Justice at Rio Rancho

In a commercial aired on New York City radio stations, a bank uses a skit to encourage listeners to put their money in savings accounts. In the sketch, a wife berates her husband as they stand in the midst of a barren desert. "You honestly believed you could resell this land at a profit?" she groans. "There's only one person in the world who'd buy it, and you already have." In fact, thousands of others have bought such desolate plots. According to an indictment handed down by a federal grand jury last week, 77,000 such "semiarid desert lots" have been sold--sight unseen.

The indictment charges AMREP Corp. of New York City with 70 counts of mail fraud and ten counts of violating the Interstate Land Sales Full Disclosure Act. Since 1961, it charges, AMREP (an amalgamation of the American Realty and Petroleum Corp. with the Great Sweet Grass Oils Co.) has managed to sell desert plots to about 45,000 people for a total of more than $200 million. AMREP's initial investment for the parched land was about $17.8 million. To hype the value of the property, the indictment charges, the company added some showcase improvements in a development called Rio Rancho, which is in fact only a small part of AMREP's 96,000-acre Rio Rancho subdivision. Most of the outlying lots --with no water, sewers or electricity and little chance of ever getting any --are too far away to benefit from the construction of the core community.

How did AMREP unload the real estate? A key tactic was to get crowds of potential buyers together for free drinks and dinner at hotel ballrooms and restaurants. There, a smooth-talking speaker would mount the podium to describe various Rio Rancho plots. As he spoke, salesmen at the tables would jump up, shouting "Hold!" as if they had just sold the lot he was talking about. Their enthusiasm would be contagious, and since the land contracts were right there on the tables, guests would impulsively sign on the dotted line. In so doing, they committed themselves to purchases ranging from a few thousand dollars to a high of $11,000 for arid half-acre homesites that had cost AMREP about $90. The buyers were usually middle-and lower-class working people; a plot at Rio Rancho was their dream. Its value would double, triple, quadruple, they were assured, but they were not allowed to take sales material away from a dinner party until they had signed a contract.

AMREP promotions recited an enticing litany: Albuquerque was expanding in the direction of Rio Rancho; land values in surrounding Sandoval County were rising at an astonishing pace; there was a hyperactive market for resale; AMREP was letting the land go at such low prices because of its "low markup, high-volume policy"; all the lots were part of a "master-planned community"; and utilities were available to anyone who wanted to build. The indictment charges that each of these claims was criminally misleading.

Actually, Albuquerque's multiple-listing realty service discouraged Rio Rancho landowners from listing their property because there was practically no local demand for it. What is more, AMREP had been told by a consulting firm that Albuquerque was not likely to expand in the direction of Rio Rancho for the foreseeable future.

P.R. Blitz. In detailing the charges, the Justice Department named seven AMREP officers and directors, including Chairman Irving Blum, 73, President Howard Friedman, 50, his brother Daniel, 40, and Chester Carity, 50, an AMREP executive vice president. In response, the indicted firm has launched a p.r. blitz protesting its innocence. AMREP officials complain that the charges are "immoral and unjust." They insist that they have spent more than $34 million improving the land.

Some homeowners in the central community have no complaints and even boast about their community. AMREP points out that if a buyer of one of the outlying plots wants to move into town, he can trade for a site in the core community--usually half the size of his original plot. The company also notes that Rio Rancho owners have always had the option to back out within six months of purchase. The catch: a purchaser could buy a Rio Rancho lot while outside of New Mexico, but had to travel to the subdivision to sell his property; the trip and other selling costs would usually amount to more than what most disgruntled purchasers had already paid for the land.

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