Carillon developer sentenced to 1-1/2 years in prison for pandemic loan fraud
A federal judge on Friday sentenced developer Eric Sheppard to one-and-a half years in prison for fraudulently obtaining hundreds of thousands of dollars in emergency loans from a government program meant to help businesses during the COVID-19 pandemic.
In punishing the 55-year-old developer, best known for renovating the Carillon Hotel in Miami Beach, U.S. District Judge Beth Bloom gave Sheppard far less prison time than prosecutors sought. They had accused him of lying when he testified during his January trial that ended with his jury conviction for wire fraud and aggravated identity theft.
Bloom rejected prosecutors’ moves to enhance Sheppard’s sentence based on allegations of obstructing justice and using sophisticated means to exploit the government’s Paycheck Protection Program, but she also denied defense lawyers’ bid for no prison time. He was facing up to two and a half years under federal sentencing guidelines for his crime.
“Certainly this case did not involve Lamborghinis or jewelry,” Bloom said, referring to dozens of PPP loan fraud cases in which South Florida defendants have been convicted of spending their ill-gotten pandemic loans on luxury items instead of business payroll. “But you received money to which you were not entitled.”
READ MORE: Lambos. Jewels. How ‘easy money’ from Uncle Sam made Miami a feast for PPP fraudsters
Bloom allowed Sheppard, a Miami native, to remain free on bond until after his restitution and forfeiture hearing on Aug. 23, and then he will have to surrender to prison.
According to evidence presented at Sheppard’s sentencing hearing on Friday in Miami federal court, the developer was convicted of receiving about $450,000 in PPP loans guaranteed by the Small Business Administration after the COVID-19 virus swept the country in March 2020. Evidence also showed that the developer paid most of the loans back — unlike the vast majority of recipients accused of fleecing the system.
One of Sheppard’s defense attorneys, Howard Srebnick, argued the developer should be given a probationary sentence, saying he used the PPP loan money for paying his employees and hiring workers to complete the renovation of a major retail store at his shopping mall in Orlando.
“Eric has been a fixture in our community for decades,” Srebnick argued, saying he may have been convicted of falsifying his loan applications but he used the proceeds to pay his employees as the SBA program requires. “This crime is so different from so many others where they take the money and spend it like a rock star. That’s not what Eric did.”
Sheppard’s college-age daughter, in addition to former Miami-Dade Circuit Judge Amy Steele Donner, who is related to him through marriage, asked the judge for lenience as they spoke of his difficult upbringing in Miami Beach, success as a businessman and acts of generosity as a family man.
But federal prosecutors depicted him as a conniving developer who fleeced the government’s PPP loan program to “enrich himself” and divert some of the proceeds for the mortgage on his Bal Harbour home and his American Express credit card.
“It may not be a Lamborghini case, but it would drop the jaw of a legitimate businessman,” said Assistant U.S. Attorney Ana Martinez.
“This is a businessman with real businesses who knew better,” said fellow prosecutor Aimee Jimenez, who accused Sheppard of lying when he testified at trial. “In my view, he’s trying to manipulate the court” at this sentencing hearing.
Two jury convictions dropped
Earlier in the week, Sheppard caught a huge break from Bloom. The judge threw out his two jury convictions for aggravated identity theft after finding that while he forged the name of his corporate accountant on tax forms submitted with two PPP loan applications, that misrepresentation was not critical to the developer’s convictions of bilking the government’s relief program.
Bloom found that Sheppard’s forgery was not “at the crux” of the developer’s crime of wire fraud, so she threw out the identity theft convictions in a 44-page order filed Monday in Miami federal court. She concluded he was convicted of fraud because he misled lenders about his development businesses and their eligibility for Paycheck Protection Program loans.
READ MORE: Carillon developer Eric Sheppard catches big break on potential prison sentence
With her decision, the judge reduced Sheppard’s potential sentence by four years. Bloom kept intact the jury’s guilty verdicts on four counts of wire fraud, which carried up to 20 years in prison for each offense.
