By Dan Christensen, BrowardBulldog.org
Two figures at the center of an alleged $164 million real estate scam marketed out of South Florida have been indicted by a federal grand jury in San Francisco on mail fraud and conspiracy charges.
James B. Catledge, an investment guru and major Republican Party donor, and Canadian businessman Derek F.C. Elliott, are accused of fraudulently soliciting $91.3 million from investors to build a resort in the Dominican Republic that never opened.
Each man faces up to 20 years in prison, and a maximum fine that is twice the value of the property involved.
The six-page indictment announced Friday is a bare-bones document that, despite the enormous sums involved, provides few details about the scope of the alleged fraud, how many people were burned or the identities of victims.
The indictment grew out of an FBI investigation that began 2½ years ago during a civil racketeering lawsuit in Miami federal court filed by 230 disgruntled investors in the ill-fated EMI Sun Village Resort and Spa.
Broward Bulldog.org reported in January 2010 that court-appointed special master Thomas Scott, a Miami lawyer and former federal judge and U.S. Attorney, had found evidence that Sun Village was actually a huge “Ponzi-style” scheme. He recommended that U.S and Canadian law enforcement investigate.
“The unassailable fact (is) that thousands of investors/owners and by extension their families in the U.S. and Canada, as well as other countries, have been financially destroyed,” Scott wrote in his 50-page report.
According to the indictment, Elliott was the president of various hospitality businesses in the Dominican Republic, including a pair of resorts. Catledge is a motivational speaker and the founder of several marketing companies that, among other things, sold investments in island resorts.
In 2005, the pair took out a 2005 bank loan to buy an old hotel near Santo Domingo they named the Sun Village Juan Dolio resort. They began renovations and recruited investors through Catledge’s Nevada-based sales and marketing companies Impact Inc. and Net Worth Solutions.
Sun Village marketed its Dominican properties out of an office in Doral in western Miami-Dade County. Money that flowed in was routed through an account at a Citibank branch in Tamarac, the Miami lawsuit said.
According to a statement released by prosecutors, Catledge and Elliott’s sales pitch “failed to tell investors that the full commissions being taken on their investment were approximately 44 percent, that the renovations were underfunded, that investors’ money was being used on other projects, and the returns they promised were unsupportable and could not be achieved.
The Miami special master’s report described Catledge as “the main architect of the Ponzi scheme.”
Catledge and Elliott diverted nearly $69 million from investors to commissions, other projects and to pay “guaranteed” interest to early investors, the indictment said.
‘REAL ESTATE SECRETS OF THE WEALTHY’
More details are contained in related, but non-criminal charges brought in May by the Securities and Exchange Commission against Catledge and Elliott. The principal allegation is that the men were involved in the fraudulent offering of unregistered investments for Juan Dolio and another Sun Village resort, Cofresi.
The SEC’s complaint contends the two men raised nearly $164 million selling timeshares and other ownership interests to approximately 1,200 investors between 2004 and 2009. The complaint also stated the pair promised investors 5 to 12 percent annual returns, while also assuring that principal investments remained safe.
Catledge and Elliott used various sales materials to convince people to use their home equity and savings to invest in securities tied to the resorts, the SEC complaint said. One visual presentation was titled, “Real Estate Secrets of the Wealthy.”
Neither the indictment nor the SEC complaint details what happened to the millions that Catledge and Elliott allegedly siphoned away from investors.
The SEC, however, said Catledge set up a trust in the South Pacific’s Cook Islands where he funneled more than $15 million in commissions that bypassed his marketing company. He and his families were the only beneficiaries.
Court papers filed in the now-closed investor litigation in Miami say the money went to pay for the lavish lifestyle and gambling debts of the resorts’ developers.
The SEC complaint says that Elliott and his father, former Sunrise resident Frederick Elliott, originally purchased the Cofresi resort in 2003 and a year later needed additional funds to finish construction work. A mutual friend suggested they talk to Catledge, who could help them raise the capital they needed.
Net Worth sales associates soon began soliciting potential investors.
Both Juan Dolio and Cofresi were ultimately foreclosed. Investors were wiped out when both projects were sold at public auction in late 2009.
The Miami special master’s report blamed Elliott and his father for “mismanagement and/or essential theft of investor monies” that ultimately delivered “the fatal blows to the investors.”
Still, prosecutors or SEC attorneys have not accused Frederick Elliott of any wrongdoing.
The SEC’s complaint seeks disgorgement of all of Catledge and Derek Elliott’s allegedly ill-gotten gains. Also sought: fines and permanent injunctions against them and EMI Sun Village.
BIG POLITICAL DONOR
In 2008, while authorities contend the scam was in operation, Catledge contributed more than $100,000 to the Republican National Committee, John McCain’s presidential campaign and other Republican causes.
Catledge and his wife, Tiffany, also contributed to Mitt Romney’s 2008 presidential campaign before he dropped out of the race.
On May 28, 2008, Catledge and his wife attended what the Deseret News in Salt Lake City reported was a $70,000-a-couple dinner with President George W. Bush at Mitt and Ann Romney’s vacation home in Deer Valley, Utah.
In April 2010, the Catledges attended a California fundraiser for Republican gubernatorial candidate Meg Whitman. California records show Catledge gave $30,000 to Whitman’s unsuccessful bid.
Catledge has reported no contributions to federal candidates this election cycle.
Catledge’s attorney, Las Vegas celebrity lawyer David Chesnoff, was unavailable for comment. He previously said his client maintains his innocence.
“He categorically denies engaging in any criminal conduct,” Chesnoff said.
Despite last week’s indictment, neither Catledge nor Elliott have been arrested.
Catledge, 45, who lives in Rancho Santa Fe, California, received a summons and is due for arraignment Oct 5., according to the U.S. Attorney’s Office in San Francisco.
No court date has been scheduled for Elliot, 42, who lives near Toronto. The spokesman declined comment when asked if prosecutors consider Elliott a fugitive.