American investors who lost $3 million in Dominican Republic will get some back

(idahostatesman.com) - Officials with the Idaho Department of Finance say a group of Idahoans who lost more than $3 million as part of bogus hotel investment in the mid 2000’s will get back about half of a million dollars.

The Department of Finance sued "primary promoters" Derek Elliot, James Catledge, Sun Village Juan Dolio Associates LLC, and Impact Inc. in 2009, when those people (and their companies) did not repay almost 30 Idahoans who invested $3.4 million to pay for the construction of two hotels in the Dominican Republic. Those investors, who put their money into the companies in 2005 and 2006, were promised a quarterly payment with a fixed rate of return and their money back in five years.

But the investors actually bought time shares in the hotels lasting 45 years, according to a lawsuit. The suit also said the promoters stopped paying quarterly returns and refused to repay investors who wanted their money. Department of Finance officials said Elliot, Catledge, and the companies sold unregistered securities and violated Idaho’s securities fraud statute.

Judgments of $2.6 million and $3.4 million were eventually entered against Elliot and Catledge. Because of these various court orders and settlements resolving matters with all defendants except Elliott (and his company), those Idaho investors are expected to get back about $510,000, Department of Finance officials said.

"While the court orders and related settlements will not make Idaho investors completely whole, they do provide some relief for Idahoans whose money was lost some years ago," Idaho Department of Finance Director Gavin Gee said Tuesday.

Investigations Chief Jim Burns said department officials began investigating the promoters in 2006, after being contacted by a prospective investor.

That investigation revealed the fraud and led the department to issue a cease-and-desist order in July 2007 for Elliot, Catledge and their companies. The order required them to return the money to any investors who asked for it back. Both men refused, Burns said.

The lawsuit said Elliot and his companies functioned as the real estate developer and received most of the $3 million. Burns said investors were solicited by members of Catledge's Impact Group, which handled marketing. Catledge and other defendants who worked for the Impact Group are not licensed to sell securities in Idaho, the lawsuit said.

Department of Finance officials said Tuesday the collection of the $2.6 million judgment against Elliot "appears unlikely."

 
 
 

Read more here: http://www.idahostatesman.com/2012/07/18/2193442/idaho-investors-who-lost-over.html#storylink=cpy

Here is the background story, Dominican Watchdog has tracked this since the first articles:

 

Sun Village, Biggest Ponzi-timeshare scam ever in Dominican Republic

(theglobeandmail.com) - 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.

The SEC’s complaint, filed in federal court in Nevada on May 24, contains similar allegations about the way timeshares and ownership interests were sold to investors by Derek Elliott and Mr. Catledge, who is based near San Diego and was the head of various “multi-level marketing” companies.

In a “road show” put on for investors called “Real Estate Secrets of the Wealthy,” the SEC complaint alleges, the pair falsely guaranteed quarterly payments of 8 to 12 per cent to convince investors to invest their home equity and savings in the Sun Village resort and another hotel being remodelled near Juan Dolio.

But very little of the $163-million in investors’ money ended up going into the resorts, the SEC alleges. Nearly $59-million went into “exorbitant” commissions for Mr. Elliott, Mr. Catledge and their related companies, the SEC alleges.

Of the $91.2-million raised for the Juan Dolio hotel alone, the SEC alleges, Mr. Elliott spent just $8-million on construction, including $1.8-million in construction payroll. The hotel was never completed.

Investor funds for the Juan Dolio hotel were used to pay returns to previous investors in the Sun Village, the SEC alleges: “Consequently, the Elliott resorts operated as a Ponzi scheme.

Investors weren’t told about the commissions, and were reassured that the first Sun Village resort was profitable even though it was losing millions of dollars a year, the SEC alleges. Investors also weren’t told, according to the SEC, that Mr. Elliott and Mr. Catledge had reneged on a 2007 agreement to refund $3.4-million to Idaho investors for breaking securities laws, after an investigation by the state’s department of finance.

The SEC is demanding financial penalties and that Mr. Catledge, Mr. Elliott and their companies “disgorge all ill-gotten gains.”

Mr. Catledge, whom Mr. Elliott has previously blamed for the problems in Florida court documents, could not be reached for comment. Neither could a U.S. lawyer he has retained.

Mr. Elliott, who has since launched a new luxury vacation rental website called Preferred Escapes, said he had not heard about the SEC allegations when contacted by The Globe and Mail.

“I’m not aware of it, and I can’t really give you a comment,” he said, referring further comment to his lawyer, who could not be reached on Tuesday.

 

www.courthousenews.com - 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.

 

Earlier articles:

 

New lawsuits in the Derek Elliott and Sun Village timeshare dispute(Update 2)

 

Businessweek article about Derek Elliott's USD 170M Ponzi scheme

 

Second restraining order issued in Dominican Republic against Canadian development teams’ assets

 

Dominican Watchdog Note: This is not the only timeshare scam in the Dominican Republic, you should read all scam forums on the internet before buying timeshare in the Dominican Republic - There is no legal system or "cool down" period protecting you in the DR. If you paid, they money is gone!!!

Go back | Date: 19 Jul 2012
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