A former Cay Clubs Resorts and Marinas sales executive has become the fourth defendant facing a federal bank-fraud count in the wake of the condo-hotel chain's costly collapse.
An indictment filed last week by U.S. attorney's office prosecutors in the U.S. District Court of South Florida accuses Ricky Lynn Stokes, along with former Cay Clubs sales director Barry J. Graham, with committing a single count of conspiracy to commit bank fraud.
If convicted, the charge carries a maximum sentence of five years in prison and forfeiture of any assets tied to Cay Clubs.
A bank-fraud count filed in early October against Graham, 59, was replaced with the conspiracy to commit bank fraud charge in conjunction with Stokes.
“In the prior charge [against Graham], Stokes was referenced but he was not charged,” Assistant U.S. Attorney Marlene Fernandez-Karavetsos said.
“The new [Graham] charge is not a new charge; it is just being filed in a separate case," she said. "The case as it pertains to Stokes is new, however.”
Cay Clubs founder Fred "Dave" Clark, 56, and wife Cristal Coleman Clark, 41, a former company executive, have been in custody on multiple federal counts since June. They were charged in September with committing fraud in the Cay Clubs failure.
"Fred Davis Clark Jr., Cristal R. Clark, Barry J. Graham, Ricky Lynn Scopes and their conspirators would reap the financial benefits of their scheme by obtaining millions of dollars in remuneration and disbursements from various Cay Clubs entities, which proceeds were derived from fraudulently obtained bank loans," prosecutors wrote.
Stokes was described as "one of Cay Clubs’ highest producing sales agents" and director of investor relations before he took over Graham's post as director of sales in late 2007.
Cay Clubs acquired a network of resorts in the Florida Keys, Clearwater and Las Vegas beginning in 2004, and sought to sell individual units to investors as condo-hotels.
The firm, based in the Upper Keys, collapsed in 2008 under pressure to meet financial commitments and failure to perform promised renovations. Banks and about 1,400 investors lost an estimated total of $300 million, according to court records.
Prosecutors wrote that Cay Clubs became a Ponzi scheme when money from new investors was used to make "leaseback" payments promised to early investors. The firm had no way to pay contractual commitments or renovate the "dilapidated" resorts, prosecution documents say.
Federal prosecutors contend the Clarks and Graham sold units to each other to "artificially inflate prices of the Cay Clubs units in order to get the proceeds of larger bank loans...and to set benchmarks that would be used for future marketing."
A civil case lodged by the U.S. Securities and Exchange Commission against several Cay Clubs executives was dismissed under a statute-of-limitations rule.
However, crimes that harm banks or other financial institutions have a longer period for potential prosecution.
On Oct. 20, U.S. District Judge Jose E. Martinez ruled that the Clarks must remain in custody until their trial, now delayed until March, at the federal courthouse in Key West.
The trial previously was scheduled to begin in early November. The Clarks opposed the continuance.
Prosecutors said new charges against the couple, combined with a lack of hotel space in Key West's busy season, require the postponement.
Martinez also ruled Oct. 20 that he agrees with U.S. Magistrate Judge Lurana Snow's decision from July that found "there are no conditions or combination of conditions which reasonably will assure the defendants' appearance" in court if released on bond.
The Clarks left the Keys for the Cayman Islands shortly after Cay Clubs ceased operations in 2008. They later moved to Roatan, Honduras, when a civil case lodged by the U.S. Securities and Exchange Commission was imminent.
The SEC case was dismissed last May under a statute-of-limitations rule. However, crimes that harm banks or other financial institutions have a longer period for potential prosecution.
David Goodhue of KeysInfoNet contributed to this report.