Lost Lake, lost dreams

Buyers at Lost Lake Resort, marketed throughout South Sound since 2005 as an “upscale RV community” on the outskirts of Yelm, thought they were purchasing a little slice of heaven.

The resort was pitched as a place where they could spend the summer months of their retirement years living in peaceful seclusion on 130 acres of pristine wilderness.

They could grab a fishing rod and walk to “an 11-acre private lake generously stocked with rainbow trout.” Or enjoy amenities such as tennis courts, an indoor-outdoor swimming pool and spa, or a clubhouse with a pool table, pingpong and shuffleboard.

But several RV lot owners at Lost Lake Resort, at 1546 Reservation Road in rural Thurston County, say dreams of easy living have collapsed because of the resort’s developer, Jeffrey Graham, 48, of Tacoma, and the complications of his financial meltdown.

Graham says he’s done everything in his power to get deeds to buyers and to fix the facilities at the resort. “I have been trying to help my owners get what I owe them,” he told The Olympian.

The park itself is a jewel.

Pseudo-log cabins with green metal roofs dot the landscape next to luxury RVs nestled among towering Douglas firs.

The clubhouse on the lake boasts a game room with a pool table. But the indoor-outdoor pool – now undergoing repairs – hasn’t been used since mid-2010 because there’s no money to heat it or keep the lights on, residents said.

About 160 lots have been sold, and about 100 unsold lots have been platted. Unplatted lots still in the design phase would give the resort up to 522 lots, according to Graham.

The resort has problems with its sewer and water systems that will cost $350,000 to $400,000 to fix.

Some buyers say they still don’t have deeds for properties they paid up to $60,000 for. Others have had to sue to try to get their deeds for properties whose values have grossly depreciated because of the resort’s problems and the sour real estate market.

“It’s a total nightmare,” said Madelin White, who once looked forward to parking her RV at the site to swim and fish with her grandchildren in the summer months.

She still is waiting for a deed to her property. “I can’t prove it’s mine, said White, a business owner in Lacey for 37 years. “There are no promises I’m going to get that title.”

White and other buyers blame Graham.

“The mistake I made was I trusted him,” said Robert Warren, who gave Graham a $52,000 check in 2008 for an RV lot at Lost Lake. Warren still has no deed.

But Graham says he’s limited in what he can do because a Thurston County Superior Court judge appointed a receiver to oversee the resort’s future after Graham defaulted on a $3.3 million loan to develop the property.

He’s also dealing with the fallout from filing for Chapter 11 bankruptcy.


Graham launched his project in 2004 after he bought a private RV campground known as Mother Nature’s Acres for $75,000 at a sheriff’s auction. The debt collection agency he owns had foreclosed on the site. He also bought adjacent parcels that would become part of the development.

He renamed the property Lost Lake Resort and used the site’s unique history to develop and sell RV lots as “airspace condominiums” without having to first show the site had adequate infrastructure in place.

He could do that, county Planning Manager Mike Kain said, because Mother Nature’s Acres predated Thurston County’s codes regarding RV parks and the resort was grandfathered in as a “legal, nonconforming use” after Graham bought it. That meant Graham did not need to obtain special-use permits showing the site had water, sewer and electricity in place before he developed and sold lots there, Kain said.

At first, Kain said, the county would not allow Graham to sell individual lots at Lost Lake Resort unless it was classified as a subdivision and was approved by the county’s permitting process.

“He found a state law that would allow him to create a condominium,” Kain said. “It’s the first one we’ve ever had in the county.”


Graham set up a limited liability company called Lost Lake Resort LLC, and set up a second LLC, Lost Lake Development, to develop land adjacent to Lost Lake Resort.

In 2007, a subsidiary of Sterling Savings bank lent Graham $3.3 million to develop the resort. In October 2009, the bank said he defaulted on the loans.

The next year, Graham’s problems with some of the lot buyers landed him in court.

Four buyers sued Graham, alleging they had paid for lots at the resort but that Graham had never given them their deeds. One suit, filed by White, alleges Graham falsely said he had his own escrow company for “cash sales” and would provide a deed “in a week or so.”

