road shows," and through the interstate mails. This

document--authored by Defendants D&W, D'ALESSANDRO and CABRERA (and approved by

FIRST HOME BUILDERS) guaranteed investors a fourteen percent (14%) annual rate of return

based upon the leasing and eventual re-sale of the properties to third parties, which would be

achieved solely through the efforts of FIRST HOME BUILDERS and D&W (and their

respective officers, employees, and affiliates, including the individual defendants herein). The

prospect of "ready-made" tenants and a guaranteed rate of return served to artificially inflate the

values of such properties, making them more profitable to sell than unoccupied properties. This

scheme was hatched by Defendants D'ALESSANDRO and CABRERA, on behalf of D&W, and

Defendants ROBB and LOGUE, on behalf of FIRST HOME BUILDERS. These defendants,

together with Defendant KREITNER, were active and direct participants in this sales scheme.

24. In furtherance of the above-described scheme, FIRST HOME BUILDERS, D&W,

D'ALESSANDRO, CABRERA, and KREITNER (and their respective officers, employees, and

affiliates) marketed, through the U.S. Mail, U.S. telephone lines and other instrumentalities of

interstate commerce, thousands of real estate investment properties to the Plaintiffs and other

prospective investors as part of a "common promotional plan," involving, inter alia, (a) the same

developer executing each contract of sale (i.e., FIRST HOME BUILDERS); (b) common sales

agents and sales facilities, (c) common advertising, (d) common marketing brochures, and (e)

common inventory. Further, in an effort to legitimize the various real estate transactions and

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create the false appearance that FIRST HOME BUILDERS stood behind the profit guarantees,

Defendant FIRST HOME BUILDERS authorized D&W, D'ALESSANDRO and CABRERA to:

(i) use its name in the Prospectus, and (ii) set up a satellite sales office in the same office

building as FIRST HOME BUILDERS, thereby leading prospective investors to believe that

when they were dealing with D&W, they were also dealing with FIRST HOME BUILDERS.

25. As described in further detail below, Plaintiffs and thousands of other investors

are now left holding the bag. Despite being promised "pre-leased" properties and a guaranteed

"double-digit" rate of return, with their only cash outlay being a modest down payment (typically

$5,000.00 or less), Plaintiffs soon discovered that not only were no actual tenants procured, but

they also were in default of the construction loans which FIRST HOME BUILDERS and D&W

had arranged and handled for them (and on which the property appraisals were inflated to ensure

that Plaintiffs qualified for the construction loans). And, as the scheme began unraveling, FIRST

HOME BUILDERS and ROBB continued to pressure Plaintiffs to obtain permanent financing by

painting an overly optimistic portrait of the Southwest Florida rental market. Due to this

fraudulent scheme, Plaintiffs now hold title to vacant properties which are worth substantially

less than the construction loans thereon and which cannot be rented for a reasonable amount. As

a result, Plaintiffs face the complete loss of their investment (including, but not limited to, their

initial down payment), the foreclosure of their investment properties, the prospect of a deficiency

judgment rendered against them in state court proceedings, and a severely damaged credit rating.

B. The Actionable Misrepresentations and Omissions Attributable to the Defendants

26. D&W, with the consent of FIRST HOME BUILDERS, acted on behalf of FIRST

HOME BUILDERS in procuring buyers for the numerous investment opportunities that FIRST

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HOME BUILDERS had on the market for sale in Cape Coral and Lehigh Acres, Florida. D&W

marketed these investment opportunities to persons located throughout the United States, and

representatives of D&W, including CABRERA, put on road shows for out- of-state investors.

27. In February 2005, KREITNER (acting on behalf of her employer, D&W, and as

an agent for FIRST HOME BUILDERS) faxed the Sewells a written offering document entitled

"First Home Lease Purchase Investment Opportunity" (hereinafter, the "Prospectus"), which

described an investment opportunity based upon the purchase, lease and re-sale of houses to be

built by FIRST HOME BUILDERS. (A copy of the Prospectus is attached hereto as Exhibit

"A"). The Prospectus was "prepared by" D'ALESSANDRO and CABRERA under the banner

of "D'Alessandro & Woodyard," and with the specific approval of FIRST HOME BUILDERS.

28. Pursuant to the Prospectus, a prospective investor (such as the SEWELLS and

countless others) would purchase a home being built by FIRST HOME BUILDERS in Cape

Coral or Lehigh Acres, Florida, and then immediately lease it to a tenant procured solely by

D&W and its affiliates, which would be followed by a re-sale to the "ready-made" tenant. The

Prospectus promised investors a 14% rate of return if they took advantage of this opportunity.

29. The Prospectus contains the following disclosures and representations regarding

the guaranteed rate of return and the procurement of tenants solely through the efforts of D&W:

• investors will purchase a home from First Home Builders. The homes will be

built in Cape Coral and Lehigh Acres, Florida."

• "The average price of the home is $210,000."

• D&W "will provide a tenant with a lease option contract."

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"The property will be managed by the Florida Gulf Coast Property

Management Division" of D&W.

"The property manager will manage the tenants, property, and document all

payments."

0 "Tenants give a deposit of $5,000 or more when they move into the property."

• "Investors will receive a gross return of 14% of the sales price of the home."

0 "The 14% is contractually agreed upon by the tenant before occupancy."

• "We will ensure that the rent will be based by an equation at a 1% spread

between the owners mortgage and the rent . A 2% fee will be charged by

[D&W] once the tenant purchases the property."

0 "The 14% is paid once the tenant refinances the home in their name, buying

the investor out of the deal."

(Ex. A, at p. 1). Attached to the Prospectus is a "Pro Forma Income Statement" which lists the

projected income, expenses, tax deductions, net income, and capital gains associated with each

lot. (Id.). The Pro Forma Income Statement shows how the 14% profit figure is achieved. (Id.).

30. The Prospectus further explains that investors will realize their guaranteed 14%

annual rate of return when the "ready-made" tenant procured by D&W buys the investor out of

the deal. In the section of the Prospectus entitled "Exit Strategy," D&W explains that this "buy-

out" is made possible through the tenant's successful procurement of refinancing in the "Sub-

prime" lending market, and that they will be "coached" in this process by D&W and its affiliates:

The 14% is paid once the tenant refinances the home in their name,buying the investor out of the deal. The refinance is possiblebecause Sub -prime lenders will allow a refinance on a propertywith 12 cancelled monthly checks for a lease payment. Tenants

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are preliminarily screened for credit, income, and debt analysis.They are coached on the process of the refinance and how toqualify in the upcoming year . The refinance will be applied for afterthe 12 months of occupancy. It takes 30-60 days for the mortgageapplication to be processed. If the tenant does not qualify to refinance,another 10% will be added to the already appreciated amount. This isthe premium added for the next 12 month extension. The tenants mustalways make their monthly payments on time and maintain the housein a satisfactory condition or they will risk loosing [sic] their depositand being evicted.

(Id.) (emphasis supplied)

31. The Prospectus was the template that was used by FIRST HOME BUILDERS and

D&W's sales representatives in marketing the "pre-leased" properties to prospective investors,

including the Plaintiffs. During a March 2005 meeting in Fort Myers, KREITNER orally

represented to the Sewells that, consistent with the representations contained in the Prospectus,

tenants would be procured by D&W prior to the completion of construction by FIRST HOME

BUILDERS, and that the Sewells had "nothing to worry about" in that regard. KREITNER

further represented to the Sewells that the rental payments were "assured," and that they would

receive a "double-digit" return on their investment. KREITNER also assured the Sewells that,

other than their initial down payment for each lot, they would incur no other costs or expenses.

She further stated that FIRST HOME BUILDERS would make all payments on the underlying

construction loan, and that the deposits received from tenants (who would be secured by D&W

prior to closing) would cover the SEWELL's closing costs, and that the rent received from the

tenants would cover the mortgage and all other expenses associated with the lot purchase.

32. Several months later, in September 2005, the Sewells received correspondence

from Defendant CABRERA, which included a proposed Exclusive Listing Agreement for the

"First Home Lease Purchase Investment Opportunity" program. (A copy of the Exclusive

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Listing Agreement is annexed hereto as Exhibit `B"). CABRERA's letter assured the Sewells

that "[w]e will not only place a tenant in your investment home, but we will assist in the sale

or new lease agreement, once your tenant reaches the end of their current lease." (Ex. B, at p. 1).

Further, the enclosed listing agreement re-affirmed D&W's promise that it would secure a tenant

for each purchased property "not later than 120 days prior to completion of the properties" and

that "a binding lease agreement would be in place" by such date. (Ex. B., at p. 2).

33. FIRST HOME BUILDERS made similar representations to the Eshkenazi

Plaintiffs. In December 2004, Reed Schweizer, a salesperson with FIRST HOME BUILDERS

(and the recipient of the "Rookie Salesperson of the Year" Award for 2004 from the National

Association of Homebuilders) orally represented to the Eshkenazi Plaintiffs during a meeting in

Fort Myers that: (a) tenants would be procured for each investment property through the efforts

of FIRST HOME BUILDERS (b) the Eshkenazis would receive a fourteen (14%) percent rate of

return on their investment based upon a tenant occupying, and then purchasing, the property; (c)

there would be no out-of-pocket cost the than the initial down payment; and (d) the tenant

procured by FIRST HOME BUILDERS would ultimately purchase the property from Plaintiffs.

34. The foregoing representations and disclosures made by the above-named

Defendants were materially false and misleading. To date, no tenant has been secured for any of

the purchased properties, despite Defendants' written and verbal assurances that a tenant would

be secured prior to closing. Nor have these Defendants made reasonable--or even adequate--

efforts to secure such tenants. As unsophisticated investors located hundreds of miles away from

the subject properties, Plaintiffs were completely dependent on Defendants' claimed ability to

procure tenants since Defendants were experienced real estate professionals who were familiar

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with the local housing market and had made "iron-clad" profit guarantees to Plaintiffs. And, as

result of Defendants' failure to procure tenants, Plaintiffs have yet to realize the rate of return

promised by Defendants and have suffered other damages as a result of this fraudulent scheme.

35. In addition, despite selling thousands of lots as part of a "common promotional

plan," neither FIRST HOME BUILDERS nor D&W filed a "Statement of Record" with the

Department of Housing and Urban Development ("HUD"), or provided Plaintiffs with a

"Property Report," as required by 15 U.S.C. § 1703 (a)(1)(A) & (B ). In addition , the purchase

agreements do not contain the "revocation" language mandated by 15 U.S.C. §§ 1703(b) & (c).

C. Plaintiffs Enter into Purchase Agreements Based Upon Defendants' False Promises

36. Based upon the foregoing written and oral representations, the Sewells purchased

three lots from FIRST HOME BUILDERS. The properties purchased are as follows:

Contract Date Real Property Legal Description7/15/05 3712 N.E.13th Place, Cape Coral, Florida7/15/05 125 Paddock Street, Lehigh Acres, Florida7/15/05 3216 S.W.12t'' Street, Lehigh Acres

Purchase Price$278,131.00$271,248.00$250,548.00

(The three purchase agreements are annexed to the original Complaint [D.E. 1] as Exhibits "C,"

"D" and "E," respectively). Although the written purchase agreements state that they were

"printed on" June 13, 2005, the agreements were not received or signed by the Sewells until July

15, 2005. The Sewells tendered a $5,000 contract deposit to FIRST HOME BUILDERS in

connection with each purchased property, which D&W represented would be the only monies

required to be paid. The Sewells were not represented by legal counsel during this process.

