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The lawsuit alleges that Michigan-based Pulte Homes fraudulently propped up home prices and sales in a "house of cards" scheme that eventually caused values in its developments to plunge.
The suit was filed in U.S. District Court, Northern District of California, by Seattle law firm Hagens Berman Sobol Shapiro. The suit was filed Friday in Oakland.
It claims Pulte artificially propped up sales and home sale prices through its control of the process.
Steve Berman, lead attorney in the case, said that some of Pulte's developments became "toxic subdivisions with foreclosure signs all over the place, homes not taken care of, and no chance that the prices will go back up."
Berman said Pulte lured unqualified buyers -- such as the lead plaintiff, Lathrop's Sodalin Kaing, who bought a $518,215 house on a $21-an-hour salary -- with the promise of large discounts if they used Pulte Mortgage.
Kaing bought a home in Lathrop's Mossdale Landing development.
The suit further alleges that Pulte Mortgage, Pulte's financing subsidiary, quickly sold its loans on Wall Street and therefore was not affected when buyers defaulted.
"Pulte Homes believes the allegations are without merit, and we will vigorously defend the case," Jacque Petroulakis, a company spokeswoman, told the San Francisco Chronicle. He said the company would vigorously defend itself. Pulte has more than a dozen developments in Northern California.
The suit is seeking plaintiffs who bought Pulte homes between Jan. 1, 2005, and March 1, 2007.
"In my client's case, the 'discount' offered was phony because it reduced the home's price from an already inflated number that was more than $50,000 higher than the appraised value," Berman said. "Pulte created a micro-environment inside the marketplace, where it could rig, falsify and inflate reports and pricing to its heart's content -- and no one had any idea what was happening."
By operating within a closed loop where it controlled all aspects of the transition, Pulte, Berman said "created an amazing opportunity for itself."
Berman also said he anticipates expanding the case to developments in Nevada and Arizona. His firm also has a class-action suit pending against KB Homes and Countrywide Financial, its preferred lender.
To see more of The Record, or to subscribe to the newspaper, go to http://www.recordnet.com. Copyright (c) 2009, The Record, Stockton, Calif. Distributed by McClatchy-Tribune Information Services. For reprints, email tmsreprints@permissionsgroup.com, call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA.
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