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Derek Elliot, photographed in his parents home in Carlisle, of The Elliott Companies, owned a resort owner in the Dominican Republic but has had it stripped from him by DR courts because of what he says are bogus claims made in Florida lawsuit that he ran a Ponzi scheme.

Glenn Lowson/The Globe and Mail

An Ontario man who once ran a well-known luxury resort in the Dominican Republic that hosted Hollywood stars and a Maxim magazine beauty contest has pleaded guilty to a fraud charge in a U.S. federal court in San Francisco.

Derek Elliott, of Hillsburgh, Ont., northwest of Toronto, had been facing U.S. criminal charges that he and an American business partner masterminded a fraud that raised $91.3-million from hundreds of investors to renovate and launch a second luxury hotel in the Dominican Republic.

According to a U.S. indictment issued in 2012, investors were promised "unsupportable" returns on what were marketed as timeshare-type interests in the project. But the hotel never opened. And only $13.4-million was ever spent working on the resort, with the rest spent on millions in undisclosed sales commissions, funding for other projects and payments to investors.

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According to documents filed with the San Francisco division of the U.S. District Court for the Northern District of California, Mr. Elliott appeared in court Aug. 27, after talks with prosecutors, and agreed to plead guilty to one count of conspiracy to commit mail fraud. Three other mail fraud charges were dropped.

The charge to which Mr. Elliott pleaded guilty carries a possible maximum jail sentence of 20 years, as well as fines. But a sentencing hearing is not scheduled until next year, where Mr. Elliott could see leniency applied for co-operating with prosecutors.

Some of the documents detailing his change of plea were initially kept under seal at Mr. Elliott's request "due to concerns for his safety," according to an order unsealing them earlier this month. Mr. Elliott has since returned to Canada.

A trial is still pending for his former business partner and co-accused, James Catledge, of Rancho Santa Fe, Calif., a self-styled multilevel-marketing guru with a televangelist-like speaking style and a history of donating tens of thousands of dollars to the U.S. presidential campaigns of George W. Bush and Mitt Romney. Mr. Catledge has denied any wrongdoing.

Mr. Elliott, who now runs an Internet-based luxury villa rental website called Preferred Escapes, referred a request for comment to his Salt Lake City-based lawyer, Brett Tolman, a former U.S. district attorney for Utah.

Mr. Tolman would not comment on what his client's safety concerns were. But he said Mr. Elliott was co-operating with the Department of Justice and had agreed both to testify against Mr. Catledge and to try to return whatever funds can be recovered to investors.

He also pointed out that his client appeared in court voluntarily and did not force U.S. prosecutors to extradite him from Canada: "Derek Elliott is not saying, 'I am an angel and I did everything right.' What he is saying is, 'I should have exercised greater control, we should have had better policies and procedures, I should have known what was going on'."

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Mr. Tolman said Mr. Elliott was also co-operating with the U.S. Securities and Exchange Commission in its civil case alleging that the resorts were used in an international $163-million "Ponzi scheme." Mr. Elliott settled his side of the SEC allegations in 2012, without admitting or denying wrongdoing, but still could face up to $250,000 in fines.

Mr. Tolman said that Mr. Elliott, who "lost everything" after his businesses collapsed, is also pursuing Mr. Catledge's Nevada-based company, Impact Inc., for damages in a lawsuit filed in a federal court in Miami last year.

(Mr. Tolman's law firm, Ray Quinney & Nebeker, did some "initial work" acting for Mr. Catledge in civil complaints he was facing several years ago in connection with the case, Mr. Tolman said, but was not involved in those cases now.)

Mr. Elliott, who is in his early 40s, and his father Fred once ran the Sun Village Resort & Spa near Puerto Plata in the Dominican Republic. In the mid-2000s, Mr. Elliott went into business with Mr. Catledge and his network of sales agents to sell timeshare-like investments in Sun Village and in a second hotel, the Juan Dolio project, near the Dominican Republic's capital, Santo Domingo.

But the business got into trouble. A co-branding deal with Maxim magazine ended in litigation. And in 2008, Mr. Elliott parted ways with Mr. Catledge, whom he alleged in court documents was actually responsible for the fraud. Investors' promised returns dried up, some investors sued in a Florida court in 2009, alleging the Elliotts spent investor cash on luxuries like a yacht and gambling debts. The Elliotts denied the allegations, and alleged in court documents that Mr. Catledge and his sales agents were behind the lawsuits.

After legal wrangling, the Florida lawsuits against the Elliotts were eventually dropped. But while the litigation was hanging over the business and the pair's assets were frozen by a court order, both hotel properties were lost in foreclosure.

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