37. Similarly, based upon the foregoing representations, the other named Plaintiffs in

this action purchased the following investment properties from FIRST HOME BUILDERS:

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The average down payment for the above-listed investment properties was $750.00.

b) Moses Eshkenazi and Therese Eshkenazi:

Date Address of Real Property Purchase Price3/23/05 565 McArthur Boulevard, Lehigh Acres, Florida $188,410.009/29/06 1219 Fogia Street, Lehigh Acres, Florida $194,980.003/23/05 600 N.W. 30th Terrace, Cape Coral, Florida $218,410.003/23/05 3127 N.W. 17th Avenue, Cape Coral, Florida $220,879.00

The average down payment for the above-listed properties was $1,750.00. And, just as with the

Sewells, none of the Eshkenazi Plaintiffs were represented by counsel during this time-period.

38. The purchase agreements for each property required Plaintiffs to obtain interim

"construction financing" for the purpose of acquiring the property and constructing a home and

improvements thereon, and, then, upon completion of the home, to secure permanent mortgage

financing , or an "end-loan ," to, inter alia , pay off the interim construction financing loan.

39. Following the execution of the purchase agreements, FIRST HOME BUILDERS

(in the case of the Eshkenazi Plaintiffs) and D&W (in the case of the Sewell Plaintiffs) arranged

for the Plaintiffs to receive interim construction financing from their preferred lenders, which

included, among others, (a) First Florida Bank, (b) Construction Loan Company and (c) Norlarco

Credit Union. Plaintiffs had no direct dealings with any of these lending institutions or credit

union. All communications with the lender regarding the specifics of the construction loans

were handled solely by representatives and affiliates of FIRST HOME BUILDERS and D&W.

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40. Although the construction loans were ostensibly to be for the cost of construction,

the actual principal amount of each loan was approximately 100% of the full purchase price

(which necessarily included FIRST HOME BUILDERS' construction costs and sales profit). As

a result, the appraised value of each property securing the loan was artificially inflated.

41. Plaintiffs are unsophisticated investors with modest income and savings. The

amounts borrowed under the construction loans greatly exceeded the Plaintiffs' ability to satisfy

such indebtedness, but Plaintiffs were induced to enter into these loans based upon Defendants'

false and misleading assurances that (a) their total cash outlay would be limited to their initial

contract deposit, (b) FIRST HOME BUILDERS would make all loan payments during the course

of construction, and (c) that, upon completion of construction and procurement of an end-loan,

the rental payments received from tenants procured by FIRST HOME BUILDERS and/or D&W

would exceed any amounts that would otherwise be due and owing under the permanent loan.

42. Defendants FIRST HOME BUILDERS, D&W, D'ALESSANDRO, CABRERA

and KREITNER were fully aware that Plaintiffs and many other members of the prospective

class were not credit-worthy and represented a high risk of failure to obtain permanent financing.

43. Despite the obvious inability of Plaintiffs to satisfy construction loans of this

magnitude, FIRST HOME BUILDERS and D&W's "hand-picked" construction lender approved

Plaintiffs' various construction loan applications. Each construction loan had a one-year term.

E. Defendants' Attempt to Pressure Plaintiffs Into Obtaining Permanent Financing

44. In late 2006, Plaintiffs expressed concern that tenants had not yet been procured for

any of the purchased properties. Prior to this time, Plaintiffs had been led to believe that tenants

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were already procured (or would soon be procured). Given this untenable situation, the Plaintiffs

were reluctant to enter into permanent financing to replace the existing construction loans.

45. In response to this expressed concern, FIRST HOME BUILDERS (which, by

then, was a "K. Hovnanian Company") began pressuring Plaintiffs and other class members to

secure permanent financing. In correspondence sent to the Sewells and other investors in late

2006, Defendant ROBB (the Chief Operating Officer of FIRST HOME BUILDERS) reassured

investors that they had "made a good decision to purchase real estate in SW Florida ... [and]

that [e]ven with the recent market correction, real estate in SW Florida should provide an

attractive return if managed properly, especially when you consider your cash-on-cash return."

(A copy of Defendant ROBB 's form letter sent to investors is attached hereto as Exhibit "C").

46. In his letter to concerned investors (which was sent several months after the start

of the supposed downturn in the Florida real estate market), Defendant ROBB reiterated that,

despite the recent market correction, the demand for rental housing was still "very strong":

Be assured, the real estate market in SW Florida is based on solideconomic fundamentals. The in-migration of new residents is stillvery strong. The need for rental housing is strong and growing, jobgrowth has been very good, interest rates are still low, unemploymentis low compared to both state and federal numbers.... [S]everal wellinformed advisors tell us that Florida real estate is still a goodinvestment for the long run.

(See Exhibit "C" hereto) (Emphasis supplied). Defendant ROBB's letter makes clear that the

recent "correction" of the Florida real estate market would have little, if any, impact, on the

ability to procure tenants. Defendant ROBB's letter concludes by warning investors that their

failure to satisfy the construction loan and take delivery of their homes would place them in

default , which, in his opinion , would be "clearly inadvisable and completely unnecessary." (Id.).

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47. The Sewells have not obtained--and cannot qualify for--permanent mortgage

financing given their income and credit history. On October 31, 2006, HOVNANIAN (which,

by that date, had acquired the Sewells' purchase agreements from FIRST HOME BUILDERS)

declared the Sewells "in default" of their various purchase agreements with FIRST HOME

BUILDERS (now owned by HOVNANIAN) because they had not yet obtained an "end-loan."

48. Although the Eshkenazis have obtained permanent mortgage financing, they are

having tremendous difficulty meeting their obligations with respect to such loans because of

Defendants' failure to procure tenants, as promised.

49. As a result, the Plaintiffs risk losing their properties in foreclosure proceedings.

Many members of the alleged class, including the Sewells, are presently defendants in state court

foreclosure proceedings instituted by their construction lenders in the Lee County Circuit Court.

The mere pendency of such proceedings have caused severe damage to Plaintiffs' credit rating.

50. The damages suffered by Plaintiffs are not limited to the loss of their properties

and damage to their credit rating. They were promised a fourteen percent (14%) return on their

investment based upon the procurement of tenants by FIRST HOME BUILDERS and/or D&W.

Neither the promised tenants nor guaranteed profits materialized, despite Defendants' promises.

In addition, as result of Defendants' fraudulent conduct and misrepresentations (including the

false promise that they would procure tenants who would rent, and then purchase, the properties

outright from Plaintiffs), Plaintiffs paid an artificially inflated price for their properties and now

hold title to vacant property which is worth substantially less than the amount of the investment.

51. In addition, because Plaintiffs' construction loans were equal to the full sales

price, which incorporated the projected income stream, Plaintiffs are now "upside-down" on

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their loans. As a result, Plaintiffs' economic losses go well beyond just "lost profits" (i.e., the

14% guaranteed by Defendants). Such losses also necessarily include: (1) the amount by which

the purchase price exceeded the value of the unoccupied property; and (2) the amount by which

the artificially-inflated loan amount exceeded the value of the unoccupied property at the time of

purchase. In addition, Plaintiffs have also incurred substantial out-of-pocket expenses relating to

the acquisition and financing of their investment properties, including but not limited to: (a) their

initial contract deposits, (b) closing costs, (c) financing costs, (d) real property taxes paid or

required to be paid to the Lee County taxing authorities; and (e) legal fees and related costs.

52. The fraudulent investment scheme perpetrated by FIRST HOME BUILDERS and

D&W has also led to the collapse of several credit unions, including Norlarco Credit Union and

Huron River Area Credit Union, which funded thousands of construction loans for purchasers of

properties from FIRST HOME BUILDERS during the Class Period. Both of the above-named

credit unions have been taken over by the National Credit Union Association because of bad debt

emanating from their construction loans to customers of FIRST HOME BUILDERS. An August

25, 2007 article published in the Fort Myers News-Press, as well as a September 18, 2007 article

by The Coloradoan.com, provide further details concerning the collapse of these credit unions

resulting from the questionable loans generated from FIRST HOME BUILDERS (and brokered

by D&W). See D. Hogan, Michigan Credit Union Collapses From Loans Like Norlarco's, Fort

Myers News-Press, Aug. 25, 2007; Broker in Florida with Ties to Norlarco Found Dead From

Accidental Drowning, Coloradoan.com, Sept. 18, 2007 (www.coloradoan.com/norlarco).

53. All conditions precedent to bringing this action have occurred or have been

performed.

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CLASS ALLEGATIONS

54. The Plaintiffs bring this action on behalf of a class of all other persons or entities

similarly situated, pursuant to Rule 23 of the Federal Rules of Civil Procedure. The proposed

class is defined to include:

All persons who purchased one or more real properties for investmentpurposes from FIRST HOME BUILDERS in either Cape Coral orLehigh Acres, Florida between September 1, 2003 and December 31,2006 (the "Class Period"), based upon representations made by FIRSTHOME BUILDERS or any of its agents, including, but not limited tothe real estate brokerage firm of D'Alessandro & Woodyard, Inc., that:(a) investors would receive a fourteen percent (14%) return on theirinvestment based upon a tenant occupying, and then ultimatelypurchasing, the property; (b) the tenants for each property would beprocured solely through the efforts and expertise of FIRST HOMEBUILDERS and/or D'ALESSANDRO and WOODYARD (and/ortheir respective affiliates or co-brokers); and (c) no cash outlay wouldbe required from investors other than the initial down payment.

55. During the Class Period, FIRST HOME BUILDERS, D&W and their respective

agents, representatives and affiliates (including other brokerage firms which acted as referring

brokers) made the following representations to prospective investors, including Plaintiffs in an

effort to induce them to purchase one or more lots from FIRST HOME BUILDERS:

a) that tenants would be provided for each property purchased;

b) that investors would receive a fourteen percent (14%) rate of return on

each investment property based upon a tenant occupying, and then purchasing, the property;

c) that no cash outlay would be required other than the initial down payment;

d) that FIRST HOME BUILDERS and/or D&W would take care of

everything, including, but not limited to, the procurement of tenants through their sole efforts.

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56. These representations were made by agents and representatives of FIRST HOME

BUILDERS and D&W to advance a common scheme to defraud, which was to sell real property

to investors based upon assurances that a tenant would be procured solely through the efforts of

scheme's promoters, and that investors would make "double-digit" returns with very little money

down or future cash outlay required. Plaintiffs and other members of the alleged class relied on

these representations in purchasing investment properties from FIRST HOME BUILDERS.

57. There are questions of law and fact that are common to all members of the

purported class, which questions predominate over any question affecting only individual class

members.

58. The principal common issues include the following:

a) whether Defendants violated the federal securities laws byinducing purported class members to purchase investmentproperties from FIRST HOME BUILDERS based upon falseand misleading representations contained in the Prospectus andin oral communications with the Plaintiffs and class members;

b) whether Defendants violated the Interstate Land Sales FullDisclosure Act by inducing purported class members topurchase investment properties from FIRST HOMEBUILDERS based upon false and misleading representationscontained in the Prospectus and in oral communications;

c) whether Defendants violated Section 1703(a)(1)(A) of theInterstate Land Sales Full Disclosure Act by failing to file astatement of record with the Department of Housing and UrbanDevelopment ("HUD") in accordance with 15 U.S.C. § 1706prior to selling lots to prospective investors;

d) whether Defendants violated Section 1703 (a)(1)(B) of theInterstate Land Sales Full Disclosure Act by failing to furnishprospective investors with a printed property report meeting therequirements of 15 U.S.C. §1707 prior to entering into apurchase agreement with such investors for the sale of a lot;

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f) whether Defendants D&W and FIRST HOME BUILDERSbreached their contractual obligations to purported classmembers failing to obtain tenants for the purchased properties.

59. In this case, there is no question as to the identification of class members because

the class is comprised of all persons who purchased real estate investment properties from FIRST

HOME BUILDERS in Cape Coral, Florida or Lehigh Acres, Florida between September 1, 2003

and December 31, 2005, based upon representations made by FIRST HOME BUILDERS or any

of its agents, including, but not limited to, D&W, guaranteeing investors a specified rate of

return and promising to provide investors with tenants for such properties upon the completion of

construction.

60. The claims of the Plaintiffs are typical of the claims of all the members of the

purported class because all claims are based on the same legal and remedial theories.

