Crime

Former Cay Clubs CFO gets 40 years in the federal pen

The former chief financial officer of a Florida Keys resort company on Thursday was sentenced to 40 years in federal prison for his role in what prosecutors have termed a $300 million Ponzi scheme.

David W. Schwarz, 60, of Orlando had been convicted of conspiracy to commit bank fraud, two counts of bank fraud and one count of interference with the administration of the Internal Revenue Service. U.S. District Court Judge K. Michael Moore handed down his sentence at the federal courthouse on Simonton Street in Key West.

Moore “found that the criminal conduct resulted in $303 million in fraudulent proceeds and approximately $170 million in victim losses,” the U.S. Attorney’s Office in Miami said in a prepared statement. A restitution hearing has been set for July 10 in Key West.

Between 2004 and 2008, Cay Clubs grew to more than 1,000 employees and became one of the largest employers in the Florida Keys. Schwarz was the one-third owner and Fred “Dave” Clark Jr. owned two-thirds. Clark 59, was sentenced to 40 years in prison last year.

Cay Clubs was based in Tavernier but also operated in Clearwater and Las Vegas.

Prosecutors say that Cay Clubs started in 2004 “with fraudulent sales of Cay Clubs units to insiders, using money from Cay Clubs bank accounts to fund the cash to close for purchases, while obtaining mortgage financing from lending institutions. These fraudulent sales were used in marketing materials to falsely show demand for Cay Clubs units and to inflate prices, as Cay Clubs was in reality purchasing units from itself. Proceeds of these sales were diverted to Schwarz and Clark.”

There were some 1,400 investors, many of whom lost their life savings.

“Schwarz and Clark failed to remodel the dilapidated properties as they promised investors, while taking millions of dollars out of the company for their own benefit. During the operation of Cay Clubs from 2004 through 2008, Schwarz and Clark diverted more than $30 million in proceeds for themselves, including millions of dollars in cash transfers that were used to purchase property and other businesses, including a gold mine, a rum distillery, aircraft and a coal reclamation business,” prosecutors say.

Former Cay Clubs sales executives Barry Graham, 59, and Ricky Lynn Stokes, 54, both formerly of Fort Myers, previously pleaded guilty to conspiracy to commit bank fraud in related cases and were sentenced to 60 months and 30 months, respectively.

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