RALEIGH, N.C. (AP) -- Three banks have been added to a multimillion-dollar lawsuit stemming from federal and state investigations into a failed real estate venture in western North Carolina.

The News & Observer of Raleigh reported Friday that BB&T of Winston-Salem, United Community Bank of Georgia and Carolina First of South Carolina are now defendants in the suit. Records provided by investors suggest the banks willingly participated in the fraud, said attorney Rob Sparks.

"It was part of a conspiracy that included a large number of people -- banks, developers, appraisers and others," said Sparks, who is representing the investors.

Investors filed the lawsuit after the financial collapse of the Village of Penland, a 1,300-acre mountain development near Asheville. The project involved properties that were used as loan collateral, but appraisals far exceeded the actual value of the land.

State prosecutors said the setup led consumers to borrow a total of $100 million to buy properties that now are worth far less. North Carolina's attorney general used a court order to halt the project in June, but investors are still required to make payments on their loans.

During a court hearing Thursday, attorneys for the investors said the scheme would have been impossible had the banks not been willing participants. A judge declined the investors' request to add First Charter of Charlotte to the lawsuit because the bank was involved in a similar court case in Mecklenburg County.

First Charter was the only bank to formally object to the investors' request Thursday.

Adding the banks to the litigation could help other criminal and civil cases stemming from the project, which also is being investigated by the Federal Bureau of Investigation.

A former BB&T bank investigator filed a lawsuit after she said she was fired for refusing to help cover-up a $20 million fraudulent loan connected to the Village of Penland project. The state Attorney General's Office filed suit against the developers alleging securities and mortgage fraud.

Earlier this month, 40-year-old Neil O'Rourke of Apex pleaded guilty to conspiracy to commit securities, mail, wire and bank fraud. Prosecutors said O'Rourke helped coax investors and lenders to get involved in the project. He faces up to five years in prison and a $250,000 fine.

Investors were told that if they got in on the ground floor of the development, they could make thousands of dollars -- in some cases, hundreds of thousands of dollars -- with little risk, according to court records. Many were told they didn't have to invest their own money.

Most of the several hundred loans provided by the banks used the same lawyer, land appraiser and loan officers. Those officers often failed to meet with customers before money was loaned, according to the suit.

Information from: The News & Observer, http://www.newsobserver.com

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