61. The Plaintiffs will fairly and adequately protect the interests of all purported class

members in the prosecution of this action and in the administration of all matters relating to the

claims stated herein. The Plaintiffs are similarly situated with, and have suffered similar injuries

as, the members of the purported class that they seek to represent. The Plaintiffs feel that they

have been wronged, wish to obtain redress of the wrong and want the defendants stopped from

reaping ill-gotten gains. To that end, Plaintiffs have retained counsel experienced in class action

cases and trial work in general. Neither the Plaintiffs, nor counsel, have any interest that may

cause them not to vigorously pursue this action.

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62. A class action is superior to other available methods for the fair and efficient

adjudication of this controversy because:

a) the individual class members are not all aware that they have beenwronged and are thus unable to prosecute individual actions;

b) concentration of the litigation concerning this matter in this Courtis desirable;

c) the claims of the representative plaintiffs are typical of the claimsof the members of the purported class;

d) a failure of justice will result from the absence of a class action;

e) the purported class and the difficulties likely to be encountered inthe management of this class action are not great.

63. The purported class is so numerous as to make it impracticable to join all

members of the class as plaintiffs. Upon information and belief, there are potentially thousands

of persons and entities who purchased real estate investment properties in Lehigh Acres, Florida

and Cape Coral, Florida from FIRST HOME BUILDERS during the Class Period based upon the

foregoing misrepresentations (which were uniformly made to all prospective investors), and then

financed the acquisition of such properties through interim construction loans arranged by FIRST

HOME BUILDERS and D&W. Many class members, who are from all over the state of Florida

and from various states within the United States, may not even be aware of the extent of

Defendants' wrongdoing and the amount in controversy would be too small to justify the

expense of individual litigation in the state of Florida. In contrast, on a class-wide basis,

Defendants have reaped huge monetary gains through their unlawful acts and omissions.

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(HOVNANIAN, FIRST HOME BUILDERS, D&W and GDW)

64. Plaintiffs repeat and reallege their allegations contained in Paragraphs 1 through

63 above as if fully set forth herein.

65. The foregoing purchase agreements (and the properties represented thereby) are in

the nature of a "investment contract," and, hence, are considered a "security" subject to the

federal securities laws because: (1) there was an "investment" of money by the Plaintiffs (who

did not intend to occupy the properties, but, rather, purchased solely for investment purposes),

(2) there was a "common enterprise," namely, the dependency on the efforts and expertise of

FIRST HOME BUILDERS and D&W in procuring tenants; and (3) the expectation of profits

derived solely from the efforts of others, namely, FIRST HOME BUILDERS and D&W.

66. Defendant FIRST HOME BUILDERS is a "seller" within the meaning of Section

12(a)(2) of the Securities Act, 15 U.S.C. § 771(a)(2), because title in the subject real estate investment

properties was passed directly from FIRST HOME BUILDERS to the Plaintiffs and/or because FIRST

HOME BUILDERS solicited Plaintiffs' purchase of the subject real estate investment opportunities.

Defendant HOVNANIAN is also a "seller" within the meaning of the above-cited statute because it

is the successor-in-interest to FIRST HOME BUILDERS and because title in many of the subject

real estate investment properties was passed directly from HOVANIAN to prospective class members.

67. Defendant D&W is a "seller" within the meaning of Section 12(a)(2) of the

Securities Act, 15 U.S.C. § 771(a)(2), because it solicited Plaintiffs ' purchase of the subject securities.

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68. The document entitled "First Home Lease Purchase Investment Opportunity"--in

which investors were offered a 14% guaranteed return on their investment based upon the

procurement of tenants by the Defendants--qualifies as a "prospectus" within the meaning of

Section 2(a)(10) of the 1933 Act, which broadly defines "prospectus" to mean "any prospectus,

notice, circular, advertisement, letter or communication, written or by radio or television, which

offers any security for sale or confirms the sale of any security ." 15 U.S.C. § 77b(a)(10).

69. Each of the above-named Defendants, directly and indirectly, by use of the means

or instruments of transportation or communication in interstate commerce and by the use of the

mails, have offered to sell or sold a security by means of a prospectus or oral communication,

which included untrue statements of material facts and omissions of material facts necessary to

make the statements made, in the light of the circumstances under which they were made, not

misleading.

70. This was a public offering because Plaintiffs are among the class of persons that

need the protections of the securities registration process. As unsophisticated investors located

hundreds of miles away from the subject properties, Plaintiffs were completely dependent upon

Defendants' understanding of the local real estate market, property management expertise, and

claimed ability to attract tenants. Plaintiffs had no access to any financial information about this

particular investment, other than a three-page written document promising them a 14% profit.

Under these circumstances, and especially since the Defendants were promising a specific rate of

return based upon the procurement of tenants in a specific local market (with which the Plaintiffs

were unfamiliar), Defendants should have been required to furnish investors with a registration

statement containing detailed disclosures as to how the promised returns would be achieved.

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71. By reason of the foregoing , the above-named Defendants have directly and

indirectly, violated Section 12 (a)(2) of the Securities Act, 15 U.S.C. § 771(a)(2).

72. Plaintiffs and the purported class they seek to represent have suffered damages as a

result of the Defendants ' violations of Section 12(a)(2) of the Securities Act.

COUNT II

CONTROLLING PERSON LIABILITY UNDERSECTION 15(A) OF THE SECURITIES ACT

(D'ALESSANDRO, CABRERA, ROBB and LOGUE)

73. Plaintiffs repeat and reallege their allegations contained in Paragraphs 1-63 and

65-71 above as if fully set forth herein.

74. By reason of the foregoing, D&W and FIRST HOME BUILDERS have directly

or indirectly violated Section 12(a)(2) of the Securities Act, 15 U.S.C. § 771(a)(2).

75. By virtue of their top-level executive positions within D&W, Defendants

D'ALESSANDRO and CABRERA had the power to control or influence the actions of D&W.

As top-level executives and controlling persons of D&W, Defendants D'ALESSANDRO and

CABRERA knew of and/or recklessly disregarded the alleged misrepresentations made by

D&W.

76. By virtue of their top-level executive positions within FIRST HOME

BUILDERS, Defendants ROBB and LOGUE had the power to control or influence the actions of

FIRST HOME BUILDERS. And, as top-level executives and controlling persons of FIRST

HOME BUILDERS, Defendants ROBB and LOGUE knew of and/or recklessly disregarded the

alleged misrepresentations and omissions attributable to FIRST HOME BUILDERS.

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77. Defendants D'ALESSANDRO, CABRERA, ROBB and LOGUE were culpable

participants in the fraudulent scheme described herein and caused their companies to engage in

the acts and omissions which give rise to liability under Section 12(a)(2) of the Securities Act.

78. Accordingly , Defendants D'ALESSANDRO and CABRERA are "controlling

persons" of D&W within the meaning of Section 15(a) of the Exchange Act, 15 U.S.C. § 77(o).

79. Similarly, Defendants ROBB and LOGUE are "controlling persons" of FIRST

HOME BUILDERS in accordance with Section 15 (a) of the Exchange Act, 15 U.S.C. § 77(o).


result of Defendants' violation of Section 15(a) of the Securities Act.

MITNT III

FRAUD IN VIOLATION OF SECTION 10(b) OF THEEXCHANGE ACT AND RULE 10b-5

(FIRST HOME BUILDERS, HOVNANIAN,D&W, GDW, D'ALESSANDRO, CABRERA, KREITNER,

LOGUE and ROBB)

81. Plaintiffs repeat and reallege their allegations contained in Paragraphs 1-63 & 65-


82. Section 10(b) of the Exchange Act prohibits conduct that is either "manipulative

or deceptive." Specifically, § 10(b) makes it unlawful for any person directly or indirectly:

[t]o use or employ, in connection with the purchase or sale of anysecurity ... any manipulative or deceptive device or contrivance incontravention of such rules and regulations as the [Securities andExchange] Commission may prescribe as necessary or appropriate inthe public interest or for the protection of investors."

15 U.S.C. 78j(b) (emphasis supplied)

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83. Rule 10b-5, promulgated by the Securities and Exchange Commission pursuant to

the authority of Section 10(b), provides that it is unlawful for any person directly or indirectly:

(a) To employ any device , scheme or artifice to defraud;

(b) To make any untrue statement of material fact or to omit to state a material

fact necessary in order to make the statements made, in the light of the circumstances under

which they were made, not misleading; or

(c) To engage in any act, practice, or course of business which operates or

would operate as a fraud or deceit upon any person, in connection with the purchase or sale of

any security.

84. Rule lOb-5 contains three separate subparagraphs, only one of which requires

"misstatements" or "omissions" as a predicate for liability. As subparagraphs (a) and (c) plainly

state, Rule lOb-5 liability is not restricted solely to isolated misrepresentations or omissions; it

may also be predicated on a "practice, or course of business which operates as a fraud." In

violation of subsections (a) and (c) of Rule lOb-5, Defendants FIRST HOME BUILDERS,

D&W, D'ALESSANDRO, CABRERA, ROBB and LOGUE have directly and indirectly, by

use of the means and instrumentality of interstate commerce, and of the mails in connection with

the purchase or sale of securities, as described in this Amended Complaint, knowingly, willfully

and/or recklessly (a) employed devices, schemes or artifices to defraud, and/or (c) engaged in acts,

practices and courses of business which have operated as a fraud upon purchasers of such securities.

85. Specifically, FIRST HOME BUILDERS and D&W (together with their respective

principals, ROBB, LOGUE, D'ALESSANDRO and CABRERA) devised a scheme through

which vacant lots in Cape Coral and Lehigh Acres would be marketed and sold as "tenant-

occupied" and generating "double-digit" returns based upon the tenant (procured through the

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sole efforts of D&W and FIRST HOME BUILDERS) initially renting and then purchasing the

property from the initial investor. The above-named Defendants were the masterminds of this

scheme, and engaged in deceptive conduct which had the principal purpose and effect of creating

a false appearance of fact in furtherance of a scheme to defraud. For example, FIRST HOME

BUILDERS referred prospective tenants to D&W, thereby enabling D&W, D'ALESSANDRO,

CABRERA and KREITNER to falsely claim to prospective investors, including the Sewells, that

there was a sizeable pool of prospective tenants who were ready, willing and able to lease the

properties. Further, in an effort to "legitimize" these transactions and create the false appearance

that FIRST HOME BUILDERS stood behind the profit guarantees, FIRST HOME BUILDERS

authorized D&W to: (1) use its name in the Prospectus, and (2) set up a sales office in the same



86. The above-named Defendants are also liable under subparagraph (b) of Rule lOb-5

because they made specific misstatements of material fact in order to induce the Plaintiffs to

purchase the various real estate investments. Specifically, in violation of subsection (b) of Rule

10(b)-5, and as alleged above with greater particularity, Defendants FIRST HOME BUILDERS,

D&W, GDW, D'ALESSANDRO, CABRERA and KREITNER fraudulently induced the Plaintiffs

and other members of the prospective class they seek to represent to purchase real estate investment

properties in Lehigh Acres, Florida and Cape Coral, Florida by making the following misstatements:


b) that investors would receive a fourteen percent (14%) rate of return oneach investment property based upon a tenant occupying, and then purchasing, the property;

c) that no cash outlay would be required other than the initial down payment;and

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d) that FIRST HOME BUILDERS and/or D&W would take care ofeverything, including, but not limited to, the procurement of tenants through their sole efforts.

87. The foregoing statements were misleading because, less than three months after

unqualifiedly representing to the Sewells that they would have tenants in place by the time the

various properties were completed (which representation induced Plaintiffs to purchase several

lots), Defendants sent the Sewells a proposed "Exclusive Listing Agreement" which stated that

it would take up to 40 months to find a tenant for each property. (Exhibit `B"). To date, no

tenant has been secured for any of the purchased properties, despite Defendants' written and

verbal assurances that a tenant would be secured prior to closing. And, as a result of Defendants'

failure to procure tenants, Plaintiffs have yet to realize the rate of return promised by Defendants.

