A timeshare and real estate Ponzi scheme operating partly out of Henderson and Las Vegas bilked some 1,200 investors out of $163 million, the U.S. Securities and Exchange Commission charges in a new lawsuit.
The SEC said Thursday it filed suit against James B. Catledge and others alleging securities fraud in an alleged scheme that ran from 2004 to 2009.
Catledge, a former Henderson and Las Vegas businessman, now lives in the San Diego area, the SEC said.
He couldn’t immediately be reached for comment and he and his attorneys have not yet filed a response to the May 24 lawsuit.
Catledge is known as a motivational speaker and Republican donor.
He operated scores of multilevel-marketing companies in Henderson with names like Net Worth Solutions LLC, Impact America and Impact Net Worth LLC, lawsuit records show.
The SEC lawsuit says Catledge, 44, and a businessman in Hillsburgh, Ontario, Canada, Derek F.C. Elliott, 41, persuaded investors to put money into timeshare and ownership interests in two resorts in the Dominican Republic, a nation in the Caribbean.
Elliott and his family had obtained the resorts and he then hired Catledge to raise money to redevelop them, the suit says. It says Catledge raised the money from investors in Nevada and elsewhere through his Las Vegas-area companies.
The resorts were in Cofresi and Juan Dolio and investors were told their money would be used to renovate and construct them and they would have ownership or timeshare visitation rights, the SEC said.
Investors were promised a guaranteed return of 5 to 12 percent annually, depending on the investment program they signed up for.
Catledge and Elliott made ''material misrepresentations to investors,'' including that their money was safe and would be used to develop the resorts, the SEC suit says.
For instance, they failed to disclose that of the nearly $164 million raised, $58.9 million was used to pay undisclosed sales commissions to Net Worth, Catledge, Elliott and related entities, the suit says.
Where the rest of the money went isn’t specified in the SEC lawsuit, though the government alleges some was used to pay promised returns to earlier investors.
The SEC suit also says Catledge falsely represented to an investor that the Juan Dolio resort carried no debt when in fact it was carrying $8.75 million in debt.
The suit says investors were told the Cofresi resort was profitable when in fact it was losing money.
The suit also says Juan Dolio investor funds were used to pay returns to Cofresi investors.
"Consequently, the Elliott resorts operated as a Ponzi scheme,'' the lawsuit says.
Ultimately, lenders foreclosed on both projects in 2009, meaning investors saw their potential interest in the projects wiped out.
The SEC suit, filed in U.S. District Court for Nevada, accuses the defendants of selling unregistered securities and securities fraud and seeks an order that they return ''ill-gotten gains,'' that they pay unspecified fines and that they be ordered not to violate the federal securities laws.
The FBI, the U.S. Attorney’s Office in San Francisco and the Ontario Securities Commission assisted in the SEC investigation that led to the lawsuit, the SEC said.
The SEC accusation that investors’ money was used to repay earlier investors is the same allegation a court-appointed special master made in a 2009 lawsuit filed by disgruntled investors in Florida.
The special master, former federal judge and prosecutor Thomas Scott, called the investment program a Ponzi scheme and said it may have involved criminal racketeering violations.
''Thousands of investors/owners, and by extension their families, have been financially destroyed,'' Scott wrote in his report.
''Approximately $170 million was collected from investors/owners. That money has now been almost completely lost, though it is the undersigned’s belief that significant monies still remain, in offshore accounts still to be located and/or have been redistributed into other assets,'' his report said.
Another lawsuit filed in San Francisco by investors charged: ''The scheme detailed in this complaint was ruthless and targeted the life savings of first generation immigrants, single mothers and the elderly as its victims.''
''It is estimated that the defendants ultimately took $180 million to $220 million from investors to purportedly build and/or refurbish two hotels into '5 star resorts.' In reality, the involved defendants simply stole money,'' that suit charged.