When Graham failed to show up in court, default judgments against him were issued in two of the suits, including White’s. Graham disputes their validity.

The two other suits would later be put on hold after Graham filed for bankruptcy. Graham has paid off the liens for two lots whose owners sued, allowing the buyers to obtain their deeds.

In May 2010, Graham helped arrange an agreement he said he believed would lead to the release of the remaining deeds to the buyers. A group of Lost Lake lot owners, described by Graham as “friends of mine,” lent $400,000 to the receiver to help solve some of the problems with the resort’s septic system. Graham said the agreement should have allowed all of the deeds to be released to those buyers. He blames the bank and the court-appointed receiver for preventing the buyers from getting the deeds.

Michael Currin, Sterling Bank’s attorney, said the bank has released its liens as per Graham’s 2010 agreement. He also notes that some of the lots have other nonbank liens against them.

In addition, three Lost Lake buyers didn’t sign the agreement, so their liens weren’t released.

According to homeowner association members at Lost Lake, the bank released its liens and deeds have been turned over to about 30 lot buyers as a result of the agreement.

Approximately 10 property owners are still without deeds.

In November 2010, Graham filed for bankruptcy protection for himself and for Lost Lake Development LLC, which remains an undeveloped parcel. A trustee, a third party appointed by the court, was charged with administering the bankruptcy estate.

Though Graham’s bankruptcy petition temporarily relieves him from having to repay his loan, Sterling Bank sued in March to prevent him from being permanently relieved of the debts.

The bank’s suit alleges Graham never repaid the loan once he started selling properties at Lost Lake Resort. It states he “sold or transferred 37 condominium units without remitting the proceeds of such real property to Sterling.” It also contends that “by misappropriating and/or converting the proceeds Graham engaged in fraud , embezzlement or larceny.”

U.S. District Judge Brian D. Lynch, who is hearing the bankruptcy case, outlined the problems at Lost Lake in May and cited Graham as the source.

“There are currently more than 100 (airspace condominium) owners living at the resort, which is beset with numerous infrastructure, permitting, easement and lot-line problems,” Lynch said. “ Graham’s disruptive behavior is the main problem in this case.”

The judge said Graham’s testimony during an earlier hearing was “self-serving, evasive and not credible.”

“The court affords it little weight,” Lynch said.

The judge cited Graham’s testimony and that of the bankruptcy trustee concerning a March 3 meeting between the two.

The trustee testified that she explicitly told Graham he could not develop or take actions with respect to the resort or an adjacent property without her permission, Lynch noted. However, the judge found, “Graham willfully stretched the trustee’s words to accommodate his own desires and goals.”

Graham complained to the judge he was getting “mixed messages” from the trustee, court papers state.

Lynch also found the acrimony that prevents the involved parties from working together “extends from Graham’s disruptive behavior and inability to comply with court orders, to cooperate with the trustee, and his inability to fulfill his obligations as a debtor under the bankruptcy code.”

An attorney for Sterling Bank testified that Lost Lake Resort still owed about $2.88 million on the $3.3 million in loans that Graham defaulted on.

Graham said he spent more than $940,000 of the loan on improvements at Lost Lake Resort and on advertising.

He said he’s been paying the bank back for his loan since 2009, and that, out of his own pocket, he’s been paying off the liens for some of RV buyers at Lost Lake Resort with encumbered titles.

“I don’t understand how anyone could allege there’s fraud when I wrote a check and the bank was supposed to release this property over a year ago,” he said.

Graham places part of the blame for not being able to repay the bank on the real estate crash of 2008. He also said he had no idea his former bookkeeper wasn’t paying the bank for lot sales.

“I don’t pay my own bills,” he said. “She’s the one that was supposed to reconcile all of the accounts.”

He said he has been told the bookkeeper has died. When asked whether he had ever filed a police report against the woman, he responded that he had not.

Graham added that he learned of the problem after a new bookkeeper he hired noticed “unreconciled” transfers out of his bank accounts that totaled hundreds of thousands of dollars. “There was $800,000 missing,” Graham said. He said he has no idea where the money went.

