An Ontario man who ran a well-known Dominican Republic resort until his business collapsed amid fraud allegations now faces criminal charges in the United States.
In an indictment issued by a U.S. federal grand jury in San Francisco, Derek Elliott, 41, of Orangeville, Ont., is alleged to have orchestrated a fraud to attract more than $90-million (U.S.) from mostly North American investors for a failed scheme to renovate a hotel in the Dominican Republic.
The hotel, in Playa Juan Dolio near the capital, Santo Domingo, was never completed. U.S. prosecutors allege that investors were promised "unsupportable" returns and were never told that most of their money would be diverted into sales commissions and other projects. Just $13.4-million went into the hotel, the indictment alleges.
Also charged is Mr. Elliott's former business associate, James Catledge of Rancho Santa Fe, Calif., a charismatic public speaker and the head of a "multi-level marketing" organization hired to sell timeshare-like investments in the hotel between 2006 and 2008.
Mr. Elliott, who now runs an Internet-based luxury villa rental website called Preferred Escapes, referred a request for comment to his Orangeville lawyer, Chris Scott.
"Very soon we will show what really happened in this matter," Mr. Scott said in an e-mail. "[Mr. Elliott] is making every effort to deal with this matter and we are confident that he will be exonerated."
David Chesnoff, a lawyer for Mr. Catledge in Las Vegas, could not be reached. Through his lawyer, Mr. Catledge has previously denied any wrongdoing.
According to court documents, a warrant has been issued for Mr. Elliott, while Mr. Catledge is to appear for an arraignment Oct. 5. Neither has been arrested.
Both men face three counts of mail fraud and one count of conspiracy to commit mail fraud, with each carrying a possible maximum prison sentence of 20 years. The allegations have not been proven.
Mr. Elliott, and his father Fred, who is not named in the indictment, ran the Sun Village Resort & Spa near Puerto Plata, Dominican Republic. Since the 1990s, the Elliotts sold shares to hundreds of Canadian and U.S. investors.
In 2006, Mr. Elliott went into business with Mr. Catledge and his network of sales agents to sell timeshare-like investments in the resort and in a second hotel, the Juan Dolio project.
But the business got into trouble, and in 2008 Mr. Elliott parted ways with Mr. Catledge, who he later accused of fraud in court documents. As investors' promised returns allegedly dried up, some sued in a Florida court, alleging the business was a Ponzi scheme.
Mr. Elliott and his father denied those allegations and that lawsuit was later dismissed. While it was hanging over the business, both resorts were lost in foreclosure in 2009.
Mr. Elliott and Mr. Catledge are also facing a civil complaint from the U.S. Securities and Exchange Commission, filed in May, accusing them of running a $163-million Ponzi scheme. Mr. Scott, Mr. Elliott's lawyer, said Friday that he has been co-operating with the SEC.