One of the companies in which Fred sold shares was Amber Coast Resort Corp.—a land deal that would later be rolled into Sun Village. The Ontario Securities Commission alleged that financial advisers had sold the shares in the late 1990s without the necessary licences, though enforcement action against Fred and several others was later dropped.
The Elliotts’ relationship with the Austrians fell apart in 2000, leaving them with no revenue stream but with the makings of their own resort—soon to be known as Sun Village.
As Derek tells it, things were rocky from day one. They sent their first run of Sun Village pamphlets to travel agents around Sept. 11, 2001. The ensuing crash of the tourism industry, they say, forced them to close until February, 2002. A little over a year later, an earthquake rocked the Dominican Republic, damaging the resort and shutting it down once again. In October, 2003, a fire wrecked four of the resort’s restaurants; to make matters worse, the Elliotts say their insurer went bankrupt, leaving them with no coverage for a $1-million loss.
Yet, they were keen to expand. The 300-room resort’s pools and restaurants were overbuilt, meaning they needed between 150 and 200 more rooms in order to turn a profit. But slow bookings and a banking collapse in the Dominican Republic made getting new financing difficult, according to Derek.
By that time, Derek—a high school grad who worked as a restaurant manager before joining Fred in 1995—was in charge of day-to-day operations at Sun Village. He and his dad first met James Catledge, a Nevada-based network marketer and motivational speaker, in 2004, through a U.S. investor in Sun Village. According to Derek, it was Catledge who presented a solution to the Elliotts’ cash-flow problem: selling time-shares. After meeting with Catledge at his office just outside Las Vegas, and again at Sun Village, Derek handed the self-styled guru an exclusive contract to sell time-shares in the resort. It was the beginning of what the Elliotts call, in a $120-million (U.S.) countersuit now working its way through the Florida court, a “disastrous relationship.”
n his many websites, James Catledge claims to be a man on a mission to provide “financial education for families.” In various YouTube videos, he can be seen pacing the stage, trying to energize a crowd of sales agents or prospective clients. “Brainwash yourself until the new way kicks in,” he tells one audience. “You’ve already been brainwashed. You’ve been brainwashed by the world to think that you are all you can do right now.”
According to his own bio, Catledge is a Mormon who was raised by a single mother in North Carolina and Tennessee. He “has helped in the design of several golf courses around the world” and says he flew around in a private plane he called Impact One. He also claims to have supported various Republican Party campaigns and dined at former Massachusetts governor Mitt Romney’s Utah home with Senator John McCain and then-president George W. Bush.
By the time he met the Elliotts in 2004, Catledge oversaw a network of thousands of “associates”—essentially, salespeople in a multilevel marketing organization then known as Impact Net Worth. His associates sold time-shares in Sun Village, as well as “fractional interests” in a second Dominican project—converting a rundown discount hotel near Juan Dolio into a luxury resort—at high-pressure investor seminars at Sun Village itself and at other hotels across the continent. The hook: The time-shares were more than just a vacation opportunity; they included a return, in the form of “non-use fees.” If buyers chose not to use their time-share weeks, they were told, the resort would rent their units to other vacationers and give them a cut of the profits.
The Elliotts allege that Catledge and his agents assured purchasers they would make 7% to 12% a year, no matter what. But Derek says the sales agreements, drawn up by the Elliotts’ U.S. lawyers for “hundreds of thousands of dollars,” clearly explained that these fees weren’t guaranteed.
For Terry Patterson, a 54-year-old air-traffic controller, the deal initially sounded great. In 2005, he’d lost his job in Boise, Idaho, and was anxious about financing his retirement and caring for his wife, Julie, who has multiple sclerosis. Some friends had signed up as sales agents with Catledge’s organization. They encouraged him to remortgage his house and put $160,000 into the Elliotts’ resort projects. It wasn’t clear precisely what he was investing in, he says—he thought he was buying a “fixed-term investment,” not a time-share. For a year and a half, he received quarterly cheques for 9% on a portion of his investment. Then the money stopped.
Patterson and his wife have since moved to North Pole, Alaska, where he landed another air-traffic-control job. But when he’s forced to retire at 56, he’ll have to find a job elsewhere: “I’m going to have to work till I’m dead.”Report Typo/Error