Lennar Corp.

Lennar Corp. is attracting the wrong sort of attention these days. I might as well put this blog officially on that bandwagon.

Lennar, which is based in Florida, is the third-biggest homebuilder in the United States.

Back in 2006, when home building still seemed like a bullet-proof business to be in, Lennar and LNR Property Corp. co-owned a large property north of Los Angeles, Calif., known as Newhall Ranch. They agreed, at the urging of go-between Victor MacFarlane, to sell a majority stake in that property to the California public retirement system, CalPERS, for $970 million. The land sat along the I-5 corridor, a developers' dream. What could go wrong?

A good deal did go wrong with this joint venture, known as LandSource. CalPERS lost $1.2 billion, and this rather dented that pension system's previously high reputation for making prudent investment calls.

That was the least of things. It appears that this year federal criminal investigators have become interested in the LandSource imbroglio.

The Fraud Discovery Institute has listed the LandSource matter as one of several red flags indicating, in FDI's words, that something RICO-actionable is underway in Lennar. It portrays LandSource (I'm paraphrasing here) as a classic pump-and-dump situation, in which Lennar took the money while the gettin' was good.

It obviously isn't illegal, or wrong, to buy low and sell high. But the FDI regards the LandSource deal as part of a broader pattern of behavior -- one of many red flags, which also allegedly included such matters as a falsified HUD document, civil complaints by homeowners, F grades from the Better Business Bureau, etc. They put together an intriguing case.

Here's what Tracy Coenen has had to say.

I've focused on the CalPERS loss here because ... well, because that is eye-catching, given CalPERS' image and broader significance for widows and orphans. But I'll be trying to catch up on this story in its other aspects as it develops.