US$163M Ponzi scheme linked to Puerto Plata developers
LAS VEGAS (CN) – Owners of two Caribbean timeshares bilked 1,200 investors out of $163 million in a five-year Ponzi scheme that netted them US$58.9 million in commissions, the SEC claims in Federal Court.
James B. Catledge and Derek F. C. Elliott, through their company Net Worth Solutions, paid themselves "exorbitant undisclosed sales commissions" from sales of securities for two resorts in the Dominican Republic, the SEC claims.
The two types of securities were known as "Residence" and "Passport" investments, for timeshare and timeshare ownership interests respectively,
The men promised annual returns of 8 percent to 12 percent on Residence investments and 5 percent annually on Passport investments, according to the complaint.
Investors were told their returns were guaranteed. "Nevertheless, only a very small percentage of investor funds were actually used to renovate and construct the properties," the SEC says in the complaint. Instead, defendants skimmed undisclosed commissions and used new money to pay off earlier investors, the SEC says.
Catledge, 44, of San Diego, founded "a series of multi-level marketing entities that sold investments in Elliott resorts," the first of which was used for Impact America, followed by Impact Net Worth and Net Worth Solutions, according to the complaint.
Elliott, 41, of Hillsburgh, Ontario, was the company’s president.
Catledge and his father bought the Cofresi resort in the Dominican Republic in 2003, but by 2004, "they needed additional funds to finish construction and make repairs," the complaint states. They hired Catledge to raise money for the resort, the SEC says.
EMI Sun Village Inc., which owned the resort, targeted investors in the western United States to buy Residence resort investments.
From the Globe and Mail today
Before his business crumbled amid allegations of fraud, Ontario entrepreneur Derek Elliott ran a luxurious but money-losing resort in the Dominican Republic that once hosted Hollywood celebrities and a Maxim magazine beauty pageant.
Now, he faces a complaint from the U.S. Securities and Exchange Commission that he and a former U.S. business associate, James Catledge, were behind an “international fraudulent scheme.
The SEC alleges that the pair sold timeshares and ownership interests in Mr. Elliott’s resorts and took in more than $163-million (U.S.) from about 1,200 investors, who were “falsely” promised attractive guaranteed returns. The allegations have not been proven.
Mr. Elliott, 41, of Hillsburgh, Ont., northwest of Toronto, ran the Sun Village Resort & Spa near Puerto Plata until 2009. That’s when local banks foreclosed on the property after a lawsuit filed by investors in Florida alleged he and his father, Fred, had blown investor cash on private luxuries like a small plane and gambling expenses. They denied those allegations, and the case against them got bogged down in legal wrangling before being dismissed.