On a Saturday afternoon in early September in the Pocono Mountains town of East Stroudsburg, the air and sky seemed cleaner than they ever do in New York City. But Louis Brown, an MTA bus driver from the Bronx, had not made the trip for fun in the sun. Instead, he joined some 200 grave-looking audience members and politicos in a local university auditorium. Taking the microphone, Brown described how he lost all his savings in the Poconos, how his credit is now so "twisted" that he can't even rent an apartment.

The audience nodded knowingly. Like Brown, many here are part of a black and Latino migration from metro New York City that in the last decade tripled the ratio of minorities in Monroe County, Pennsylvania, near the Delaware Water Gap. As a result, the Stroudsburg area--almost lily white a generation ago--now boasts braiding salons, a Caribbean restaurant, and other amenities that once would have taken a trip to Harlem to find. The clientele are New York City municipal workers such as cops and transit workers, along with private-industry employees, who moved to the mountains looking for peace and quiet and big, cheap houses. Thousands commute five hours a day to their jobs. (According to reporter David Pierce of the Pocono Record, six Pocono commuters died in the World Trade Center on 9/11.) All this to get a piece of homeowner heaven.

Instead, many say, they've gotten real-estate--scam hell.

Since last year, scores of New York expats have joined lawsuits charging that 26 Pocono-area builders, realtors and appraisers pushed over 200 mostly first-time homebuyers into foreclosure and financial ruin by offering them inexpensive country homes, then ruthlessly bilking them with a complicated scam. The suits seek $18.5 million in restitution and penalties. Hundreds more plaintiffs are expected to join the civil litigation soon. Even more are thought to have been victimized and left the area. In addition, in late September the Monroe County District Attorney's office arrested a mortgage company employee and charged him with committing forgery and fraud while selling a house.

At the East Stroudsburg meeting, sponsored by the Pocono Homeowners Defense Association (PHDA), a community group, attendees bemoaned what has become a home foreclosure epidemic in Monroe County: up from 120 in 1990 to a projected 1,041 this year. The number is shocking for a county with only 148,000 residents. Nine hundred and twenty-five homes were foreclosed there last year, compared to 3,200 sold, according to the Pocono Association of Realtors. Divide one number by the other, and the sales-to-foreclosure ratio is an astounding 29 percent. Nationwide, the rate is less than 1 percent. Even in New York City boroughs, where predatory lending is common, only about 5 percent of low-income homeowners with FHA loans have suffered foreclosure in recent years.

The only comfort for the audience at the East Stroudsburg meeting was the fact that Pennsylvania Attorney General Mike Fisher has filed two consumer fraud lawsuits against some of the firms and individuals involved. One suit names developer Gene Percudani and several companies he is associated with, including Raintree Homes, Inc., Why Rent Co. and Coastal Environmental, Inc. The other suit names officers at four Keystone companies presided over by Thomas Senofonte. Three appraisers are also defendants.

According to the suits, victims were lured by ads placed in the New York City and New Jersey media, offering luxury, custom-built homes for about $190,000. That's half what similar houses would cost in Flushing or Jamaica. Keystone gave potential clients a videotape, "You Can Own Your Dream Home," which contrasts gracious Pocono living with images of purported big city ills: gang warfare, muggings, shotgun attacks, rooms overrun by vermin. Keystone offered homebuyers one-stop shopping with the company's own builder, mortgage services and lawyer. People with shaky credit were reassured they could buy anyway. Former clients of Percudani remember seeing advertisements on Pathmark grocery store bulletin boards in the Bronx, and on Jerry Springer. His companies offered to pay tenants' existing rent, even cover closing costs.

What buyers didn't know, the suits allege, is that companies were recouping these payouts by inflating the selling price of the homes by as much as $114,000 over their real value. Allegations also include the use of a "ghost account" set up to mislead lenders into thinking buyers' credit was better than it was. Investigators for the attorney general's office say that at least one husband and wife were told to meet a realtor at a local bank and open an account in the couple's name. Once they closed on the home, the suit alleges, the realtor withdrew the money and closed the account. An investigative task force headed by the Monroe County District Attorney's office found further evidence of wrongdoing, including bank fraud, tax fraud, falsifying HUD settlement sheets, and lot-flipping: buying and reselling property quickly for profit. The Federal Reserve Bank also investigated overpricing in the Poconos in 2001. So did Freddy Mac and Fannie Mae, quasi-governmental agencies that buy mortgage loans from banks and lending institutions.

Buyers usually did not discover problems until they tried to sell or refinance. Bus driver Louis Brown, for instance, bought a home from Why Rent for $153,000 and moved with his family from Brooklyn to the Poconos. But after his marriage dissolved, he decided to sell. "I had the house appraised," Brown says. "It was worth $77,000." Today, he's living in the Bronx, facing foreclosure or bankruptcy.

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This isn't the first time members of the Poconos real estate industry have been accused of fraud. In the late 1980s, HUD and the New Jersey Real Estate Commission investigated a company, Cost Control Marketing and Management, for allegedly selling lots to mainly white, blue-collar New Jersey residents at inflated prices. White ethnics from New York City also filed suits against Cost Control after they saw ads in local newspapers and paid too much for lots. The company later went bankrupt.

And in 1992, Gene Percudani, the defendant in one current Pennsylvania Attorney General suit, was investigated by the same office for allegedly building shoddy homes and failing to return deposits to buyers. (Charges were dropped after he agreed to issue refunds.) Almost a decade later, in 2001, some residents filed a federal civil racketeering suit against Chase Manhattan Mortgage Corporation, alleging that Chase--the country's biggest mortgage lender--conspired with Percudani and appraiser Dominick Stranieri to defraud first-time homebuyers. Chase admitted having approved some loans on homes sold at inflated prices, and it agreed to reduce the principal for almost 300 Poconos homeowners by as much as $50,000 apiece. Stranieri gave up his appraiser's license after being accused of falsifying three appraisals.