2 Plead Guilty in Connection with Real Estate Ponzi Scheme

Allison Tussey —  December 11, 2014 — Leave a comment

Barry J. Graham, 59, and Ricky Lynn Stokes, 54, both of Ft. Myers, Florida, pled guilty to conspiracy to commit bank fraud, in violation of Title 18, United States Code, Section 371, before U.S. Magistrate Judge Lurana S. Snow in Key West.  The charges stem from the defendants’ participation in a $300 million Ponzi scheme involving the sale of vacation rental units to approximately 1,400 investors in the Florida Keys and elsewhere.

Cay Clubs Resorts and Marinas (Cay Clubs) operated from 2004 through 2008, from offices in the Florida Keys and Clearwater.  Cay Clubs marketed vacation rental units for 17 locations in Florida, Las Vegas and the Caribbean, to investors throughout the United States.  Cay Clubs would promise to develop dilapidated properties into luxury resorts, and would promise investors an upfront “leaseback” payment of 15 to 20% of the sales price of the unit at the time of closing.  Once an investor agreed to purchase a unit, Cay Clubs would arrange for a real estate closing and lender financing, but would not disclose the leaseback payment and other financial inducements to the borrowers on paperwork submitted to lending institutions.

According to court documents, Graham was the Director of Sales for Cay Clubs from 2004 through late 2007.  Stokes was, from September 2005 to 2008, one of Cay Clubs’ highest-producing sales agents and was Cay Clubs’ Director of Investor Relations.

During this time, Graham and Stokes conspired with others to fraudulently inflate the prices of Cay Clubs units through insider sales.  Graham, Stokes and other insiders purchased units from Cay Clubs without disclosing their affiliation with Cay Clubs.  Thereafter, these insider sale prices were used on marketing materials to make it appear to investors that the Cay Clubs units were rapidly increasing in price.  Furthermore, as Cay Clubs experienced financial difficulties, Graham, Stokes and others conspired to fraudulently market the Cay Clubs investment to new investors by making false and misleading statements, including by concealing Cay Clubs’ failure to convert dilapidated properties into luxury resorts.

Stokes, Graham, and also others created and distributed marketing materials that contained false and misleading statements in order to induce investors to purchase units. For example, Stokes created a sales script and power point presentation entitled “Retire Rich and Young in Paradise.”  The sales script contained numerous false and fraudulent statements and was provided to investors and made available to the investing public on the internet.

Graham received approximately $6.5 million and Stokes received approximately $6.2 million disbursed as real estate commissions or referral fees from Cay Clubs’ affiliated accounts during the fraud.

As previously reported by Mortgage Fraud Blog, Fred Davis Clark, Jr., and Cristal R. Clark, a/k/a Cristal R. Coleman, were charged by Superseding Indictment on September 16, 2014, with conspiracy to commit bank fraud and substantive counts of bank fraud, in connection with the alleged Cay Clubs Ponzi scheme.  The defendants were ordered to be detained pretrial, and trial is set for March 16, 2015 before U.S. District Judge Jose E. Martinez in Key West.

Graham and Stokes are scheduled to be sentenced on March 23, 2015, at 1:30 p.m.

Wifredo A. Ferrer, United States Attorney for the Southern District of Florida, Kelly R. Jackson, Special Agent in Charge, Internal Revenue Service, Criminal Investigation (IRS-CI), Alysa D. Erichs, Special Agent in Charge, U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (ICE-HSI), and Laura S. Wertheimer, Inspector General, Federal Housing Finance Agency, Office of Inspector General (FHFA-OIG), announce the guilty pleas.

Mr. Ferrer commended the investigative efforts of IRS-CI, ICE-HSI and FHFA-OIG, and the assistance of the SEC Miami Regional Office in this matter.  The matter is being prosecuted by Assistant U.S. Attorneys Jerrob Duffy and Thomas A. Watts-FitzGerald.

 

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Allison Tussey

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