SMI liens pile up

Builder already under FBI probe

UNION - A Northern Kentucky home-building company that is the subject of a federal investigation owes more than $600,000 to area contractors, according to liens and lawsuits filed in Boone and Kenton counties.

In mid-December, FBI agents executed a search warrant at the Covington office of SMI New Home Solutions on Madison Avenue. SMI is based in Union.

Bill O'Leary, head of the Northern Kentucky FBI office, declined to comment on the case, which remains sealed.

Since the FBI's search Dec. 13, area contractors have begun lining up, filing dozens of liens against SMI in Boone and Kenton counties.

As of this week, more than 15 companies had filed liens against SMI with claims totaling $619,000.

Tim Seiter, owner of the Burlington concrete company Boone Ready-Mix, said he had conducted business with SMI's owner Mark Wheatley for at least three years and spoke frequently with him about the builder's struggles.

In late December, Boone Ready-Mix filed a lawsuit against SMI in Boone County Circuit Court, claiming that the home builder owed more than $221,000 for costs incurred on an open credit account that dates to August 2006. No court date has been set in the case.

"He promised that there was a pot of gold at the end of the rainbow, but it never came," Seiter said. "I guess he tried to cater to the lowest end of the borrowing spectrum and would arrange exotic financing to get a home sold."

Seiter said Wheatley had told him that closings for new homes were regularly delayed because of credit problems with home buyers that had been lined up.

"He would rent them the house in hopes of buying time for them to fix their credit," Seiter said. "I think he's just a victim of the market."

Wheatley deferred comment to his lawyer, David Fessler of Fort Thomas, who did not return calls for comment.

Earlier this month, Huntington National Bank filed a lawsuit against SMI, saying the builder had defaulted on a $3.4 million loan. According to the suit filed in Kenton County Circuit Court, SMI secured the loan with mortgage deeds that the builder held for 10 homes in the Whispering Woods and Bristow Lakes subdivisions in Independence.

While SMI held the mortgage for the properties, each of the properties also is connected with purchase contracts or lease agreements involving a second party, according to the lawsuit. No court date has been set for the case.

Huntington isn't the only bank with a lawsuit against SMI.

In December, Heritage Bank of Burlington filed suits in Boone and Kenton counties, saying SMI had defaulted on loans for two homes in the Whispering Woods subdivision and one home in the Steeplechase subdivision in Burlington.

The Whispering Woods loans are valued at $234,762 and $197,200, while the Steeplechase loan is $256,800, according to court documents.

Both banks have asked that the homes and properties be sold as a means of recouping the debt, according to the lawsuits.

Huntington Bank's lawyer did not return calls seeking comment. Heritage Bank's lawyer declined to comment.

According to property valuation administrator records, SMI owns more than 50 homes and building lots in Boone and Kenton counties.

In addition to Whispering Woods, Steeplechase and Bristow Lakes, SMI built homes ranging from $150,000 to $300,000 in Sunnybrook Farms and Carspens Creek in Florence, Darlington Creek in Alexandria and Bearcat Crossing in Walton.

This sort of thing will continue to happen, at all levels until there's safeholds in place to protect all parties involved when the warning signs show evidence that the bottom is falling out. Unbelievably I only know 1 contractor affected by this. 

The best business move I ever made was leaving the new construction industry for an income. Intentional starving is what it's called.