5 Former Real Estate Executives Charged with Defrauded Investors

Allison Tussey —  October 11, 2013 — 2 Comments

Five former real estate executives have been charged with defrauding investors into believing they were funding the development of five-star destination resorts in Florida and Las Vegas when they were actually buying into a Ponzi scheme.

Fred Davis Clark, Jr., president and CEO, David W. Schwarz, chief accounting officer, Cristal R. Coleman, manager and sales agent, Barry J. Graham, sales director, and Ricky Lynn Stokes, sales director, were charged.

The complaint alleges that Cay Clubs Resorts and Marinas raised more than $300 million from nearly 1,400 investors nationwide through a network of hundreds of sales agents, marketing seminars, and podcasts that touted the profitability of purchasing units at Cay Clubs resort locations. Investors were promised immediate income from a guaranteed 15 percent return and a future income stream through a rental program that Cay Clubs managed. But instead of using investor funds to develop resort properties and units, the Cay Clubs executives used new investor deposits to pay leaseback returns to earlier investors. Meanwhile they paid themselves exorbitant salaries and commissions totaling more than $30 million, and investor funds also were misused to buy airplanes and boats. While still advertising itself as a profitable venture, Cay Clubs eventually abandoned its operations. Many investors’ properties went into foreclosure.

According to the complaint, the scheme began in 2004. Clark, Coleman, Graham, and Stokes solicited investors with promises of guaranteed income, instant equity in undervalued properties, historic appreciation, and at least $30,000 in upgrades to the units they purchased at Cay Clubs resort locations in Florida and Las Vegas. The representations about investors’ profitability and instant equity were false because the purported triple-digit returns resulted from undisclosed insider transactions with Cay Clubs by Coleman, Graham, and Stokes. Their actions made it appear that Cay Clubs units had enormous rates of appreciation over a short period of time when in fact the transactions were merely part of an insider flipping scheme. Further, Stokes wrote letters directly to potential investors claiming that the leaseback payments and profits were “guaranteed” and that Cay Clubs was a “very stable financially healthy company worth BILLIONS.”

Cay Clubs allegedly continued to solicit new investors despite the fact that the company’s financial condition had deteriorated so significantly that it did not have sufficient funds to make the “guaranteed” leaseback or rental payments to investors. Clark, Coleman, and Schwarz misappropriated millions of dollars in investor funds using the multitude of bank accounts they controlled. Besides purchasing airplanes and boats, they misused investor money for unrelated business ventures including investments in precious metals and a liquor distillery that produced Pirate’s Choice Rum. After Cay Clubs abandoned its operations in 2008, Clark and Coleman (who are now husband and wife) moved to the Cayman Islands and continued to dissipate assets and funnel at least $2 million to offshore accounts.

The complaint seeks financial penalties from Clark, Coleman, and Stokes and the disgorgement of ill-gotten gains plus prejudgment interest by all five executives. The complaint also seeks injunctive relief to enjoin them from future violations of the federal securities laws as well as an accounting and an order to repatriate investor assets.

The complaint was filed by the Securities and Exchange Commission in U.S. District Court for the Southern District of Florida.

The SEC’s investigation was conducted in the Miami Regional Office by Senior Counsel Linda S. Schmidt and Senior Regional Accountant Fernando Torres under the supervision of Assistant Regional Director Jason R. Berkowitz. Senior Trial Counsel Amie R. Berlin will lead the SEC’s litigation.

“These Cay Clubs executives lined their pockets with millions of dollars that they told investors would be used to develop five-star resort properties,” said Eric I. Bustillo, Director of the SEC’s Miami Regional Office. “They continued to defraud investors as Cay Clubs collapsed.”

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2 responses to 5 Former Real Estate Executives Charged with Defrauded Investors

  1. still haven’t begun to follow the real money (south florida Bird-man and other birds/falcones, JDI-XYZ, and the lawyers (wsc and southwest floridas other bird-phoenix) who helped mastermind the schemes against people, places, states’ filings, city govs. Now Clark, his missy Cristal, and Schwarz are hiding out in Honduras. what about the other Schwarz who was side-by-side with brother, keeping things tidy and helping with the books. speaking of books, wouldn’t the bookkeepers be a good place to start, debbie, nancy, deana, mary, vicki. the stories they could tell.

  2. It’s been a long time coming. Here in the Tampa Bay Area, the connection is the Clearwater Cay Club project; the Grand Bellagio at Baywatch, and Grand Venezia at Baywatch. Working as an Expert Witness in three civil cases and two appraisal license law actions, I have had the opportunity to examine thousands of pages of documents and many appraisal reports related to the two Clearwater projects. It is an amazing story.

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