88. The above-named Defendants acted with scienter, as evidenced by the following:

(a) their severe recklessness in guaranteeing rentals and profitability to

unsophisticated investors with respect to a speculative real estate investment;

(b) the artificially-inflated purchase price associated with each lot, which

resulted from the guaranteed income stream and profit being factored into the purchase price;

(c) the Exclusive Listing Agreement (which purported to give Defendants up

to 40 months to find a tenant, when they had previously represented to Plaintiffs that a tenant

would be provided not later than the date that Plaintiffs took delivery of their properties);

(d) Defendants' failure to file a "Statement of Record" with the Department of

Housing and Urban Development ("HUD"), as required by 15 U.S.C. § 1703(a)(1)(A);

(e) Defendants' failure to furnish Plaintiffs and other class members with a

"Property Report" meeting the requirements of 15 U.S.C. §1707(a) prior to entering into

agreements with Plaintiffs and other class members , as required by 15 U.S.C. § 1703(a)(1)(B);

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(f) the inflated loan amount associated with each construction loan;

(g) Defendants' failure to register the securities; and

(h) Defendants' motive and personal financial gain (as alleged in further detail

below).

89. FIRST HOME BUILDERS (and its successor , HOVNANIAN) have profited

greatly from the sale of properties to Plaintiffs through the fraudulent scheme and representations

described above, and stand to profit again when it is paid for the construction of improvements

on the various investment properties sold to Plaintiffs and other putative class members. As the

"Seller" denoted on each Purchase Agreement , FIRST HOME BUILDERS (and its successor,

HOVNANIAN, which has assumed performance of all the agreements ) received the full contract

price and the proceeds of all construction loans. The fraudulent scheme and misrepresentations

described herein has resulted in unprecedented profits for FIRST HOME BUILDERS during the

Class Period. For example, FIRST HOME BUILDERS reported 5,038 gross home sales in 2004,

nearly doubling its 2003 annual sales. Further, as of July 31, 2005, FIRST HOME BUILDERS

had approximately 4,350 homes in contract backlog with a related sales value of $925 million.

90. D&W and GDW have likewise profited from the sale of properties by First Home

Builders to Plaintiffs and other purported class members they seek to represent as a result of the

fraudulent representations described above by receiving commissions and/or fees from said sales.

91. D'ALESSANDRO has profited from the sale of properties by First Home

Builders to Plaintiffs and other purported class members they seek to represent as a result of the


92. CABRERA has profited from the fraudulent sale of the various properties to

Plaintiffs and the other class members by receiving commissions on the sale of the properties

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and/or receiving fees and/or commissions through the procurement of financing for the Plaintiffs

through Primary Mortgage Funding of which he is a principal and/or an officer and agent.

93. KREITNER has profited from the sale of properties by First Home Builders to

Plaintiffs and the other purported class members they seek to represent as a result of the


94. The sales proceeds received by FIRST HOME BUILDERS and HOVNANIAN,

and commissions received by D&W, GDW, D'ALESSANDRO, CABRERA and KREITNER

were much higher than in typical real estate transactions because the purchase price for each lot

purchased by the Plaintiffs was artificially inflated to reflect the projected income stream

generated by the promised rental of each property and the subsequent purchase thereof by the

procured tenant. In addition, Defendants ROBB and LOGUE reaped a windfall when they sold

the assets of FIRST HOME BUILDERS to HOVNANIAN in 2005, at a time when the company

had produced unprecedented sales due, in large part, to the fraudulent scheme described above.

Thus, ROBB and LOGUE sold the company for considerably more than what it was truly worth.

95. The above-described misstatements were material because, without them,

Plaintiffs would not have purchased the investment properties from FIRST HOME BUILDERS.

The procurement of tenants by FIRST HOME BUILDERS and D&W--and related income

stream generated thereby (through rental and eventual purchase)--was critical to Plaintiffs'

investment decision. Indeed, the material inducement for this investment was Defendants'

promise to procure tenants, manage the properties, establish and collect rent, and "coach" the

tenants into qualifying for a mortgage so that they could eventually buy these properties from

Plaintiffs. This was not a typical real estate investment where Plaintiffs were expecting to go

out into the marketplace and "flip" their properties to an unknown third-party. Instead, their

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promised profit was tied to the immediate procurement of a tenant, followed by several years of

rental income and the eventual sale of the property to the tenant at a predetermined price.

96. Plaintiffs and the other purported class members reasonably and justifiably relied

on the foregoing representations in deciding to purchase the properties for investment purposes.

97. By reason of the foregoing, the above Defendants have directly or indirectly

violated Section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and Rule 10b-5, 17 C.F.R. § 240.


result of Defendants' violation of Section 10(b) of the Exchange Act and Rule lOb-5 thereunder.

COUNT IV

CONTROLLING PERSON LIABILITY UNDERSECTION 20(A) OF THE EXCHANGE ACT

(D'ALESSANDRO, CABRERA, ROBB and LOGUE)

99. Plaintiffs repeat and reallege their allegations contained in Paragraphs 1-63, 65-70,

and 82-97 above as if fully set forth herein.

100. By reason of the foregoing, D&W and FIRST HOME BUILDERS have directly

or indirectly violated Section 10 (b) of the Exchange Act, 15 U.S.C. § 78j(1), and Rule lOb-5

promulgated thereunder , 17 C.F.R. §240.

101. By virtue of their top-level executive positions within D&W, Defendants

D'ALESSANDRO and CABRERA are "controlling persons" of D&W within the meaning of

Section 20 ( a) of the Exchange Act, 15 U.S.C. § 78t(a), and, further, caused it to engage in the

acts and omissions of D&W that violated Section 10(b) and Rule lOb-5of the Exchange Act. As

"controlling persons" of D&W, Defendants D'ALESSANDRO and CABRERA knew of or

recklessly disregarded the alleged misrepresentations made by D&W (as described above).

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102. By virtue of their top-level executive positions within FIRST HOME

BUILDERS , Defendants ROBB and LOGUE are "controlling persons" of FIRST HOME

BUILDERS within the meaning of Section 20(a) of the Exchange Act, 15 U.S.C . § 78t(a), and,

further, caused it to engage in the acts and omissions that violated Section 10 (b) and Rule lOb-5

of the Exchange Act. As top-level executives and "controlling persons" of FIRST HOME

BUILDERS , Defendants ROBB and LOGUE knew of or recklessly disregarded the alleged

material misrepresentations and omissions attributable to FIRST HOME BUILDERS.


result of Defendants' violation of Section 20(a) of the Exchange Act.

COUNT V

VIOLATION OF SECTION 1703(a)(1)(A) & (B) OF THEINTERSTATE LAND SALES FULL DISCLOSURE ACT

(FIRST HOME BUILDERS, HOVNANIAN,D&W, GDW, D'ALESSANDRO, KREITNER

CABRERA, ROBB and LOGUE)

104. Plaintiffs repeat and reallege their allegations contained in Paragraphs 1-63 above

as if fully set forth herein.

105. The Interstate Land Sales Full Disclosure Act ("ILSA" ) makes it unlawful for a

developer or agent to use interstate commerce or the mails to sell or lease any nonexempt lot

unless a "statement of record" with respect to such lot is on file with the Department of Housing

and Urban Development ("HUD"). See 15 U.S.C. § 1703(a)(1)(A). The "statement of record"

must set out certain factual information deemed necessary for the protection of potential buyers,

such as details regarding the identity and financing of the developer and anyone having an

interest in the land and the condition of the title to the property. See 15 U.S.C. §§ 1704 & 1705.

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106. The ILSA also makes it unlawful for the developer (and its agents) to sell or lease

any nonexempt lot unless a printed "property report" meeting the requirements of 15 U.S.C.

§ 1707(a) is furnished to prospective purchasers or lessees in advance of the signing of any

contract or agreement by such purchaser or lessee. See 15 U.S.C. § 1703(a)(1)(B).

107. These disclosure requirements ensure that a buyer, prior to purchasing certain

types of real estate, is informed of the facts which will enable him to make an informed decision

about purchasing the property, and to prohibit and punish fraud in land development enterprises.

108. Section 1709 of the ILSA establishes a civil remedy in favor of purchasers of land

against developers and agents who fail to comply with the foregoing disclosure requirements.

109. The various properties purchased by Plaintiffs were at all material times subject

to, and governed by, ILSA, including the registration and disclosure requirements thereunder.

Defendants never attempted to qualify (or otherwise qualified) for any exemption permitted

under ILSA. Although it was Plaintiffs' intention to eventually sell the properties to a tenant

procured solely through the efforts of FIRST HOME BUILDERS or D&W (and/or their

respective officers, employees, and affiliates), none of the Plaintiffs are engaged in a bona fide

land sales business or sell property in the normal course of business, with any continuity,

regularity, or permanency, or as a means of livelihood.

110. FIRST HOME BUILDERS is a "developer" within the meaning of §1701(4) of

the ILSA since it directly or indirectly sold or offered to sell, or advertised for sale, more than

100 undeveloped lots through the U.S. Mail, U.S. telephone lines, and other instrumentalities of

interstate commerce as part of a "common promotional plan," as defined by Section 1701(4) of

ILSA, involving: (a) the same developer executing each contract of sale (i.e., FIRST HOME

37LAW OFFICES



BUILDERS); (b) common sales agents and sales facilities, (c) common advertising, (d) common

marketing brochures, and (e) common inventory. The properties purchased by Plaintiffs are

among the lots sold by FIRST HOME BUILDERS as part of the common promotional plan.

111. HOVNANAN, in turn, became a "developer" within the meaning of § 1701(4) of

the ILSA when it acquired the various purchase agreements between FIRST HOME BUILDERS

and Plaintiffs . These agreements became assets of HOVNANIAN when it acquired all of the

assets (and certain liabilities) of FIRST HOME BUILDERS in August 2005. Since FIRST

HOME BUILDERS is listed as the "seller" on each purchase agreement, then, by virtue of its

acquisition thereof, HOVANIAN replaced FIRST HOME BUILDERS as the "seller" under each

agreement. This is further evidenced by an October 31, 2006 letter sent by HOVANIAN to the

Sewells, declaring them "in default" of the purchase agreement since they had not yet obtained

an "end-loan ." HOVNANIAN would not be taking that position unless it believed that it was,

indeed, the "seller." That letter evinces HOVNANIAN' s belief that it was performing the

agreements entered into between FIRST HOME BUILDERS and Plaintiffs. That is sufficient to

qualify it as a "developer" for purposes of ILSA. In addition , HOVANIAN is liable for all of

First Home Builders' ILSA violations pursuant to common law principles of successor liability.

112. Defendants D&W, D'ALESSANDRO, CABRERA, and KREITNER acted as

"agents" of FIRST HOME BUILDERS in connection with the sale and offer of sale of such lots.

113. The above-named Defendants failed to comply with ILSA's mandatory disclosure

regime in several material respects . First , in violation of 15 U.S.C. § 1703 (a)(1)(A), the above-

named Defendants failed to file a "statement of record" with HUD concerning the lots that were

marketed and sold to Plaintiffs and other putative class members. Second , in violation of 15

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U.S.C. § 1703(a)(1)(B), the above-named Defendants failed to provide Plaintiffs with a printed

"property report" meeting the requirements of 15 U.S.C. § 1707(a) prior to inducing them to

enter into one or more purchase agreements with FIRST HOME BUILDERS. Third , in violation

of 15 U.S.C. § 1703(b), the above-named Defendants failed to include in the purchase agreement

contractual language stating that if the printed property report was not provided to the purchaser,

the purchaser could revoke the purchase agreement within seven (7) days of signing. Fourth , in

violation of 15 U.S.C. § 1703(c), the above-named Defendants failed to include in the purchase

agreement contractual language stating that if the property report was not provided to the

purchaser, the purchase agreement may be revoked by the purchaser within two years of signing.

