Court Records Shed Light on Troubled Woodlake Community

Empty Woodlake
View of the empty lakebed at Woodlake Resort and Country Club. (Jaymie Baxley/The Pilot)

By JAYMIE BAXLEY | The Pilot

VASS, N.C. — A recent deposition of the sole executive and lone U.S. representative of the troubled Woodlake Resort and Country Club sheds new light on the inner-workings of the business.

The deposition became public record after being submitted as evidence in a class action lawsuit against Woodlake CC Corp. A Superior Court judge on Thursday ordered the company to pay more than $160 million to residents of the gated Woodlake community.

The lawsuit was filed on behalf of the residents whose property values plummeted after the state drained Lake Surf, the community’s 1,200-acre centerpiece, to prevent a potentially catastrophic dam failure, The tax value of waterfront properties in Woodlake was slashed by half after a revaluation last year by the county tax department.

Julie Watson has represented at least two ownership groups over the course of her career at Woodlake. Under Woodlake Partners, she was general manager. When that company filed for bankruptcy three years ago, the resort was bought by a venture called Woodlake CC Corp. Watson received 100 shares in the business at no cost and was named its vice president.

Both business entities were owned by German investors. Woodlake Partners was owned by Ingolf and Gabrielle Boex. Woodlake CC Corp. was bought out of bankruptcy by German businessman Illya Steiner.

Watson, 58, began her career at Woodlake as head of the resort’s janitorial staff in the early 1990s. She has kept a low profile in recent years, repeatedly declining to speak with The Pilot and other news organizations about the issues at Woodlake.

Watson’s testimony was collected by Hope Carmichael, attorney for the more than 1,900 property owners represented in the class-action lawsuit, during a three-hour interview held March 14 at the law offices of William T. Clemmons in Southern Pines.

Throughout the 109-page transcript of the deposition, Watson repeatedly describes the erstwhile lake as the gated community’s signature asset.

“The lake is Woodlake,” she told Carmichael. “The lake is a value — when you buy a lakefront property, that’s your value. That’s a lot of the value of your home.”

In addition to the lake, the corporation’s assets include two golf courses — one is closed — an antebellum-style clubhouse, a pool and other facilities.

A Plan to Purchase Woodlake

During the deposition, Watson said she receives an annual salary of $80,000 to manage the resort. In her role with both ownership groups, Watson served as the liaison between the state and Woodlake’s foreign owners.

But she claims Steiner — and Ingolf Boex before him — were the only ones with access to the large sums of money needed to pay the company’s mounting debts and the costs associated with rebuilding the dam, a necessary precursor to refilling the lake.

The state Division of Energy, Mineral and Land Resources began sending notices to Watson about the deteriorated condition of the dam’s spillway in 1996.  Waston said Steiner had pledged to address the issues before he purchased the bankrupt community at auction for $750,000 in 2015.

Steiner, the auction’s first and only bidder, planned to invest $6.5 million in the development, Watson said, with $2 million earmarked to repair the dam.

“At the time we were all in a meeting in the clubhouse, and they just said they were interested in purchasing,” Watson told Carmichael. “Mr. Steiner asked me to give him a list of everything that was needed to restore Woodlake to its beauty.”

Repairs were never made, and the dam came perilously close to collapsing after the lake was inundated with rain from Hurricane Matthew in October 2016. Concerns about the dam’s stability led to the temporary evacuation of nearly 100 homes downstream of the lake.

State safety officials later ordered the controlled draining of the lake, a move that frustrated homeowners who paid premiums for waterfront property in the gated community. The state Attorney General’s Office sued Woodlake CC Corp. in January 2017 for repeatedly failing to follow through on promises to repair the dam’s spillway.

‘Everything Would Stop; Always’

In March 2017, an agreement to dismantle the spillway was reached between Watson and representatives from the Attorney General’s Office in Moore County Superior Court. Destroying the spillway, officials said, was the only way to prevent water from pooling in the empty lake 

The agreement established a series of deadlines for the work, but Woodlake failed to meet them. With hurricane season approaching,  the state decided to take matters into its own hands. 

Crews were contracted by the state to tear down the spillway. Watson later vowed that Woodlake CC Corp. would rebuild the dam after work on the breach project was completed.

In her interview with Carmichael, Watson said the funds for the breach and the repair of the dam were never transferred from Germany.

“When I spoke with Steiner, it was to continue to go on. We would repair the dam. I would never (…) sign anything not knowing that they would be — I mean, that Steiner was not going to send the funds to get it repaired,” Watson said, later adding “in the middle of the ball game, everything would stop; always. It’s always been that way.”

