Mastermind of $300 million fraud involving Clearwater condos gets 40 years in prison Tampa Bay Times
Susan Taylor Martin
For a few heady years, Fred Davis Clark Jr. enjoyed the perks of an ill-gotten success — aircraft, yachts, waterfront homes.
But now Clark likely will spend the rest of his life behind bars for
masterminding a $300 million fraud scheme involving condos in
Clearwater and other vacation spots.
A federal judge in Key West this week sentenced Clark, in his late 50s,
to 40 years in prison. Clark was also hit with judgments totaling
$307.1 million for bank fraud and obstructing a Securities and Exchange
Commission investigation.
Clark was convicted in December on three counts each of bank fraud and
making a false statement to a financial institution. The charges
stemmed from his role as CEO of Cay Clubs Resorts and Marinas, a
company that said it would turn Clearwater's run-down Grand Venezia
condos and 16 other tired properties in Florida, Las Vegas and the
Caribbean into luxurious "hotel condos.''
Cay Clubs promised investors who bought the condo units that they would
receive steady rental income and upfront "lease-back'' payments of up
to 20 percent of the purchase price at the time of closing. Federal
investigators said the company raised more than $300 million from
buyers but the operation turned into an illegal Ponzi scheme when it
began using money from new buyers to pay the lease-back fees to earlier
ones.
In an attempt to meet his obligations, Clark engaged in an elaborate
series of fraudulent mortgage transactions that drove up the sales
prices of units. He also extracted $22 million from Cay Clubs
operations for his personal use, investigators found.
Cay Clubs, which never completed the renovations, collapsed in 2008.
The fraud "cost me my retirement, cost me my life savings, cost me all
the sacrifices I made in 30 years of traveling the road to support my
family,'' said Kimball Pugmore of Utah, one of several victims who went
to Key West to testify at Clark's sentencing Monday.
Laurie McNulty of Charleston, S.C., paid $669,000 in 2005 for a condo
in the Grand Venezia, which had views of Old Tampa Bay but was just a
few hundred yards from congested U.S. 19. She and others were told that
a water park and high-end shopping complex would soon be built nearby,
transforming the area into a classy resort.
"This has affected my life so much over the last 10 years,'' McNulty, a
pharmacist, said in court. "It has hurt my marriage. It's taken so much
time away from my kids.''
McNulty's unit went into foreclosure after the promised amenities
failed to materialize and was sold by the bank in 2008 for $175,500.
In related cases, two other Cay Clubs executives pleaded guilty last
year to bank fraud charges. Each was sentenced to five years in prison
and ordered to pay $161.5 million to victims, both individuals and
financial institutions.
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Ex-CFO of $300 Million Resort Condo Fraud Charged by Feds Daily Business Review
Carla Vianna,
14 October 2016
When investors handed money to the Cay Clubs Resorts and Marinas during
the last real estate boom, they were promised a hefty return that comes
with owning a snazzy condo in South Florida, one of nation's hottest
markets.
The Florida-based developer, which operated from Key Largo, among other
places, touted plans to deliver several five-star luxury resorts in the
sunny, tourist-laden Florida Keys and elsewhere. Buyers hoped to
"Retire Rich and Young in Paradise," as Cay Clubs' marketing material
told them.
But the five-star resorts were never built, and investors never
received the quick return or steady stream of rental income promised to
them.
Cay Clubs' former Chief Financial Officer David Schwarz was arrested
Thursday in Orlando on bank fraud and tax charges, more than 10 years
after he and imprisoned company president Fred "Dave" Clark launched a
shady real estate scheme that fleeced 1,400 investors out of more than
$300 million.
Schwarz allegedly played a key role in what federal authorities have
described as an illegal Ponzi scheme carried out by the defunct Clay
Clubs between 2004 and 2008.
Schwarz co-owned the company with Clark, who served as president and
CEO. The duo sought to "unlawfully enrich themselves by misleading and
defrauding lending institutions," according to a sealed indictment
filed Oct. 11 in the Southern District Court of Florida.
Federal prosecutors charged Schwarz with conspiracy to commit bank
fraud, three counts of bank fraud, three counts of making false
statements to a financial institution and one count of interfering with
the administration of the Internal Revenue Service.
The U.S. attorney's office in Miami issued a news release but declined additional comment.
In late 2004, Schwarz and Clark began selling Cay Clubs condo units to
insiders, using money from company bank accounts to fund the deals,
while falsifying loan applications to secure mortgages, the indictment
alleges.
The purchases were made to inflate condo prices and paint an artificial
portrait of high demand for the units when in reality the company was
simply buying from itself. While Schwarz and Clark pocketed the cash,
investors were shown a picture of a project whose tony condo units were
selling well.
But the developers faced dwindling sales in 2006 when dilapidated
properties still stood where the shiny new hotels were slated to rise.
Schwarz, Clark and other Cay Clubs executives continued selling units
at higher prices to insiders, including family members, and falsifying
mortgage documents, the indictment states. Eventually, the company
began using money from new investors to pay off older ones with no new
profits or loans coming in.
Clark and Schwarz personally snagged over $28 million in investment
funds between them while Cay Clubs was operating from 2004 to 2008,
according to the indictment.
They failed to file tax returns for the Cay Clubs' shell companies and
didn't file individual returns until after the U.S. Securities and
Exchange Commission began probing the fraud.
Schwarz hid millions of dollars from the federal government in false
tax returns for 2004, 2005 and 2006, according to the indictment. If
convicted, he could face 30 years in prison for each of the conspiracy
and bank fraud offenses plus three years for the tax offense.
Clark received a 40-year prison sentence in February for bank fraud and false statement to a lender.
Former Cay Clubs executives Barry Graham and Ricky Lynn Stokes, both of
Fort Myers, were sentenced to five years each in prison last year after
pleading guilt for their roles in the scheme.
Assistant U.S. Attorneys Jerrob Duffy and Alison Lehr are prosecuting
Schwarz, and the case has been assigned to Chief District Judge K.
Michael Moore in Key West.