114. By reason of the foregoing, FIRST HOME BUILDERS (and, through principles

of successor liability, HOVNANIAN) and D&W (and, through principles of successor liability,

GDW) have directly or indirectly violated Section 1703(a)(1)(A) & (B), (b) and (c) of the ILSA.

115. As top-level executives of FIRST HOME BUILDERS and one of the

participating planners of the alleged fraudulent scheme, Defendants ROBB and LOGUE are

individually liable for any violations of ILSA committed by FIRST HOME BUILDERS.

116. As a top-level executive of D&W and one of the participating planners of the

alleged fraudulent investment scheme, Defendant D'ALESSANDRO is individually liable for

any violations of ILSA's disclosure requirements committed by D&W.

117. Likewise, as a one of the participating planners of the alleged fraudulent

investment scheme--indeed, he was one of the scheme's "masterminds"--Defendant CABRERA

is individually liable for any violations of ILSA's disclosure requirements committed by D&W.

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118. By virtue of the foregoing, the purchase agreements at issue are voidable at the

absolute and unconditional election of the Plaintiffs pursuant to ILSA. In addition, Plaintiffs

have suffered damages as a result of Defendants' violation of Section 1703(a)(1)(A) & (B) of ILSA.

COUNT VI

FRAUD IN VIOLATION OF SECTION 1703(a)(2)(A)-(C) OFTHE INTERSTATE LAND SALES FULL DISCLOSURE ACT

(FIRST HOME BUILDERS, HOVNANIAN,D&W, GDW, D'ALESSANDRO, CABRERA,

KREITNER, ROBB and LOGUE)

119. Plaintiffs repeat and reallege their allegations contained in Paragraphs 1-63, 88-96

& 105-117 above as if fully set forth herein.

120. This is an action pursuant to Section 1709 of the Interstate Land Sales Full

Disclosure Act, 15 U.S.C. § 1709, which creates a civil remedy in favor of purchasers of land

against developers and their agents who violate the Act's requirements, including by, inter alia,

making any untrue statements or omissions of material fact in connection with the sale of land.

121. Each of the above-named Defendants have directly and indirectly, by use of

the means or instruments of interstate commerce or communications in interstate commerce

and of the mails, in connection with the sale or offer to sell any lot, (a) employed devices, schemes

or artifices to defraud; (b) made untrue statements of material facts and omitted to state material

facts necessary in order to make the statements made, in light of the circumstances under

which they were made and within the context of the overall offer and sale, not misleading with

respect to any information pertinent to the lot or subdivision; and/or (c) engaged in acts, practices and

courses of business which have operated as a fraud upon Plaintiffs and other alleged class members.

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122. Specifically, FIRST HOME BUILDERS and D&W (together with their respective

principals, ROBB, LOGUE, D'ALESSANDRO and CABRERA) devised a scheme through

which vacant lots would be marketed and sold as "tenant-occupied" and generating "double-

digit" returns based upon the tenant initially occupying and then purchasing the constructed

property from the initial investor. The above-named Defendants were the masterminds of this

scheme, and engaged in deceptive conduct which had the principal purpose and effect of creating

a false appearance of fact in furtherance of a scheme to defraud. For example, FIRST HOME

BUILDERS referred prospective tenants to D&W, thereby enabling D&W, D'ALESSANDRO,

CABRERA and KREITNER to falsely claim to prospective investors, including the Sewells, that

there was a sizeable pool of prospective tenants who were ready, willing and able to lease the

properties. Further, in an effort to "legitimize" these transactions and create the false appearance

that FIRST HOME BUILDERS stood behind the profit guarantees, FIRST HOME BUILDERS

authorized D&W to: (1) use its name in the Prospectus, and (2) set up a sales office in the same



123. Further, by failing to comply with Section 1703(a)(1)(A) & (B), (b) and (c) of the

ILSA, and otherwise attempting to circumvent ILSA's disclosure and registration requirements,

the above-named Defendants "employed a device, scheme, and artifice to defraud," in violation

of 15 U.S.C. § 1703(a)(2)(A) of the ILSA , and "obtained money or property by means of any

untrue statement of a material fact, or any omission to state a material fact necessary in order to

make the statements made (in light of the circumstances in which they were made and within the

41LAW OFFICES



context of the overall offer and sale or lease) not misleading, with respect to any information

pertinent to the lot or subdivision," in n violation of 15 U.S.C. § 1703 (a)(2)(B) of the ILSA.

124. In addition, Defendants FIRST HOME BUILDERS, D&W, D'ALESSANDRO,

CABRERA and KREITNER fraudulently induced Plaintiffs and other members of the prospective

class they seek to represent to purchase various real estate investment properties in Lehigh Acres,

Florida and Cape Coral, Florida by making the following misrepresentations and false statements:


b) that investors would receive a fourteen percent (14%) rate of return oneach investment property based upon a tenant occupying, and then purchasing, the property;

andc) that no cash outlay would be required other than the initial down payment;

d) that FIRST HOME BUILDERS and/or D&W would take care ofeverything, including, but not limited to, the procurement of tenants through their sole efforts.

125. At the time they made these representations, each of the above-named Defendants

knew that they would be unable to timely procure tenants for the properties. This is evidenced

by, inter alia, the fact that less three months after unqualifiedly representing that they would have

tenants in place by the time the various properties were completed (which representation induced

Plaintiffs to purchase several lots), Defendants sent Plaintiffs an "Exclusive Listing Agreement"

which stated that it would take up to 40 months to find a tenant for each property. (Exhibit `B").

126. The above-described misstatements were material because, without them,

Plaintiffs would not have purchased the investment properties from FIRST HOME BUILDERS.

The procurement of tenants by FIRST HOME BUILDERS and D&W--and related income

stream generated by such tenants (through rental and eventual purchase)--was critical to

Plaintiffs' investment decision. Indeed, the material inducement for this investment was

42LAW OFFICES



Defendants' promise to procure tenants, manage the properties, establish and collect rent, and

"coach" the tenants into qualifying for a mortgage so that they could eventually buy these

properties from Plaintiffs. This was not a typical real estate investment where Plaintiffs were

expecting to go out into the marketplace after their purchase and "flip" their properties to an

unknown third-party. Instead, their profit was tied to the immediate procurement of a tenant,

followed by several years of rental income and the eventual sale of the property to the tenant

127. Plaintiffs and the other purported class members reasonably and justifiably relied

on the foregoing representations in deciding to purchase the properties for investment purposes.

128. By reason of the foregoing, the above-named Defendants have directly or

indirectly violated Section 1703 (a)(2) of the ILSA, 15 U.S.C. § 1703(a)(2).

129. As top-level executives of FIRST HOME BUILDERS and one of the

participating planners of the alleged fraudulent scheme, Defendants ROBB and LOGUE are

individually liable for any violations of ILSA committed by FIRST HOME BUILDERS.

130. As a top-level executive of D&W and one of the participating planners of the

alleged fraudulent investment scheme, Defendant D'ALESSANDRO is individually liable for

any violations of ILSA's disclosure requirements committed by D&W.

131. Likewise, as a one of the participating planners of the alleged fraudulent

investment scheme--indeed, he was one of the scheme's "masterminds"--Defendant CABRERA

is individually liable for any violations of ILSA's disclosure requirements committed by D&W.

132. Plaintiffs and the class they seek to represent have suffered damages as a result of

Defendants' violation of Section 1703(a)(2) of the Interstate Land Sales Full Disclosure Act.

43LAW OFFICES


(FIRST HOME BUILDERS, HOVNANIAN, D&W and GDW)

133. Plaintiffs repeat and reallege their allegations contained in Paragraphs 1 through


134. FIRST HOME BUILDERS and D&W offered Plaintiffs and other class members

an opportunity to purchase investment property as part of the "First Home Lease Purchase

Investment Opportunity" program offered by D&W for FIRST HOME BUILDERS' benefit.

135. Plaintiffs and the other class members accepted the offers of FIRST HOME

BUILDERS and D&W by entering into agreements for the purchase of the various properties.

136. Plaintiffs and the other class members paid consideration pursuant to the terms of

the various contracts.

137. FIRST HOME BUILDERS and D&W breached their contractual promise to

provide Plaintiffs and other class members with (a) a guaranteed tenant; (b) a 14% annual rate of

return; and (c) no out-of-pocket expenses other than their initial contract deposit on the property.

138. As a consequence of the foregoing, Plaintiffs and the members of the purported

class they seek to represent have suffered substantial damages, including, but not limited to, the

complete loss of their investment, the possible foreclosure of their investment property and the

prospect of a deficiency judgment rendered against them in state court proceedings.

44LAW OFFICES


(FIRST HOME BUILDERS, HOVNANIAN, D&W and GDW)

139. Plaintiffs repeat and reallege their allegations contained in Paragraphs 1-63 and

134-137 above as if fully set forth herein.

140. Defendants' actions also constitute a breach of the implied duty of good faith and

fair dealing inherent in every contract by failing to use good faith and best efforts to procure

tenants to rent (and then purchase) the various properties that Plaintiffs and other class members

had purchased as part of the First Home Lease Purchase Investment Opportunity" program.

141. As a consequence of the foregoing, Plaintiffs and the other members of the

purported class they seek to represent have suffered substantial damages, including, but not

limited to, the complete loss of their investment, the foreclosure of their investment property and

the prospect of a deficiency judgment rendered against them in state court proceedings.

COUNT IX

DECEPTIVE AND UNFAIR TRADE PRACTICES

(All Defendants)

142. Plaintiffs repeat and reallege their allegations contained in Paragraphs 1-63 above

as if fully set forth herein.

143. The foregoing conduct also constitutes a violation of the Florida Deceptive and

Unfair Trade Practices Act (the "FDUTPA"), Florida Statutes, § 501.201 et seq.. Defendants'

scheme to sell real estate based upon their false and fraudulent promises constitutes unfair or

45LAW OFFICES



deceptive acts or practices in the conduct of any trade or commerce. Such practices are likely to

mislead the consumer acting reasonably in the circumstances, to the consumer's detriment.

144. Defendants' above-described conduct was willful because they knew or should

have known that their conduct was unfair or deceptive or otherwise prohibited by statute or rule.

145. Plaintiffs and other class members they purport to represent have been damaged

as a result of Defendants' unlawful and deceptive trade practices.

WHEREFORE, Plaintiffs and the purported class demand the following relief:

a) that the Court certify the case as a class action and appoint the Plaintiffs as

class representatives and Plaintiffs' counsel as class counsel;

b) that judgment be entered against Defendants in the amount of their

damages incurred with interest thereon, including reasonable attorneys' fees and costs; and

c) that this Court order such other relief as it deems just and proper,

including, but not limited to, rescission of the subject purchase agreements and restitution of all

out-of-pocket expenditures incurred by Plaintiffs and other members of the purported class.

Respectfully submitted,

BECKER & POLIAKOFF, P.A.Attorneys for PlaintiffsP.O. Box 9057Fort Lauderdale, FL 33310-9057(954) 987-7550, telephone(954) 985-4176, facsimile

By: s/ Daniel L. WallachGary C. RosenFlorida Bar No. 310107Daniel L. WallachFlorida Bar No. 540277

46LAW OFFICES



CERTIFICATE OF SERVICE

I hereby certify that on October 31, 2008, I electronically filed the foregoing document

with the Clerk of the Court using CM/ECF. I also certify that the foregoing document and the

notice of electronic filing is being served this day on all counsel of record or pro se parties

identified on the Service List below in the manner specified, either via transmission of Notices of

Electronic Filing generated by CM/ECF or in some other authorized manner for those counsel or

parties who are not authorized to receive electronically Notices of Electronic Filing.

BECKER & POLIAKOFF. P.A.

