Suit filed against Rarity president

Latest document in dispute accuses Ross of racketeering

 Josh Flory
Accusations of racketeering activity are the latest twist in an ongoing legal dispute involving a Maryville developer and his former business partner.

Robert Stooksbury Jr., has filed a lawsuit in U.S. District Court against Mike Ross, the president of Maryville-based Rarity Management - formerly known as Rarity Communities - and a slew of other defendants.

Among other things, the suit alleges that property was sold based in part on false representations and that a portion of the proceeds from lot sales in various developments were diverted for the personal use of Ross and/or others, and to begin other projects, instead of being used to benefit the developments in which the lots were sold.

As a result, the suit that was filed last week alleges that Stooksbury and others invested significant amounts of money "only to see significant portions of their investments misappropriated, misused, and/or devalued."

The federal case is far from the first sign of tension between the former partners. In April, Stooksbury filed a suit in Blount County Chancery Court against Ross and several companies, including three owned by Ross. A counter-complaint was filed by Ross and two of the companies he owns, alleging that Stooksbury's claims and his threat of litigation were motivated by Stooksbury's desire to force Ross into buying Stooksbury's interest in a certain development firm.

In a statement last week, Ross' attorney said his client strongly denied the allegations in the new federal suit.

"Mr. Stooksbury continues to file a multitude of lawsuits believing that, if he states the allegations enough times, the allegations will suddenly be true," the statement said.

According to the federal suit, a firm owned by Ross called LTR Properties joined with Stooksbury and another person in 2001 to form Tellico Landing LLC, which aimed to develop a Loudon County waterfront community called Rarity Pointe.

The suit noted that Ross later launched other Rarity developments, and alleged that by 2007 hundreds of lots in the developments had been sold, generating more than $100 million of cash flow in that year alone. The suit also alleged the entities that operated those developments co-mingled money in accounts in which Ross or his late brother, Dale Ross, had an ownership interest.

Among other things, the suit alleged that in connection with Rarity Pointe, Ross changed one underlying loan to an interest-only loan without providing notice to minority members of the LLC; that false price lists and false closing statements were provided to minority members; and that agents of Ross and or entities he controlled entered into relationships with third parties to buy Rarity Pointe property and re-sell it at a profit, "sometimes in direct competition with open market buyers."

Those activities, the suit said, are among the examples of a pattern of "predicate acts" of racketeering activity. The suit seeks restitution of up to $10 million. A representative of the estate of Dale Ross - which is also named as a defendant - could not be reached for comment.

Other defendants include Gregory Baker- identified in the suit as the de factor chief financial officer of business entities that are also defendants - and Tracy Riedl . Baker could not be reached for comment. An attorney who has represented Riedl in the past could not be reached for comment.