|A former Orangevillearea father and son are among several persons potentially facing criminal charges as the result of forensic analysis report submitted to the U.S. District Court in Miami.
The court-ordered report recommends the fraud related charges in connection with Dominican Republic real estate transactions alleged to be a type of Ponzi scheme.
Frederick Elliott and his son Derek, who lived near Hillsburgh and had an office on Orangeville's Broadway, are among a number of corporations and individuals alleged to have collected more than
170 million from thousands of Canadian and American investors, including several in the Orangeville area.
The report, submitted Nov. 12, reads: "There is enough and sufficient information available which establishes a reasonable and supportable conclusion that criminal activities have occurred and/or are still ongoing.
"These activities need to investigated and prosecuted and the proper redress needs to be meted out to those involved."
While the report suggests illegal actions were undertaken, they remain as allegations that have yet to be proven in a court of law.
The report alleges that the Elliotts and their assortment of companies - along with those associated with business partner James Catledge - operated what "amounted to a Ponzi-style scheme ... including the taking of exorbitant commissions."
The alleged scheme dates back to the 1980s, when the Elliotts set out to acquire waterfront land in the Dominican Republic's Puerto Plata area. They relocated their business operations to the island in 2000 and, in 2001, launched plans to construct Sun Village Resort & Spa.
Plans for the new Sun Village, or Confresi, resort included a 300-room complex offering luxury villas, five restaurants, nine bars and seven pools. An abandoned Sheraton Hotel in Juan Polio was also purchased with the idea of renovating it.
Between 2001 and 2004, district court reports say, US $32 million was raised from 1,600 investors enticed by a brochure that projected 60% total returns over three years and assured investors that they would receive payments every 90 days.
When the project still wasn't completed by 2004 and was losing money, the report says, the Elliotts offered fractional ownership stakes in luxury suites, much like timeshare agreements, which would give investors use of the suites in one-week increments.
Any unused weeks would be turned over to agents who would, in turn find renters and the rental proceeds would go to the investors in the form of quarterly payments called NUFs.
Despite an infusion of US $64 million from the offering, the report says the resort remained unfinished and was posting an annual loss of US $1 million. Audits reveal that the Confresi project, from its inception through to 2006, had accumulated losses of about US $24 million.
The report suggests that the Elliotts, who were still paying themselves substantial commissions and management fees, were paying investors with fees they received from new investors.
According to the forensic analysis report, over 58 million in commissions were paid from 2004-09 to the Elliotts, Mr. Catledge and/or their related companies.
Much of the money intended for the resort development is alleged to have, instead, gone to finance a lavish lifestyle for the Elliotts that included a $500,000 yacht and the payment of over $1 million in gambling debts incurred by Derek Elliott.
Following the collapse of the consortium of companies - either owned or related to the Elliotts and Mr. Catledge - that was building the resort, Sun Valley in Confresi was sold at bank auction for US $4.3 million in October.
Dominican banks foreclosed on the Juan Dolio project in September.
"Approximately $170 million was collected from investors/owners between the Juan Dolio and Confresi projects," the report points out. "That money has now been completely lost, though (there is) belief that significant monies still remain, in offshore accounts still to be located and/or have been redistributed into other assets."
In an effort to recoup some of those funds, investors launched a series of lawsuits against the Elliotts and their associates in March.
Read also: Elliotts facing suit in Canada over alleged Ponzi scheme in the DR