By Kevin Gray
MIAMI, Jan 30 (Reuters) - U.S. securities regulators on
Wednesday accused five former real estate executives of bilking
more than 1,000 investors of more than $300 million with claims
the money would be used to develop five-star resorts in Florida
and Las Vegas.
The Securities and Exchange Commission, in a civil lawsuit
filed in federal court in Miami, allege the executives of the
now-defunct Cay Clubs Resorts and Marinas promised guaranteed
returns of 15 percent on units at the resorts and income through
a company-managed rental program.
But the Florida-based executives instead used the money to
run a Ponzi scheme, paying out early backers with cash from new
investors, the SEC said.
The executives paid themselves "exorbitant" salaries and
commissions of more than $30 million and used investor money to
buy airplanes and boats and make an investment in a rum company,
the SEC said in the lawsuit.
"These Cay Clubs executives lined their pockets with
millions of dollars they told investors would be used to develop
five-star resort properties," Eric Bustillo, the head of the
SEC's office in Miami, said in a statement.
The five-count criminal complaint names Cay Club's former
president and chief executive officer, Fred Davis Clark, Jr.;
the company's ex-chief accounting officer, David Schwarz; and
three sales executives, Cristal Coleman, Barry Graham and Ricky
Lynn Stokes.
The five are accused of violating federal securities laws.
The scheme began in 2004 and raised money from more than
1,400 investors across the United States, according to the SEC.
The SEC said the executives promised investors the
properties they were buying were undervalued and would offer
instant equity because Cay Club properties had historically
appreciated by up to 300 percent.
One sales director wrote letters to potential investors
insisting that profits were "guaranteed" and describing Cay
Clubs as a "very stable financially healthy company worth
BILLIONS."
The company abandoned its operations in 2008, and Clark, the
former CEO, moved from Key Largo, Florida, to the Cayman
Islands, the SEC said.
Clark is currently the co-chairman of a Cayman Islands
entity that includes a Caribbean pawn shop network and a liquor
business, the SEC said.
A lawyer representing Clark could not be immediately reached
for comment.
The SEC is seeking financial penalties from Clark and two
other executives. It also seeks to have the five executives
account for the money they received and repay any "ill-gotten"
financial gains.
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