Anthony Pugliese’s dream was to build Destiny, the first eco-sustainable city in the world.
This is the story of how his partner, Subway co-founder Fred DeLuca, destroyed that dream… subverting Destiny.
Pugliese’s dream is to build the world’s first eco-sustainable city, a project which he has named “Destiny.” He finds a 27,410 acre tract of land near Yeehaw Junction in Osceola County, Fla., at the intersection of the Florida Turnpike, State Road 60 and U.S. 441. Pugliese makes an offer to the owner, the Latt-Maxcy Corporation, of $5,000 an acre, for a total cost of $137 million. On September 18, the sellers accept his offer.
Pugliese makes a deposit of $2.7 million on the land, pursuant to the Purchase and Sale contract.
Pugliese hires a “Dream Team” of environmental, planning, engineering and other consultants to perform due diligence on the project.
DeLuca’s entity FD Destiny Credit continues to own the Destiny property and has contracts in place to derive revenue from the property such as cattle and citrus leases. None of these revenues are shared with Pugliese.
Pugliese and DeLuca meet for the first time. Asserting that he has access to financing at favorable rates, DeLuca asks to be a partner in the Destiny project, and in a New Jersey recycling plant venture in which Pugliese is involved. Pugliese agrees to give DeLuca a 50 percent partnership in Destiny, and a 33.3 percent owner in GreenSky, the recycling project. DeLuca agrees to arrange financing. Pugliese manages the Destiny project without drawing a salary.
Pugliese’s $2.7 million deposit on the Latt-Maxcy land becomes non-refundable.
DeLuca borrows a total of nearly $140 million from Wachovia Bank at .9 percent over LIBOR, but does not disclose the terms of the loan to Pugliese. He then loans the money to the Destiny project, at 4 percent over LIBOR – a 400 percent mark up – still without disclosing the original terms.
Pugliese and DeLuca sign an operating agreement which sets forth their funding obligations for the expenses of the Destiny Project. Pugliese and DeLuca agree that the expenses are to be paid on a 75/25 basis (75% for DeLuca and 25% for Pugliese) once the principal and interest of DeLuca’s loan to LCOC exceeds $140 million.
LCOC applies for a federal trademark for “Town of Destiny.”
LCOC signs a contract to purchase an additional 14,000 acres, known as the Rohde property, paying $30,000 per acre. The purchase totals $420 million. The land expands the size of Destiny to 41,000 acres, and would allow for a community of 80,000 to 85,000 homes and 20 million sq. ft. of space for commercial, industrial and other uses.
The Osceola County Board of County Commissioners submits a Rural Land Stewardship Area designation for the Destiny property, an important step in getting necessary permits for the project.
Gov. Charlie Crist signs law designating the property as the “Community of Destiny.”
Osceola County submits its “notice” to the Florida Department of Community Affairs for a Rural Land Stewardship Act (RSLA) designation for the Destiny property. An RSLA designation is a strategy to bring economic growth to rural areas while also protecting the environment and preserving agricultural land uses.
The Florida Department of Community Affairs responds to Osceola County’s request for a RLSA, and suggests that the developers combine their application with another, unrelated developer’s project being considered for property adjacent to the Destiny land.
Expenses for Destiny reach $6 million. DeLuca stops making payments, forcing Pugliese to scramble to pay employees and contractors. He puts $1.5 million of his own money into the project, a contribution not stipulated in his agreement with DeLuca. DeLuca refuses to sign a new operating agreement.
DeLuca demands more detailed accounting and requests that Pugliese contribute 50 percent of expenses, contrary to their initial agreement. Disputes between the partners continue.
DeLuca continues to withhold funds he has agreed to provide.
Using Subway’s parent company, Doctors and Associates, DeLuca hires a man named David Friedman to oversee his investments, including the Destiny project. Friedman has a background in finance but no previous experience in real estate development.
Initial purchase of 27,410 acres is conservatively appraised at $189.5 million.
Pugliese contributes an additional $500,000 for ongoing costs.
Pugliese learns from Wachovia Bank that DeLuca, his partner, has charged the Destiny project more than 400 percent interest on the financing he has provided for the Destiny project.
Pugliese travels to Tallahassee with project staffers to meet with the Florida Department of Community Affairs to discuss how to move the development forward. Meanwhile, DeLuca continues to withhold funding.
DeLuca owes $2.6 million to LCOC; stating that he will now pay 75 percent of expenses instead of the 100 percent he agreed upon, he pays $1.9 million. Pugliese puts in the difference to pay expenses. Fred Florio, DeLuca’s personal advisor and DeLuca’s representative, warns Pugliese that DeLuca sometimes gets “squirelly.” He advises Pugliese to put money in reserve in case DeLuca stops funding entirely.
Pugliese begins to create a reserve.
