Executives of the former Cay Clubs Resorts and Marinas declared in sales pitches that investors could "Retire Rich and Young in Paradise," but many investors found themselves in financial purgatory, federal prosecutors charge.
"False promises [of guaranteed income] were made to investors with regard to dilapidated properties for which Cay Clubs did not have the financial ability to make the promised improvements," say charging documents filed Wednesday against Barry J. Graham, Cay Clubs' former director of sales.
Graham, a 59-year-old Fort Lauderdale resident, was charged with a single count of conspiracy to commit bank fraud. A conviction would carry a maximum prison sentence of five years, plus forfeiture of any assets Graham acquired through his Cay Clubs dealings.
Graham is the third high-ranking Cay Clubs executive to be hit with federal charges in recent weeks stemming from the collapse around 2008 of Cay Clubs. The feds have called it a $300 million Ponzi scheme.
Cay Clubs founder Fred Davis "Dave" Clark, 56, and his wife, Cristal Coleman Clark, 41, were charged in September with bank fraud and conspiracy connected to "the alleged Cay Clubs Ponzi scheme," a statement from U.S. Attorney General Wilfredo Ferrer says.
One of Graham's "overt acts" cited in the 11-page information took place during a March 2007 investors' meeting at Sombrero Resort in Marathon, a Cay Clubs property.
Graham reportedly told investors that Cay Clubs "had undertaken development activities for that project ... when he knew that Cay Clubs did not have the financial ability or specific plans to develop the project at all."
Even as Cay Clubs' financial plan was crashing, the federal information says, Graham and others tried to lure new investors by "making false and misleading statements, including by concealing Cay Clubs' failure to convert dilapidated properties into luxury resorts."
Graham, during his three-year work as Cay Clubs' sales director, "conspired with others to fraudulently inflate the prices of Cay Clubs units through insider sales," according to the U.S. Attorney's Office.
Cay Clubs' plan to market vacation-rental units in the Keys, Clearwater, Las Vegas and other areas ended as a "Ponzi scheme [affecting] approximately 1,400 investors in the Florida Keys and elsewhere," said federal prosecutors. Losses have been estimated at $300 million.
In the Keys alone, hundreds of people lost their jobs when the company went belly-up.
On Friday, U.S. Magistrate Judge Lurana Snow denied a motion by Dave Clark to separate newly filed Cay Clubs charges from earlier counts of mail-fraud and obstruction related to a Cayman Islands firm that operated a network of Caribbean pawn shops.
Tavernier bank accounts opened as part of the complex Cay Clubs operations were later used by the Clarks to siphon money from CMZ Group, the Cayman firm, prosecutors said in June.
Evidence "of the Cay Clubs conspiracy is required to prove the obstruction count" and is "inextricably intertwined with the CMZ conspiracy," Snow concluded.
The magistrate also granted a prosecution motion to delay the Clarks' scheduled November trial on combined CMZ and Cay Clubs charges.
Pretrial discovery likely will not be finished by the Nov. 3 trial date, and Key West has a shortage of hotel rooms in November, Snow ruled. No new date was announced.