By: s/ Daniel L. WallachDaniel L. WallachFlorida Bar No. 540277

47LAW OFFICES



SERVICE LIST

Robert W. Turken, Esq.Bilzin Sumberg Baena Price & Axelrod, LLPSuite 2500200 S Biscayne BlvdMiami, FL 33131-5340Phone: 305/350-2352Fax: 305/351-2221Email: [email protected] for K. Hovnanian First Homes, LLC

Philip J. SnyderburnSnyderburn, Rishoi & SwannSte 420258 Southhall LnMaitland, FL 32751Phone: 407/647-2005Fax: 407/647-1522Email: [email protected] for D'Alessandro & Woodyard, Inc.and Frank D'Alessandro

Charles WachterGianluca MorelloPerdita MartinFowler White Boggs Banker P.A.501 East Kennedy BoulevardTampa, Florida 33602Phone: 813/769-7867Fax: 813/229-8313Email: [email protected] , [email protected] , [email protected] for FHBF Partners, LLP and First Home Builders Of Florida I, LLC

Ronald L . BuschbomConroy, Simberg, Ganon, Krevans Abel,

Lurvey, Morrow & Schefer, P.A.4315 Metro Parkway, Suite 250Ft. Myers, FL 33916Phone: 239/337-1101Fax: 239/334-3383Email: [email protected] for Honora Kreitner

48LAW OFFICES



Jon D. Parrish, Esq.Parrish, Lawhon & Yarnell, P.A.3431 Pine Ridge Road, Suite 101Naples, FL 34109Phone: 239/566-2031Fax: 239/566-9561Email: [email protected] for Gates D'Alessandro & Woodyard, LLC

Barry A. PostmanAllison S. BernsteinCole, Scott & Kissane, P.A.1645 Palm Beach Lakes Blvd.2"d FloorWest Palm Beach, FL 33401Phone: 561/383-9234Fax: 561/683-8977Email: [email protected] , [email protected] for Samir Cabrera

Steven Douglas Knox, Esq.Ronald Sturgis Holliday, Esq.DLA Piper Rudnick Gray Cary US, LLP101 E. Kennedy Blvd.Suite 2000Tampa, Florida 33602-5148Phone: 813/229-2211Email: [email protected] for Bruce A. Robb

Robert J. Pratte, Esq.DLA Piper Rudnick Gray Cary US, LLP90 South Seventh StreetSuite 5100Minneapolis, Minnesota 55402Email: [email protected] for Bruce A. Robb

FTL DB: 11521751

49LAW OFFICES


Document 205-2 Filed 10/31/2008 Page 1 of 4

First home Lease PurchaseInvestment Opportunity

Presented by:Samir Cabrera

Frank D'Alessandro(239) 425-6000

[email protected]

EXHIBIT "A"


First Home Lease Purchase .Investment Opportunity

Investment

Investors will purchase a home from First Home builders. The homes wilt be built in Cape Coraland Lehigh Acres Florida. The home, on average, is a 3 bedroom, 2 bath, den, 2 car garage, witha lanai. The average price for the home is $210,000. This includes an additional amount equalto 3.5% of the sales price for closing costs. The D'Alessandro and Woodyard team will providea tenant with a lease option contract. The property will be managed by the Florida Gulf CoastGroup Property Management Division. The property manager will manage the tenants, property,and document all payments. Tenants give a'deposit of $5,000. or more when they move into theproperty. That deposit will be credited towards the profits paid after the 12 months ofoccupancy. The deposit will be forfeited if the tenant defaults on their contract.

Return

Investors will receive a gross return of 14% of the sales price of the home . The 14% iscontractually agreed upon by the tenant before occupancy . The monthly lease payment by thetenant will be estimated based on the sales price minus the deposit, at..a 7 . 5% interest only rate.An additional $ 175. per month will be charged for taxes and insurance . The Actual Rate will bedetermined 60 days before CO. We will ensure that the rent will be based by an equation at aI % spread between the owners mortgage and the rent . A 2% fee will be charged byD'Alessandro & Woodyard, Inc. once the tenant purchases the property.

Exit Strategy

The 14% is paid once the tenant refinances the home in their name, buying the investor out of thedeal. The refinance is possible because Sub-Prime lenders will allow a refinance on a propertywith 12 cancelled monthly checks for a lease payment. Tenants are preliminarily screened forcredit, income, and debt analysis. They are coached on the process of the refinance and how toqualify in the upcoming year. The refinance will be applied for after the 12 months ofoccupancy. It takes 30-60 days for the mortgage application to be processed. If the tenant doesnot qualify to refinance, another 10% will be added to the already appreciated amount. This isthe premium added for the next 12 month extension. The tenant must always make theirmonthly payments on time and maintain the house in a satisfactory condition or they will riskloosing their deposit and being evicted.

Filed 10/31/2008 Page 3 of 4

Pro Forma

Gross Income$20,428. Annually

ExpensesDebt Service $15 ,313. Annually(Based on an adjustable interest only payment of 7%)

Taxes & Insurance $2,100. Annually

Management $1,451. Annually(10% oflncome)

Total $18,864. Annually

Tax Deduction

$1,702. Monthly

$1,276. Monthly

$175. Monthly

$145. Monthly

$1,572. Monthly

$210,000. - $40,000. depreciated by 27.5 years = $6,181.

Net Income$1,564. Annually $130. Monthly

Capital GainAverage Sales Price with Closing Cost $218,750.

Capital Gain 14% Appreciation $30,625.

01'6k "A'teS^S ocument 205-2 Filed 10/31/2008 Page 4 of 4

&WO..O.dY.a rCOMMERCIAL REALTORS'

Investment ExampleBased on 4 homes

Average Sales Price $210,000.X4 = $875,000.

Possible Capital Gain $ 30,625. X 4 = $122,500.Based on 14% of sales price

Income $ 1 ,564. X 4 = $ 6,256.

Total $128,756.

Document 205-3 Filed 10/31/2008 Page 1 of.7

September 21, 2005

Randolph George Sewell782 Hawthorne TerrWeston, Florida 33327

Re: Exclusive Listing Agreement for Lease Purchase ProgramProperty: 3216 12th St. SW

Lehigh Acres, Florida

Dear Randolph:

Enclosed please find an Exclusive Listing Agreement for the Residential Lease with PurchaseOption Program. D'Alessandro & Woodyard, Inc., Commercial Realtors is proud to representyou and we strive to bring the top dollar to our clients.

We will not only place a tenant in your investment home , but we will assist in the sale or newlease agreement , once your tenant reaches the end of their current lease,

Please review the Agreement and if the same meets with your approval , please execute bothoriginals and return them to my office for completion in the self- addressed envelope which wehave provided for your convenience . Once the Agreement is fully executed , we will provide toyou one of the originals for your records.

Thank you for the opportunity to assist you with your investment properties and we look forwardto a long standing relationship,

Sincerely,

Samir CabreraTransaction Specialist

IsmgEnclosurescc: Honora Kreitner

ExHIBIT "B" 7800 University Pointe DriveSuite 100Fort Myers, Florida 33907Office: (239) 425-6000Fax: (239) 425-6001www, DW-CR.com


EXCLUSIVE LISTING AGREEMENT

Residential Lease with Purchase OptionProgram

This Listing. Agreement is made the . . day of , 2005, by and betweenD'Alessandro & Woodyard, Inc., a Florida corporation (hereinafter "Broker"), and Randolph GeorgeSewell and Daphne E. S WglJ , (hereinafter the "Owner").

Broker, in conjunction with one or more home builders in Southwest Florida (hereinafter the "Builder"), hasdeveloped a program for real estate investors were by the investor will purchase a home, either completeor nearly complete or pursuant to a contract with the Builder for purchase of a lot and construction of 'ahome on the lot (hereinafter the "Home". After purchase by Owner of the lot or Home, Broker locatesprospective tenants for the Home, (hereinafter the "Tenant") who are interested in leasing the Home for aperiod of one or two years while establishing credit, and thereafter purchase the Home if suitablefinancing is available pursuant to an option right (hereinafter the "Option"). The Tenant may initiallyexecute and deliver for Owner's written acceptance a reservation expressing the Tenant's interest in theHome (hereinafter the "Reservation"). Approximately 120 days before the anticipated completion of theOwner and Tenant enter into a lease agreement outlining the basic lease terms, including the Option,(hereinafter the "Lease").

1. In consideration of Broker's agreement to list and to use Broker's efforts to secure a Tenant for theproperty described as:

3216 12th St. SW

Lehigh Acres, FloridaOwner hereby gives Broker for a period of forty (40) months, the sole right and authority to find a Tenantfor the above described property at the following price and terms, or at any other price and termsacceptable to Owner:

Lease: A term of 12 months at a monthly rental rate equal to 7,5% per annum of the purchase priceunder the Option, divided by 12; plus $175.00 for taxes and insurance. The term may be extended for anadditional 12 month period by the Tenant with an increase in the rent calculated on the forgoing basisfrom the revised Option purchase price. Tenant shall pay a deposit upon execution of the Lease of$5,000.00.

Option: The Lease shall include an Option to purchase the Home at a price equal to the acquisition costto the Owner of the Home increased by 14% per annum to the end of the initial lease term, In the eventthe Lease is extended , then the Option purchase price shall increase to equal the prior Option purchaseprice increased by 10% per annum to the end of the extension term.

Sale: in the event the Home is not purchased by the Tenant pursuant to the Option, the Price shall equalthe last established Option purchase price.

The transaction shall be a cash purchase from Owner, and on terms as are customary for residentialsingle family homes in Lee County, Florida. Interest In encumbrances, taxes, Insurance and rents shallbe adjusted prorata at dale of closing. Improvement liens are to be paid by Owner.

Ira It us.mn am upe= pr*$I I m"I.,, wrw. SM pi.rwa.d, n,:sar+iI a.m MifW* mrSAW to der s., loan, ,Mmtrm gar pne. c .sp wNhat nobc..

7800 University Pointe Dt*ve3ults 100, Sewed FloorFort Myers, FL 33907Phone: (259)425.6000Fa* (239)425-6001www.VW-CR.com

Case 2:07-cv-00343-J S-SPC Document 205-3 Filed 10/31/2008 Page 3 of 7

2. In case Broker secures a Tenant for the property, the usual and customary practice for theexamination and for closing the transaction shall apply. Owner agrees to deliver to the Tenant a goodand marketable title free and clear of all liens and encumbrances and chattels except encumbrances ofrecord which would not customarily render the title uninsurable by a title insurance company doingbusiness in Lee County, Florida, and those which the Tenant shall assume as part of the purchase priceand which are specifically detailed above.

3. For finding a Tenant or other purchaser for the above property:A. Owner agrees to pay Broker a fee of two percent (2%) of the gross sales price of the Home.B. The fee is to be paid whether,the Tenant or other purchaser is secured by Broker or Owner, or by

any other person at the price and upon the terms mentioned or at any other price acceptable toOwner; or if the property Is afterwards sold within six (6) months from the termination of thisagency, to a Tenant or other purchaser to whom It was submitted by Broker, or a cooperatingbroker during the continuance of the agency, and whose name has been disclosed to Owner.

C. In any exchange of the property, permission is given Broker to represent and receive brokers feefrom both parties.

D. The fee is earned in the event of a sale to a Tenant upon presentation to the Owner of aReservation by a Tenant, who thereafter executes a Lease and exercises the Option andpurchases the Home on the terms outlined above or otherwise acceptable to Owner. In the eventOwner withdraws the Home from the program or refuses to execute and deliver the Reservation,Lease or any other closing or other document reasonably related to consummation of thetransactions contemplated hereby, the fee shall be paid immediately in such event based uponthe highest possible amount of the fee calculable hereunder. In all other events the fee is earnedupon presentation of an offer to purchase on the terms described herein by a bone fidepurchaser, who may the Broker or any affiliate or principal of Broker, and shall be paid uponclosing, or the failure of Owner to accept the offer or the default of Owner upon any contractaccepted by Owner. P

E. Owner acknowledges that Broker may receive a fee under a separate arrangement with theBuilder in the sale by Builder to Owner of the Home or lot and construction package. Owneracknowledges that Broker shall act as a transaction broker in such purchase by Owner and in thesubsequent lease and/or re-sale of the Home.