Tom Pelham of the Florida Department of Community Affairs writes to Pugliese, stating that the project will not be approved as an Rural Land Stewardship Area in its current state. He suggests that they seek a Comprehensive Plan Amendment instead.
Numerous organizations, including General Electric, Florida Atlantic University, Skyron Systems, Velocita and others, have expressed interest in having facilities in or partnerships with Destiny that will create jobs and advance sustainable technologies and research.
Pugliese pays 25 percent of Destiny’s expenses before being contractually obligated to do so.
Principal plus interest reaches $140 million on the loan, triggering a new phase of the operating agreement in which Pugliese is now obligated to pay 25 percent of expenses while DeLuca pays 75 percent. Pugliese has already been using his own money to keep the project going, although until this point it was DeLuca’s obligation to pay all expenses.
Organizations continue to express interest in establishing operations in Destiny. Among them are DayStar Technologies, which wants to build a solar panel manufacturing plant; Rice University, which enters into a memorandum of understanding to develop a model for efficient and carbon-free living that includes a research lab; Capernaum Ministries, which wants to create a retreat; and Diversified Energy Group, which proposes building an alternative energy division plant. By the end of 2009, others including Hilton Hotels, Dominion Development Partners, Earthpark and Cold Mix Manufacturing will demonstrate interest in playing roles in the project.
The Florida Department of Community Affairs confirms that Osceola County will no longer be pursuing the RSLA, and instead will request permits under a Comprehensive Plan Amendment. The Florida Department of Community Affairs revokes its May 7 notice that it will pursue the RSLA.
DeLuca and his representatives have meetings and conversations with Destiny employees, including lobbyist RandyJohnson, suggesting that Pugliese may not be with the project much longer.
The Florida Department of Community Affairs issues an Objections, Recommendations and Comments (ORC) report that states: “This is the beginning and not the end of this process. The Department’s staff is available to assist the County in responding to our report and to work towards mutually acceptable solutions.”
LCOC enters into a Memorandum of Understanding with the Clinton Climate Initiative, establishing Destiny as a model Climate Positive Development. Fewer than 20 projects worldwide were selected for this designation.
The Osceola County Board of Commissioners issues a proclamation recognizing Destiny as one of the initial participants in the Clinton Climate Initiative program.
Acting on orders from DeLuca, David Friedman hires the law firm of Proskauer Rose to review the permitting strategy for Destiny.
DeLuca withholds funding. Pugliese uses reserve funds to pay employees and contractors.
Pugliese and DeLuca meet to discuss getting the project back on track. Pugliese discloses that he has created reserves.
DeLuca’s attorney instructs Pugliese not to pay any vendors, stating that DeLuca will pay them.
Most Destiny employees, experts and consultants are fired from their jobs.
DeLuca files suit, seeking control of Destiny/LCOC.
Pugliese hands over management and control of project.
Pugliese files a countersuit against DeLuca.
Acting as DeLuca’s agent, Friedman replaces the law firm of Proskauer Rose with Holland & Knight, a larger Florida firm. They take on the civil case against Pugliese and assist in the foreclosure.
DeLuca abandons efforts to get permits for Destiny and files for foreclosure in Osceola County on LCOC and the Destiny property. Friedman, acting as DeLuca’s agent, hires lawyers to both pursue the foreclosure, and to defend LCOC, of which DeLuca owns 50 percent. In other words, DeLuca is paying for both sides of the litigation, suing himself and defending himself, in an attempt to gain control of the property. Though Pugliese also owns 50 percent of the property, DeLuca never consults him before filing suit. Pugliese attempts to intervene in the foreclosure in Osceola County but he is turned away because he is already involved in litigation against DeLuca in another county.
Three years into the civil litigation, DeLuca’s lawyer from Holland & Knight approaches his former law partners, now working at the Palm Beach County State Attorney’s office, and persuades them to investigate Pugliese. Despite having invested more than $9 million of his own money in the Destiny project, Pugliese is charged with numerous counts of grand theft, totaling $1.2 million.
The final judgement of foreclosure is entered, in the amount of $173,108,005.28
The Destiny property goes to foreclosure sale. FD Destiny Credit,LLC, controlled by Fred DeLuca, buys the property for $100.
Just before Christmas, DeLuca’s lawyers seek a deficiency judgement in the amount of $142,391,178 against DeLuca himself.
Pugliese pleads no contest to criminal charges brought against him concerning the reserve he created to pay expenses. The charges stemmed from his testimony in the civil case between he and DeLuca, in which he admitted creating reserves to make sure expenses were met. He had told DeLuca about his actions before the suit was filed.
Pugliese makes restitution and begins a six-month sentence on fraud charges. He serves four. Evidence proves that none of the money he put in reserve was used for his personal gain; it all went to Destiny’s expenses.
FD Destiny Management, LLC, continues to manage and control LCOC, LLC.