Robert Falor, once the condo-hotel king of South Florida, is accused by federal regulators of improperly pocketing about $5 million from investors in failed South Beach and Chicago ventures.

The Securities and Exchange Commission sued the Chicago developer partly over money he was supposed to spend converting the Tides, Breakwater and Edison hotels into luxury condo-hotel projects on Ocean Drive in South Beach.

The SEC claims he misled investors in his development companies while spending the funds on himself and his family, with the money going to a new Bentley, private jet trips and other condo-hotel ventures.

The charges are the latest blow to Falor, who lost his hotel portfolio to bankruptcies and legal fights with partners.

Falor, 41, could not be reached for comment Friday. An e-mail to his brother and business partner, Chris, was not responded to, and calls to Falor's cellphone went unanswered.

The suit seeks recovery of the $4.6 million Falor is accused of diverting to himself, as well as unspecified civil penalties against Falor.

In court documents filed in federal court in Chicago, the SEC portrays Falor as diverting funds only days after unnamed investors gave him cash to back ventures at what was the height of the condo-hotel boom.

His strategy was to partner with other developers to buy posh hotels, then sell units to individual buyers as condominiums. The business model was popular throughout South Florida, as hotel owners sought to cash in on the booming condominium market.

Falor was at the forefront of the trend, pushing conversions at Islamorada's Cheeca Lodge, South Beach's Royal Palm and nearly a dozen more. The peak came when he signed Paris Hilton's younger sister to brand a new Ocean Drive hotel being formed out of the Breakwater and Edison, plus a sister property in Chicago.

DEAD END

Falor's sales materials promised returns of between 50 and 120 percent over two years once the condo-hotel units were sold, according to the SEC, though each of the ventures cited in the complaint ended in sales or bankruptcy.

The SEC papers say that in four weeks in late 2004, Falor raised $2.8 million from 26 investors to fund the Tides conversion on Ocean Drive. The SEC claims he spent $1.8 million of it ``for his personal benefit,'' including jet trips and unrelated real estate projects.

At the time, Falor was pursuing purchase of the nearby Royal Palm, a 417-room hotel built with Miami Beach's financial support that fell into a foreclosure fight after Falor and partners launched a failed condo conversion there in 2005.

Falor's partners ousted him from the Tides project and sold the hotel, with Falor keeping his $600,000 share of the proceeds, according to the SEC complaint.

The suit also accuses him of keeping $1.2 million out of the $2.2 million he raised for a conversion of a Hyatt in Chicago. Of that, $48,000 allegedly went toward a new Bentley.

And he's accused of keeping $1.6 million of the $2.8 million raised for the Breakwater and Edison project, which got national attention when Nicky Hilton, signed a branding deal with Falor for the planned Ocean Drive hotel. The hotels were sold out of bankruptcy after the venture collapsed.

The SEC says some of the money went to his brother, Chris, for services as a general contractor on the condo-hotel projects. The SEC said investors weren't told that Chris did not have experience as a contractor or that he had a conviction credit-card fraud.

The complaint also says Robert Falor's wife at the time, Jennifer, received $860,000 from the Tides investor dollars and used it for a down payment on a multimillion-dollar home in Winnetka, Ill. Now his ex-wife, Jennifer is named as a ``relief defendant'' in the suit because she reportedly has nearly $1 million of the diverted funds.

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