2 Sent to Prison for Real Estate Ponzi Scheme

Allison Tussey —  March 31, 2015 — Leave a comment

Barry J. Graham, 59, and Ricky Lynn Stokes, 54, both of Ft. Myers, Florida, were sentenced to 60 months imprisonment, followed by three years of supervised release, for promising to develop dilapidated properties into luxury resorts as well as an upfront leaseback payment at the time of closing, but failed to disclose the leaseback payment and other financial inducements to the borrowers, on paperwork submitted to lenders.

According to court documents and statements made in court, the defendants participated in a $300 million Ponzi scheme involving the sale of Cay Clubs Resorts and Marinas vacation rental units to approximately 1,400 investors in the Florida Keys and elsewhere.  The Cay Clubs business operated from 2004 through 2008, out of offices in the Florida Keys and Clearwater, Florida. Graham was the Director of Sales for Cay Clubs from 2004 through late 2007.  From September 2005 to 2008, Stokes was one of Cay Clubs’ highest-producing sales agents and was Cay Clubs’ Director of Investor Relations.

Cay Clubs marketed vacation rental units, in seventeen locations throughout Florida, Las Vegas and the Caribbean, to investors throughout the United States. Cay Clubs promised to develop dilapidated properties into luxury resorts.  They also promised investors an upfront “leaseback” payment of 15 to 20% of the unit’s sales price, at the time of closing.  Once an investor agreed to purchase a unit, Cay Clubs arranged for a real estate closing and lender financing.  Clay Clubs would not disclose the leaseback payment and other financial inducements to the borrowers, on paperwork submitted to lending institutions.

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.  Stokes, Graham, and others created and distributed marketing materials that contained false and misleading statements in order to induce investors to purchase units.

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.

During the course of the fraud scheme, Graham and Stokes received approximately $6.5 and $6.2 million, respectively, in real estate commissions or referral fees from Cay Clubs’ affiliated accounts.

On September 16, 2014, co-conspirators Fred Davis Clark, Jr., a/k/a Dave Clark, 56, and Cristal R. Clark, a/k/a Cristal R. Coleman, 41, both formerly from Monroe County, were charged by Superseding Indictment with conspiracy to commit bank fraud and substantive counts of bank fraud, in connection with their alleged participation in the Cay Clubs Ponzi scheme.  Dave Clark and Cristal Clark are scheduled for trial before United States District Judge Jose E. Martinez, in Miami, on June 1, 2015.

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 Timothy Mowery, Special Agent in Charge, Federal Housing Finance Agency, Office of Inspector General (FHFA-OIG), made the announcement.

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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