Convicted in January of loan fraud
In January, Sheppard was convicted after a three-week trial of falsifying paperwork and forging signatures on applications to obtain about $900,000 in government-guaranteed loans under the emergency COVID-19 relief plan for struggling businesses during the pandemic.
Sheppard, who records show lives in a $4.2 million home in Bal Harbour, first drew attention as a real estate developer 15 years ago when he renovated the historic Carillon in Miami Beach and turned it into an upscale resort complex with a pair of condo towers and the Canyon Ranch spa. The Collins Avenue project put Sheppard and his company, WSG Development, atop Miami Beach’s real estate world.
The U.S. Attorney’s criminal case against Sheppard, the first South Florida real estate developer accused of defrauding the U.S. government’s Paycheck Protection Program, has yielded mixed results.
The 12 Miami federal court jurors unanimously found Sheppard guilty on four out of nine wire fraud charges but acquitted him of the other five. The panel also found him guilty of two aggravated identity theft charges but acquitted him of the other three.
Prosecutors depicted Sheppard as a duplicitous developer who cheated the system to line his pockets, while his defense team portrayed him as a hard-working businessman who needed the government’s help to pay his employees during a public health crisis.
Sheppard was charged with COVID-19 loan relief fraud under the Small Business Administration’s Paycheck Protection Program approved by Congress, which authorized $800 billion in loans through private banks to companies across the country. The loans under this and other pandemic programs were forgiven by the SBA as long as they were used for legitimate purposes, such as employee wages, leases and utility costs.
Sheppard’s loan applications were in the $150,000 range, reviewed by three lenders and disbursed during the pandemic, according to an indictment. Four of Sheppard’s pandemic relief loans were included in the indictment.
Jimenez and Martinez, the prosecutors, said his loan applications for three different companies — HM Management and Development, HM-UP Development Alafaya Trails and HM Four — were “false and fraudulent.”
They contended he used some of the loan proceeds for personal expenses — though Sheppard’s lawyers argued that the commingling of his funds was proper. The prosecutors also said only one of his companies had any employees — HM Management and Development — and that business employed only a few workers besides him.
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Prosecutors said the main problem with Sheppard’s pandemic loan applications was that they contained purported benefits for full-time W2 employees, but his business hired only independent contractors. That was not allowed under the SBA’s Paycheck Protection Program.
In response, his attorney, Jayne Weintraub, downplayed the difference between the two definitions of workers, saying the Florida State University economics graduate was a smart, self-made millionaire but “unsavvy with a computer.”
She also challenged the prosecutors’ claim that Sheppard forged the signatures of others without their knowledge on a bank letter, a lease agreement and three IRS tax forms.
Weintraub, who worked on Sheppard’s trial defense with attorneys Jonathan Etra and Christopher Cavallo, stressed that the developer sought economic assistance from the SBA program at a critical time during the COVID-19 pandemic.
She said Sheppard used the federal loans to pay workers and buy materials to rebuild a vast space left vacant by the bankruptcy of anchor tenant Toys ‘R Us to make way for another major retailer, Burlington Coat Factory, at a shopping center that he developed off Alafaya Trail in Orlando.
As the nation’s No. 1 fraud capital, South Florida has led the financial crime wave that followed Congress’ passage of the CARES Act during the pandemic.
About 200 South Floridians have been charged with defrauding the PPP program, submitting hundreds of millions of dollars in applications deemed bogus by federal prosecutors. Almost all have been convicted, while others still await trial.
Of those convicted: a businessman using PPP money to buy a $318,000 Lamborghini; a nurse alleged to have lied about his business to get $474,000 that was used in part to pay a Mercedes-Benz lease and child support; and a North Miami suburban couple who claimed to be farmers to qualify for $1 million in relief benefits.
This story was originally published June 7, 2024 at 4:49 PM.
