Two agree to testify against executives in Cay Clubs fraud case

Article Courtesy of The Miami Herald

By Kevin Wadlow

Published December 31, 2014


Plea agreements signed by two top sales executives with the failed Cay Clubs Resorts and Marinas firm might require them to testify in other cases related to the $300 million collapse of the company.

In a federal hearing in Key West, Barry J. Graham, 59, and Ricky Lynn Stokes, 54, both of Fort Myers, each pleaded guilty Dec. 9 to one count of conspiracy to commit bank fraud.

"The defendant agrees that he shall cooperate fully" with South Florida U.S. Attorney's Office prosecutors, according to the agreements signed separately by Stokes and Graham.

That cooperation includes "providing truthful and complete information and testimony ... at any trial or other court proceeding."

A fraud trial for Cay Clubs founder Fred "Dave" Clark and his wife Cristal Coleman Clark, also a company executive, is set to start March 16 in Key West federal court. The Clarks have entered not-guilty pleas on multiple fraud counts from the Cay Clubs debacle, which the feds have termed a Ponzi scheme.

Sentencing for Graham and Stokes is scheduled March 23 in Key West. Prosecutors agree in the guilty pleas that if they are satisfied the defendants "provided substantial assistance," the government could recommend lighter sentences to the judge. Any recommendation is not binding on the judge.

The bank-fraud count has a maximum prison sentence of five years, plus fines and forfeitures.

"Mr. Graham has acknowledged his role in the scheme, and is hopeful that his full cooperation will be taken into consideration," defense attorney Jordan Lewin said this week.

The defense attorney for Stokes could not be reached.

A motion in the case against the Clarks, now held in federal custody in Miami as flight risks, was filed Monday. Details of the sealed filing were not available.

Cay Clubs acquired a network of 17 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. A federal judge said the firm turned into an illegal Ponzi scheme when money from new investors was used to pay make payments to previous investors.

"Graham received approximately $6.5 million and Stokes received approximately $6.2 million disbursed as real-estate commissions or referral fees from Cay Clubs' affiliated accounts during the fraud," a statement from the U.S. Attorney's Office says.

The fraud cases against Stokes and Graham says they participated in insider sales of Cay Clubs units, which fraudulently indicated the units were soaring in value.

"For example, Stokes would list his employment as an airline pilot ... and would omit that he was the director of investor relations or a sales agent for Cay Clubs," the plea agreement says.

They did not disclose to banks and other lending institutions that they received hefty commissions from the buyers' loans. Both men continued to make "false promises" to investors while knowing that Cay Clubs had no money to upgrade the resort properties, the plea deals say.