4. In consideration of this exclusive listing, Broker agrees:A. To direct the concentrated efforts of Broker's organization in bringing about a lease and/or sale.B. To advertise the Home as Broker deem advisable , and use Broker ' s established methods of

locating prospective Tenants.

5. In consideration of the above, Owner agrees:A. To refer to Broker all inquiries of brokers or others interested in my property.B. To indemnify Broker and hold harmless from losses, damages, costs and expenses of any nature,

including attorney's fees , and from liability to any person, that Broker incurs because of (1)Owner's negligence, representation, misrepresentation, actions or inactions, (2) the existence ofundisclosed material facts about the properly or (3) a court or arbitration decision that a brokerwho was not compensated In connection with a transaction is entitled to compensation fromBroker. This clause will survive Broker's performance and the transfer of title.

0. To make all legally required disclosures, including all facts that materially affect the Property'svalue and are not readily observable or known by the buyer, Owner certifies and represents thatOwner knows of no such material facts (local government building code violations, unobservabledefects, etc.) other than the following:Owner will promptly disclose any such matters arising or becoming known hereafter.

6. As Owner's agent, Broker is authorized to accept, receipt for and hold all money paid or deposited as abinder thereon and if such deposit shall be forfeited by the prospective Tenant, Broker may retain suchdeposit provided that Broker locates a replacement therefore before the expected Lease commencement


date. If such deposit shall be forfeited by any other prospective purchaser, Broker may retain one half ofsuch deposit, but not exceeding the total amount of Broker's fee as compensation.

7. Owner understands that this agreement does not guarantee the lease or sale of the Home, but that Itdoes guarantee that Broker will make an earnest and continued effort to lease and/or sell same until thisagreement Is terminated. At Qwner's request, Broker may agree to conditionally terminate thisagreement. if Broker agrees to conditional termination, Owner must sign a withdrawal agreement,reimburse Broker for all direct expenses incurred in marketing the property, or if a fee has been earnedbut not yet paid, pay the fee. Broker may void the conditional termination and Owner will pay the feestated In paragraph 3A Jess any fee already paid if Owner transfers or contracts to transfer the property orany interest to the property during the time period from the date of conditional termination to the datewhich would otherwise have been the termination date hereof plus the six month protection period, ifapplicable.

8. This Agreement will be construed under Florida law. All controversies, claims and other matters Inquestion between the parties arising out of or relating to this agreement or the breach thereof will besettled by first attempting mediation under the rules of the American Mediation Association or othermediator agreed upon by the parties. If litigation arises out of this agreement, the prevailing party will beentitled to recover reasonable attorney's fees and costs, unless the parties agree that disputes will besettled by arbitration as follows:

Arbitration: By initialing in the spaces provided, Owner (j) ( ), Listing Associate ( ) andListing Broker (_) agree that disputes not resolved by mediation will be settled by neutral bindingarbitration in the county in which the property Is located in accordance with the rules of the AmericanArbitration Association or other arbitrator agreed upon by the parties. Each party to any arbitration orlitigation (including appeals and interpleader(s) will pay its own fees, costs and expenses, includingattorney's fees and will equally split the arbitrator's fees and administrative fees of arbitration.

9. This agreement is binding on Broker's and Owner's heirs, personal representatives, administrators,successors and assigns. Broker may assign this agreement to another listing office. Signatures, initialsand modifications communicated by facsimile will be considered originals. The terms "tenant" or "buyer"as used in this agreement includes buyers, tenants, exchangers, optionees and other categories ofpotential or actual transferees.

10, This listing agreement shall commence on the last date signed by a party below and terminate on thedate which is the same day of the calendar month 40 calendar months thereafter, unless the Home isunder contract at that time, in which event this agreement shall continue in effect until the contractedtransaction is closed or otherwise terminates,

(Owner) Randolph George Sewell (Date)

(listing Agent) Honora Kreitner (Date)

(Owner) Daphne E. Sewell

(Broker) Frank D'Alessandro


EXCLUSIVE LISTING AGREEMENT

Residential Lease with Purchase Option Program

This Listing Agreement is made the day of , 2005, by and betweenD'Alessandro & Woodyard , inc., a Florida corporation (hereinafter "Broker"), and Randolph GeorgeSewell and Daphne E. Sewell , (hereinafter the "Owner").

Broker, in conjunction with one or more home builders in Southwest Florida (hereinafter the "Builder"), hasdeveloped a program for real estate investors were by the investor will purchase a home, either completeor nearly complete or pursuant to a contract with the Builder for purchase of a lot and construction of ahome on the lot (hereinafter the "Home". After purchase by Owner of the lot or Home, Broker locatesprospective tenants for the Home, (hereinafter the "Tenant") who are interested in leasing the Home for aperiod of one or two years while establishing credit, and thereafter purchase the Home if suitablefinancing is available pursuant to an option right (hereinafter the "Option"). The Tenant may initiallyexecute and deliver for Owner's written acceptance a reservation expressing the Tenant's interest in theHome (hereinafter the "Reservation"). Approximately 120 days before the anticipated completion of theOwner and Tenant enter into a lease agreement outlining the basic lease terms, including the Option,(hereinafter the "Lease").

1. In consideration of Broker's agreement to list and to use Broker's efforts to secure a Tenant for theproperty described as:

3216 12th St. SW

Lehigh Acres , FloridaOwner hereby gives Broker for a period of forty (40) months, the sole right and authority to find a Tenantfor the above described property at the following price and terms, or at any other price and termsacceptable to Owner:

Lease: A term of 12 months at a monthly rental rate equal to 7.5% per annum of the purchase priceunder the Option, divided by 12; plus $175.00 for taxes and insurance. The term may be extended for anadditional 12 month period by the Tenant with an increase in the rent calculated on the forgoing basisfrom the revised Option purchase price. Tenant shall pay a deposit upon execution of the Lease of$5,000.00.

Option: The Lease shall include an Option to purchase the Home at a price equal to the acquisition costto the Owner of the Horne increased by 14% per annum to the end of the initial lease term. In the eventthe Lease is extended, then the Option purchase price shall increase to equal the prior Option purchaseprice increased by 10% per annum to the end of the extension term.

Sale: In the event the Home is not purchased by the Tenant pursuant to the Option, the Price shall equalthe last established Option purchase price.

The transaction shall be a cash purchase from Owner, and on terms as are customary for residentialsingle family homes in Lee County, Florida. Interest In encumbrances, taxes, Insurance and rents shallbe adjusted prorala at date of closing. Improvement liens are to be paid by Owner.

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7800 UMvenft Points DriveSuits 100, Second FloorFort Myers, FL 33907Phone: (239) 425.600 0Fa1C (239) 425.6001www.DW-CR.com


2. In case Broker secures a Tenant for the property, the usual and customary practice for theexamination and for closing the transaction shall apply. Owner agrees to deliver to the Tenant a goodand marketable title free and clear of all liens and encumbrances and chattels except encumbrances ofrecord which would not customarily render the title uninsurable by a title insurance company doingbusiness in Lee County, Florida, and those which the Tenant shall assume as part of the purchase priceand which are specifically detailed above.

3, For finding a Tenant or other purchaser for the above property:A. Owner agrees to pay Broker a fee of two percent (2%) of the gross sales price of the Home.B. The fee is to be paid whether the Tenant or other purchaser is secured by Broker or owner, or by

any other person at the price and upon the terms mentioned or at any other price acceptable toOwner; or If the property Is afterwards sold within six (6) months from the termination of thisagency, to a Tenant or other purchaser to whom It was submitted by Broker, or a cooperatingbroker during. the continuance of the agency, and whose name has been disclosed to Owner.

C. In any exchange of the property, permission is given Broker to represent and receive brokers feefrom both parties.

D. The fee is earned in the event of a sale to a Tenant upon presentation to the Owner of aReservation by a Tenant, who thereafter executes a Lease and exercises the Option andpurchases the Home on the terms outlined above or otherwise acceptable to Owner, in the eventOwner withdraws the Home from the program or refuses to execute and deliver the Reservation,Lease or any other closing or other document reasonably related to consummation of thetransactions contemplated hereby, the fee shall be paid immediately in such event based uponthe highest possible amount of the fee calculable hereunder. In all other events the fee is earnedupon presentation of an offer to purchase on the terms described herein by a bone fidepurchaser, who may the Broker or any affiliate or principal of Broker, and shall be paid uponclosing, or the failure of Owner to accept the offer or the default of Owner upon any contractaccepted by Owner.

E. Owner acknowledges that Broker may receive a fee under a separate arrangement with theBuilder in the sale by Builder to Owner of the Home or lot and construction package. Owneracknowledges that Broker shall act as a transaction broker in such purchase by Owner and in thesubsequent lease and/or re-sale of the Home.

4. In consideration of this exclusive listing, Broker agrees:A. To direct the concentrated efforts of Broker's organization in bringing about a lease and/or sale.B. To advertise the Home as Broker deem advisable, and use Broker's established methods of

locating prospective Tenants.

5. In consideration of the above, Owner agrees:A. To refer to Broker all inquiries of brokers or others interested in my property.B. To indemnify Broker and hold harmless from losses, damages, costs and expenses of any nature,

including attorney's fees, and from liability to any person, that Broker incurs because of (1)Owner's negligence, representation, misrepresentation, actions or inactions, (2) the existence ofundisclosed material facts about the property or (3) a court or arbitration decision that a brokerwho was not compensated In connection with a transaction Is entitled to compensation fromBroker. This clause will survive Broker's performance and the transfer of title.

C. To make all legally required disclosures, including all facts that materially affect the Property'svalue and are not readily observable or known by the buyer. Owner certifies and represents thatOwner knows of no such material facts (local government building code violations, unobservabledefects, etc.) other than the following:Owner will promptly disclose any such matters arising or becoming known hereafter.

6. As Owner's agent, Broker is authorized to accept, receipt for and hold all money paid or deposited as abinder thereon and if such deposit shall be forfeited by the prospective Tenant, Broker may retain suchdeposit provided that Broker locates a replacement therefore before the expected Lease commencement


date. If such deposit shall be forfeited by any other prospective purchaser, Broker may retain one half ofsuch deposit, but not exceeding the total amount of Broker's fee as compensation.

7. Owner understands that this agreement does not guarantee the lease or sale of the Home, but that Itdoes guarantee that Broker will make an earnest and continued effort to lease and/or sell same until thisagreement Is terminated. At Owner's request, Broker may agree to conditionally terminate thisagreement. If Broker agrees to conditional termination, Owner must sign a withdrawal agreement,reimburse Broker for all direct expenses incurred in marketing the property, or if a fee has been earnedbut not yet paid, pay the fee. Broker may void the conditior:al termination and Owner will pay the feestated In paragraph 3A less any fee already paid if Owner transfers or contracts to transfer the property orany interest in the property during the time period from the date of conditional termination to the datewhich would otherwise have been the termination date hereof plus the six month protection period, ifapplicable.

8. This Agreement will be construed under Florida law. All controversies, claims and other matters Inquestion between the parties arising out of or relating to this agreement or the breach thereof will besettled by first attempting mediation under the rules of the American Mediation Association or othermediator agreed upon by the parties. If litigation arises out of this agreement, the prevailing party will beentitled to recover reasonable attorney's fees and costs, unless the parties agree that disputes will besettled by arbitration as follows:

Arbitration: By initialing in the spaces provided, Owner { ' ( ), Listing Associate ( ) andListing Broker ( ) agree that disputes not resolved by mediation will be settled by neutral bindingarbitration in the county in which the property Is located in accordance with the rules of the AmericanArbitration Association or other arbitrator agreed upon by the parties. Each party to any arbitration orlitigation (including appeals and interpleader(s) will pay its own fees, costs and expenses, includingattorney's fees and will equally split the arbitrator's fees and administrative fees of arbitration.