At various points during the deposition, Watson suggested she was unfairly blamed for the inaction of Woodlake’s past and present owners.

“If I called Dr. Boex, it’s the same as Illya — I have to beg” for resources, she said. “Dr. Boex, Illya, they’re all — they’re not interested in Woodlake. They’re not interested in Woodlake.”

Watson said she had not communicated with Steiner since the class action lawsuit was filed in October. She said she does not know what German city Steiner lives in. 

“Illya does not communicate with me,” she said.

Watson claimed she had reached into her own pocket to cover some of Woodlake’s bills.

“Even though I get a paycheck, it goes right back into Woodlake,” she said. “It’s paying for this, paying for that, making sure the operations — I mean, it’s just — you know, it’s just trying to keep things alive.”

While Watson stressed the financial challenges faced by Woodlake, she could not provide Carmichael with an estimate of the company’s revenues for 2017. She did not present any evidence of bills she had paid and did not give examples of specific business costs she had covered.

Other Possible Buyers?

According to Watson, a handful of potential investors have expressed interest in Woodlake. She had been in talks, she said, with prospective buyers from China who ultimately backed out because of “bad PR and the uncertainty of the dam.”

“If anyone has the money and comes to me and says, hey, I’ve got money, I’ve got someone backing me up, I’d sign my shares over today to them,” Watson said. “I don’t want shares at Woodlake. I don’t want to be vice president at Woodlake. I work hard there. I take care of my father, who has dementia. I’m tired, but I won’t turn my back on the community.”

Watson later lamented that she had been “kicked aside” by Steiner. 

“I’ve put up with a lot of things from Woodlake,” she said. “I’ve put up with a lot of things from Germany.” 

Several of the lead plaintiffs in the lawsuit against Woodlake CC Corp. are members of a committee that hopes to refill Lake Surf. The Restore Woodlake Committee, which paid the $40,000 retainer for Carmichael’s legal services, has repeatedly criticized Watson for not communicating with residents and for ignoring invitations to meet with the group.

In an email to community members on June 27, Watson announced that Woodlake CC Corp. could not afford to rebuild the dam and the company was preparing to transfer ownership of Lake Surf to residents with lakefront property. David Watterson, chairman of the Restore Woodlake Committee, said the group spent $7,000 to establish the Lake Surf Property Owners Association to facilitate the transfer, only to be met with silence from Watson.

“We heard not a single word back from Julie or any representative of Woodlake,” Watterson said at the time. “We spent $7,000 to get zero response from Woodlake.”

Despite her lack of communication with the committee, Watson told Carmichael she “only want(s) to see the property owners have a lake.”

Watson accused some of the plaintiffs of trying to “sabotage” her. “There’s a couple of them that have personal agendas against me,” she said. “But the rest of them (…) they just want their lake.”

Property Owners Look Ahead

Much of Thursday’s court hearing bore resemblance to when the state took Woodlake CC Corp. to court last year. That hearing was also held in March, in the same courtroom, with the same judge, James Webb, presiding. 

Though Watson did not attend the most recent hearing, her voice was repeatedly invoked through excerpts from her deposition shared by Carmichael.

“Ms. Watson testified in her deposition that the German funding arm that supports Woodlake CC Corp. has ‘closed the books on Woodlake,’ and she has indicated that there will be no money forthcoming for any repairs to the dam,” Carmichael said during the hearing.   

Webb awarded the plaintiffs $40.6 million in compensatory damages and $121.8 million in punitive damages, but the likelihood of collecting on the judgment is slim. 

The Attorney General’s Office plans to order Woodlake CC Corp. to pay back the more than $1.2 million the state spent to dismantle the Lake Surf dam. Multiple contractors claim to be owed money from Woodlake CC Corp., and the county says the company owes tens of thousands in unpaid property taxes. 

If Woodlake CC Corp. fails to pay the judgment, the plaintiffs hope to take control of Lake Surf through a foreclosure auction. They plan to then seek funding to repair the dam and eventually refill the lake.

Of the more than 1,900 property owners in Woodlake, 39 decided to opt out of the lawsuit. Property owners who declined to participate in the lawsuit “retain the right to sue Woodlake CC Corp. as individuals,” according to a statement issued by the Restore Woodlake Committee. 

Before the judgment can be enforced, the plaintiffs must wait 30 days for any objections to be submitted to the court. Woodlake CC Corp. also has 30 days to file an appeal.