CHARLOTTE — An administrative law judge has rejected a bank's request to close a federal hearing involving a former BB&T investigator who says she was fired after exposing a North Carolina development scam that cost the banking giant millions of dollars.
BB&T asked Judge Jeffrey Tureck to keep the public and journalists out of the hearing about the failed $100 million Village of Penland development to protect the confidentiality of employees not involved in the case, "competitive information" about the bank and an ongoing criminal investigation.
But attorneys for Amy Stroupe, a former BB&T investigator who called the FBI after the Winston-Salem-based bank "refused to take action," said the bank filed the motion to protect its image.
"Obviously their motivation was they didn't want the case to be subject to public scrutiny," said John Yanchunis, one of Stroupe's attorneys. "They wanted to preclude public access, and I've never heard of that happening. The law is clear: Trials are to be public. We have a long history of public trials in this country."
Tureck issued his decision Friday.
This is the latest twist in the case. Stroupe filed a "whistleblower" complaint nearly two years ago with the U.S. Labor Department. Her claim was dismissed by the Occupational Safety and Health Administration, but her attorneys appealed the case to Tureck's court. Under federal law, it's illegal to retaliate against a worker for exposing wrongdoing. Her hearing is scheduled June 15 in Winston-Salem.
Tureck could reject the complaint or award back pay and order BB&T to rehire Stroupe, a former Cleveland County sheriff's deputy who has been unable to find steady work since she was fired. She has a separate unlawful termination lawsuit pending in state court.
BB&T spokesman Bob Denham said the judge "left open the option" that parts of the hearing could be closed to the public.
"The judge has agreed that there is legitimate information that needs to be protected and will preserve its confidentiality as we go through the hearing," he said.
The Village of Penland scam -- one of the largest fraud cases in North Carolina's history -- came to light two years ago when state Attorney General Roy Cooper shuttered the project, citing fraudulent business practices. But it was Stroupe's behind-the-scenes role that exposed it.
Five people have pleaded guilty and are awaiting sentencing for their roles in the bogus development that began in 2002 when developer Tony Porter recruited Frank Amelung and his brother, Richard, as partners in the project, envisioned as a sprawling complex with luxury homes, wide streets with shops and boutiques set in the Blue Ridge Mountains.
The Amelungs, who owned a Florida manufacturing business, wanted to get into real estate development. They set up a company and bought 1,200 acres in Mitchell County, which they subdivided into more than 2,000 lots to create Penland.
They also devised a complicated scheme to attract investors to raise money for the development, according to federal documents and interviews.
Investors -- doctors, lawyers and other professionals -- were told they could borrow money from banks for the lots and that Peerless Real Estate Services would repay their loans. Each lot cost about $125,000. Porter and others said the money would be used to develop Penland. In return, investors would receive money -- at least 10 percent of the loan -- at closing, and more money was promised once the lots were sold.
But investigators say the scam was a classic Ponzi scheme -- in which money from new investors is used to pay high returns to earlier investors. They say the lots were inflated and that the developers diverted the money to other projects, including a spa in Brazil.
Several banks helped finance the project; BB&T lent more than $20 million to investors.
The project began to unravel when a BB&T official in the Shelby office became suspicious that an employee who recently transferred to the branch was making too many Penland loans. He asked Stroupe to look into it. After months of interviews and sifting through records, she discovered the scheme. But when Stroupe told her bosses in March 2007, she said "they didn't want to hear it."
She said she even told her regional manager. Still, nothing happened, Stroupe said. BB&T continued to make Penland loans, she said. Frustrated, Stroupe contacted the FBI but was fired a month after the state shut down the project.
Banks have since started suing investors to recover their money. Some investors have settled, but many said they are unable to repay the loans and say that their lives have been ruined.