9. This agreement is binding on Broker's and Owner's heirs, personal representatives, administrators,successors and assigns. Broker may assign this agreement to another listing office. Signatures, initialsand modifications communicated by facsimile will be considered originals. The terms "tenant" or "buyer"as used in this agreement includes buyers, tenants, exchangers, optionees and other categories ofpotential or actual transferees.

10. This listing agreement shall commence on the last date signed by a party below and terminate on thedate which is the same day of the calendar month 40 calendar months thereafter, unless the Home isunder contract at that time, in which event this agreement shall continue in effect until the contractedtransaction is closed-br otherwise terminates.

(Owner) Randolph George Sewell (Date) (Owner) Daphne B . Sewell

(Listing Agent) Honora Kreitner ( Date) (Broker) Frank D'Alessandro

ase 2:07-cv-00343-J S-S Filed 10/31/2008 Page 1 of 1CFirst Horne Builders or Florida

2503 Del Prado Blvd. Suile #300

Cape Coral, F!, 33904 Lima

RANDOLPH SEWELL 11/21/06

782 HAWTHORN TER

WESTON , FL. 33327

RE: 12174

3216 12TH ST SW

Dear RANDOLPH SEWELL,

You made a good decision to purchase real estate in SW Florida. I'm sure you made an informed decision and yourealized that an investment in real estate should always be considered a long-term investment. Many buyers acquired realestate to diversify their investment portfolio and I assume you are one of those buyers. There are many advantages andbenefits to real estate investments and we were happy to assist you to secure this property. Even with the recent marketcorrection, real estate in SW Florida should provide an attractive return if managed properly, especially when you consideryour cash-on-cash return.

Be assured, the real estate market in SW Florida is still based on solid economic fundamentals. The in-migration ofnew residents is still very strong. The need for rental housing is strong and growing, job growth has been very good,interest rates are still low, unemployment is low compared to both state and federal numb?rs. The weather here is stillgreat, there are still no income taxes and several well informed advisors tell us that Florida real estate is still a goodinvestment for the long run.

On 05110/2005 you purchased a lot and a home from First Home Builders. At that time you signed mortgage papersthat were recorded at the courthouse and you took title to the property. You have been the owner of record since thatdate. You also have a contract with First Home Builders to build a home for you.

I understand that you may have expressed concern about completing your transaction to one of our staff members. As.mentioned above, you do already own the property. It would be quite problematic to try to stop the process now. The bestoption, and the option agreed to by contract, would be to fully complete the transaction, To complete the transaction youmust satisfy your construction loan and take delivery of the home. At that point you can move in, rent the home, sell thehome, place it in a lease-to-own program or anything else that you choose. Failure to satisfy the construction loan wouldresult in a default with both the construction lender and First Home guilders of Florida. The consequences of a defaultwould be material and are clearly inadvisable and completely unnecessary.

It is our recommendation that you complete the project that you have started. In sure you will thoughtfully analyze thefacts and choose the most effective exit strategy for the future. .

If you have any questions please call Patti Biato at (239) 673-3155

Respectfully.

r e A. Robbhief Operating Officer

k

:' Mark C. AndersonFowler, While, Boggs BankerAttorneys at Law2201 Second Street, 5th floorFt. Myers, FL 33901

yp:s DEL. PitADO E3OULrVARD. SwITE 300. CAIN[ CORAL. Fi. 33904

EXHIBIT "C"

1^1N^^+.IIN571lOnaF.RV^LUr.RS.Cpnd 1 239.458.8000

New Home Builder - K. Hovnanian® HomesTM: Press Releases : First Home Builders Page l of 2

' Case 2:07-cv-00343-J S-SPC Document 205-5 Filed 10/31/2008 Page 1 of 2

Press ReleasesI PreYious I back to listing I Next

Hovnanian Enterprises Acquires First Home Builders OfFloridaAugust 8, 2005

Hovnanian Enterprises, Inc., a leading national homebuilder, announced today that itacquired the assets of First Home Builders of Florida, a privately held homebuilder andprovider of related financial services headquartered in Cape Coral, Florida, for anundisclosed purchase price paid in cash. First Home Builders is a leading builder inWestern Florida and ranked 1st in the greater Fort Myers-Cape Coral market and 51stnationally based on 2004 permit activity as tracked by Builder Magazine. Thus theacquisition provides Hovnanian with the number one market position in the high growth FortMyers-Cape Coral market, which is the 18th largest housing market in the U.S. as rankedby Builder Magazine based on 2004 permits.

First Home Builders of Florida designs, markets and sells single family homes, with a focuson the first-time home buying segment. The company also provides mortgage financing,title and settlement services to its homebuyers. In 2004, First Home Builders delivered1,819 homes with revenues of $308 million. As of July 31, 2005, First Home Builders hadapproximately 4,350 homes in contract backlog with a sales value of $925 million.

"We are excited about the addition of Fred Hermann, Bruce Robb and their team to ourCompany," commented Ara Hovnanian, President and Chief Executive Officer ofHovnanian Enterprises, Inc. "First Home Builders has an excellent reputation as a high-quality homebuilder and a strong track record of financial performance. With severalinitiatives in vertical integration underway, Fred and Bruce share our focus on becomingmore efficient as a homebuilder to gain competitive advantages."

"Earlier in 2005, we increased our presence in Florida through two acquisitions. Theaddition of First Home Builders further solidifies our footprint in this strategically importantstate," Mr. Hovnanian said. "We have targeted further investment in Florida because theregulatory process in the state is lengthening, which is constricting the supply of landavailable for homebuilding. At the same time, population growth and job growth in Floridaare creating sustained demand for new homes. The confluence of these factors makeFlorida an attractive market for the foreseeable future," Mr. Hovnanian concluded.

Mr. Patrick Logue, General Partner and Founder of First Home Builders of Florida, stated,"We established our presence in Western Florida by providing homebuyers with a qualityproduct. By combining our operations with a premier company such as Hovnanian, we cantake our vertical integration efforts to the next level and expand our product offering. Thispartnership will provide us with the capital we need to continue our growth and remain oneof the dominant homebuilders in the Fort Myers-Cape Coral market. Our cultures have acommon purpose that will provide our associates with tremendous opportunities forprofessional growth and development."

Fred Hermann, President, and Bruce Robb, Chief Operating Officer of First Home Buildersof Florida, will remain with Hovnanian following the acquisition. JMP Securities LLCrepresented First Home Builders of Florida in the transaction.

Hovnanian expects the addition of First Home Builders will be accretive by approximately$0.05 to earnings per fully diluted share in its 2006 fiscal year. In future years, Hovnanianexpects First Home Builders' contribution to earnings to increase through growth of theoperations and a reduction in the amount of stepped up inventory and intangiblesamortized. Hovnanian does not anticipate booking any goodwill in conjunction with thetransaction. Further, after taking Into account the effects of the acquisition, the Company

EXHIBIT "D"

http://www,khov.comlHome/BrandslKHV/AboutUs /FirstHomeBuilders .htm?PageItem=4 10/27/2008

New Home Builder - K. Hovnanian® HomesTM: Press Releases : First Home Builders Page 2 of 2, Case 2:07-cv-00343-J S-SPC Document 205-5 Filed 10/31/2008 Page 2 of 2

expects to be within its targeted ratio of 50% net debt to capitalization at its fiscal year end,October 31, 2005.

Hovnanian Enterprises, Inc., founded in 1959 by Kevork S. Hovnanian, Chairman, isheadquartered in Red Bank, New Jersey. The Company is one of the nation's largesthomebuilders with operations in Arizona, California, Delaware, Florida, Illinois, Maryland,Michigan, Minnesota, New Jersey, New York, North Carolina, Ohio, Pennsylvania, SouthCarolina, Texas, Virginia and West Virginia. The Company's homes are marketed and soldunder the trade names K. Hovnanian Homes, Goodman Homes, Matzel & Mumford,Diamond Homes, Westminster Homes, Forecast Homes, Parkside Homes, BrightonHomes, Parkwood Builders, Great Western Homes, Windward Homes, Cambridge Homes,Town & Country Homes and Oster Homes. As the developer of K. Hovnanian's FourSeasons communities, the Company is also one of the nation's largest builders of activeadult homes.

Additional information on Hovnanian Enterprises, Inc., including a summary investmentprofile and the Company's 2004 annual report, can be accessed through the InvestorRelations page of the Hovnanian website at http://www.khov.com . To be added toHovnanian's investor e-mail or fax lists, please send an e-mail to IR _,khov.com or sign upat htto:/twww.khov.com.

Note: All statements in this Press Release that are not historical facts should beconsidered as "forward-looking statements" within the meaning of the Private SecuritiesLitigation Reform Act of 1995. Such statements involve known and unknown risks,uncertainties and other factors that may cause actual results, performance or achievementsof the Company to be materially different from any future results, performance orachievements expressed or implied by the forward-looking statements. Such risks,uncertainties and other factors include, but are not limited to, (1) changes in general andlocal economic and business conditions, (2) weather conditions, (3) changes in marketconditions, (4) changes in home prices and sales activity in the markets where theCompany builds homes, (5) government regulation, including regulations concerningdevelopment of land, the homebuilding process and the environment, (6) fluctuations ininterest rates and the availability of mortgage financing, (7) shortages in and pricefluctuations of raw materials and labor, (8) the availability and cost of suitable land andimproved lots, (9) levels of competition, (10) availability of financing to the Company, (11)utility shortages and outages or rate fluctuations, (12) geopolitical risks, terrorist acts andother acts of war and (13) other factors described in detail in the Company's Form 10-K forthe year ended October 31, 2004.

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http://Www.khov.comlHome/BrandsIKHVIAboutUsIFirstHomeBuilders .htm?PageItem=4 10/27/2008

Case 2:07-cv-00343-J S-

Lad

Filed 10/31/2008 Page 1 of 1First Home Builders of Florida

2503 Del Prado Blvd, suite #300

Cape Coral, FL 33904

10131106

DAPHNE SEWELL782 HAWTHORN TERRACE

WESTON, FL, 333272117

RE: 1 1 362 37 12 NE 13TH PL CAPE CORAL, FL 33909

Dear homeowner, DAPHNE SEWELLThis letter Is being sent after multiple attempts to finalize your closing on the above named property,

one of the letters sent to you previously was a notice of home completion that contained your closingrequirements. That letter was dated 06/30/2006.

As of today's date, your closing has not occured. Failure to close within the timeframe allowed by yourcontract with First Home Builders of Florida constitutes a default. The default is on both the contract withFirst Home Builders as well as with your construction lender.

We still look forward to final closing and delivery of your home, Unfortunately, this letter must serve asofficial notice that now in default of your agreement with First Home Builders and your constructionloan, Arrangements to conduct your final closing must take place within five days of the delivery of thisletter. If closing does not take place, First Home Builders may take any and all legal action neccessary toenforce its rights and remedies under the contract. In addition, failure to close may force your constructionlender to initiate forctosure proceedings. Those proceedings can result in a deficiency judgement againstyou.

Again, we still look forward to a successful conclusion to your transaction. Please contact us at yourvery earliest opportunity.

Respectfully,

CHRISTINE CASTILLO

(239) 673-3161

K. Hovnanian First Homes L.L.C.,d/b/a First Home Builders of Florida

cc: Mark Anderson, Esq.Fowler White Banker Boggs2201 Second Street, 5th floorFt. Myers, FL 33901239-334-7892

EXHIBIT ""E"

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4 '•

DEL PRADO BOULEVARD . SUITE 300. CAPE CORAL. f-L 33904 1 Wti%'W. FIRSTHOMEBUILDFR5 .CO1,n 1 239.4 58.8000 '.'

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