The federal bank-fraud case against former Cay Clubs Resorts and Marinas executives goes to the jury this week in Miami.
Defense attorneys for company founder Fred D. "Dave" Clark, 57, and wife Cristal Coleman Clark, 41, a Cay Clubs manager, rested their case Thursday.
After U.S. District Judge Jose E. Martinez denied the defense's motion for a directed acquittal, the prosecution and defense made their closing arguments Monday. Jury deliberations in the Cay Clubs' $300 million collapse -- described by prosecutors as a Ponzi scheme -- were expected to begin after Martinez delivered instructions to the jury Tuesday.
"It is Dave Clark's theory of defense that he acted in good faith and he did not have any intent to defraud," defense attorneys Todd Foster and Valentin Rodriguez said in a Friday filing on proposed jury instructions.
"As to the bank-fraud counts and bank-fraud conspiracy count relating to Cay Clubs, Dave Clark's position is that he relied in good faith on the advice of professionals, including lawyers and accountants," his attorneys contend.
"A scheme to defraud is not necessarily to be inferred from business adversity or unprofitable ventures," another defense filing says. "Mere puffing and exaggerated enthusiasm do not constitute legal fraud."
The primary counts against the Clarks accuse them of bank fraud by providing false information and artificially inflated property values to obtain mortgages for buyers of the condo-hotel units, and using the mortgage payouts for unpermitted expenses.
Cay Clubs, founded in 2004 and based in the Upper Keys, aimed to convert existing resorts in the Keys, Clearwater and Las Vegas into luxury condo-hotels. Buyers for individual units were solicited with forecasts of high income from future rentals.
By 2008, the firm failed under pressure to meet financial commitments and the inability to perform promised renovations. Banks and about 1,400 investors lost an estimated total of $300 million.
It became a Ponzi scheme when Cay Clubs executives realized by mid-2005 that Cay Clubs "was not the successful business [the Clarks and salesmen] claimed it was," prosecutors said in a filing. "By April 2005, in Ponzi scheme fashion, [Cay Clubs] began using new investor funds to pay leaseback returns to earlier investors."
Undisclosed insider sales between company executives created a bogus record of skyrocketing property value, prosecutors argued. Other expenses, including leaseback payments to the buyer, were improperly included in the mortgage.
During the five-week trial that opened July 8, online court documents indicate many of the court arguments centered on the relevance of expert witnesses and admissibility of records, including e-mails.
The Clarks also are charged with mail fraud in connection with the use of a Tavernier mailing address to skim money from a Cayman Islands pawn-and-loan business they co-owned with other investors. The U.S. Marshals Service took them into custody in Central America last year.
Each of the multiple counts carries maximum penalties of 20 years or more. If the Clarks are convicted, prosecutors plan to seek forfeiture of about $2.7 million in cash and property.
Two former Cay Clubs executives got five years in federal prison in exchange for testifying against the Clarks.