In August, the bankruptcy trustee obtained a permanent injunction that bans Graham from access to Lost Lake Resort. That came after the judge found Graham had repeatedly violated a preliminary injunction. Among other things, he spent the night at the resort on multiple occasions and had a confrontation with a resort manager.

In late October, Lynch conditionally allowed Sterling Bank to provide $150,000 in financing to the limited liability company that operates Lost Lake Resort. It, in turn, can purchase from Lost Lake Development, through its trustee, water rights, easements and equipment to help solve the resort’s water problems.

The resort has a working water system, but problems remain with the sewer system, said Neil Reid, vice president of Lost Lake homeowners association.

Some drain fields are inadequate, he said, adding that at some places water and sewer lines cross, creating the potential for contamination of the water system if a sewer line were to leak.

On Nov. 1, acting as his own attorney, Graham sued Sterling Bank, alleging that the bank “deliberately tricked Graham into appointing a receiver” for Lost Lake and failed to provide deeds to lot buyers.

Currin, Sterling Bank’s attorney, said the bank will contest Graham’s counterclaim as “utterly baseless and without merit.”

The bank also accuses Graham of providing incomplete answers to its questions about Lost Lake’s finances, including bank statements, tax returns and other financial statements. Graham contests this.

Sterling Bank had asked that Graham provide the information by last Wednesday or be held in contempt. The judge ordered Graham to turn over the documents or be fined $10 a day. As of noon Friday, the documents had not been provided.

Graham counters that he cannot provide certain financial statements because he can’t enter the resort due to the injunction against him, according to court records.


Graham still faces problems with several property buyers at Lost Lake.

Homeowner association member Terri Mohr said at least 10 buyers still do not have deeds and have nothing to show for the cash they gave Graham.

The Olympian reached eight buyers who confirmed they have no deeds. Among them were Robert Warren, who paid Graham $52,000, and Madelin White, who gave him almost $60,000.

Neither Warren nor White keep their RVs at Lost Lake Resort. White said she hasn’t gone camping at Lost Lake for about 18 months after Graham came to her RV and screamed and swore at her after she filed her suit. Graham said it’s “100 percent untrue” that he ever screamed or swore at White.

Another buyer, Jamie Peek, said he and his wife gave Graham about $54,000 for an RV lot at Lost Lake in August 2008. They said they had no idea he never paid the bank to ensure there were no liens on the property.

“That’s a lot of money just to gamble with,” Peek said.

Graham maintains he’s worked to get the lot buyers their deeds.

“Even though a few like Terri Mohr say bad things, I have been trying to help my owners get what I owe them, even though it is not my responsibility after the receiver came in,” Graham wrote in an email.


After getting numerous complaints from lot buyers at Lost Lake, the Thurston County Sheriff’s Office began an investigation.

On Sept. 27, sheriff’s detective Mike Hirte sent a letter to the buyers, alerting them to the investigation.

“The focus of our investigation is to determine if any criminal laws have been violated,” the letter states,

An attached questionnaire asked the buyers for copies of receipts from the property transaction proof of ownership and names of the title company if a title company was used in the lot purchase, and other details.

Sheriff’s Lt. Greg Elwin said “the vast majority” of buyers who responded said they had received deeds to their property.

However, Elwin added, a handful of respondents said they had not received deeds, “or they haven’t received deeds in a timely or appropriate fashion.”

Investigators are looking at the transactions for those property buyers to determine why that is the case, he said.

Chief Deputy Prosecuting Attorney Andrew Toynbee said it would be inappropriate for him to comment on the merits of the buyers’ allegations unless a case is referred to his office.

But he added that, in general, it can be challenging to win convictions in cases alleging fraud in real estate deals and other financial transactions.


Today, Lost Lake’s future is uncertain.

Graham’s bankruptcy case is pending. Some lot buyers remain without deeds. Sterling Bank is trying “to mitigate its loss,” according to its attorney.

The trustee and the receiver appear to be making progress in solving the water and sewer problems at the resort.

Graham says he’s optimistic he will come up with a reorganization plan that will satisfy the bankruptcy judge and end the permanent restraining order that bars him from Lost Lake Resort.

“The truth,” he said, “is going to win here.”

Jeremy Pawloski: 360-754-5465