Case 4:16-cr-10039-KMM Document 9 Entered on FLSD Docket 10/14/2016 Page 1 of 4

U NITED STA TE S D ISTR ICT C O U R T
SO U TH E RN DISTR ICT O F FLO RIDA
C A SE N O .16-10039-C R -M O O RE/M CA LlLEY
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D AV ID W .SCH W A R Z,
D efendant.
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G O VER NM E NT 'S A PPEA L O F M A G ISTRA TE JUD G E 'S BO N D O RD E R
The U nited States of A m erica respectfully files this A ppealof M agistrate Judge's Bond

Orderpursuantto l8U.S.C.jj3142and3143(c),andrequeststhattheCoul'
tstaytheentryofthe
M agistrate Judge's Bond Order untilsuch tim e asthe Coul'thas fully considered the appropriate
conditions ofrelease,ifany,forthis defendant.
Atapproxim ately 2pm today,a United States M agistrate Judge in O rlando,Florida,issued
an order granting bond to defendant,which bond w as substantially low erthan thatrequested by
the Governm ent. M oreover,the defendantw as authorized to utilize hisresidence ascollateralfor

thebond,eventhoughthegovelmmentrepresentedtothecourt(andpreviouslytothedefendant's

counsel),thattheresidencewasacquiredwithapproximately$200,000inproceedsfrom thefraud
allegedinthelndictment(andpossiblymore),andthegovernmentrequestedatNebbiacondition.
The defendant w as further authorized to be released without prior satisfaction of any N ebbia
condition. A s set forth m ore fully below ,the G overnm entrespectfully requests that due to the
facts and circum stances ofthis case and ofthis defendant,the Courtstay the issuance ofthe bond
im posed by theM agistrate Court,and im pose a bond thatis appropriate underthe circum stances.l

lBecauseoftim econstraintsthegovernmentdoesnothaveacopyofthew rittenbond orderand respectfully
requeststhe opportunity to supplem entthe record asappropriate.

Case 4:16-cr-10039-KMM Document 9 Entered on FLSD Docket 10/14/2016 Page 2 of 4

Backuround

D efendant,D avid W .Schwarz,wascharged by indictm entw ith conspiracy to com m itbank

fraud,in violation ofl8 U.S.C.j 1349,threecountsofbattk fraud,in violation of18U.S.C.j
l344,threecountsoffalsestatementstoafinancialinstitution,inviolation of18U.S.C.j 1014,
andonecountofinterferencewiththeadministrationoftheIRS,involationof26U.S.C.j7212(a).
Ifconvicted,Schwarz faces a statutory m axim um of30 yearsforeach ofthe conspiracy and bank
fraud offenses,and 3 years forthe tax offense. The case is charged in the Southern Distlict of
Florida and venue isthe K ey W estD ivision.
Schw arz was the V ice President and Chief FinancialO fficer of Cay Clubs Resorts and
M alinas,w hich operated pulported luxury resorts in the Florida Keys,Clealw ater,O rlando,Las
V egas,and elsew here. The indictm ent alleges that Schw arz and D ave Clark,w ho was the twothirds owner,began Cay Clubs in late 2004 with fraudulentsales of Cay Clubsunits to insiders,
using m oney from Cay Clubs' bank accounts to fund the cash to close for purchases while
obtaining m ortgage financing from lending institutions. These fraudulent sales were used in
m arketing m aterialsto falsely show dem and forCay Clubsunitsand to inflate prices,asCay Clubs
w asin reality purchasing unitsfrom itself.Thispractice,along w ith otherfraudulentcom ponents
ofCay Clubs operation,continued through early 2008 asCay Clubsceased operations. A ccording

to theirown accounting,more than $30 million in Cay Clubsproceedswere diverted to Schwarz
and Clark.

According to thegovem m ent'sevidence,Schwarzreceived m orethan $6 m illion in fraud
proceeds,and deposited these into accounts he controlled. Schw arz used Cay Clubs proceeds to

pay off his Orlando residence (approximately $200,000).
,purchased a Port Orange condo;
purchased anothercondo in the Flolida K eys;deposited funds into brokerage accounts'
,and m ade
cash transfersto third parties butforhisow n benefit.

Case 4:16-cr-10039-KMM Document 9 Entered on FLSD Docket 10/14/2016 Page 3 of 4

Sentencinu G uidelines

The lossin this case for guidelinespup oses ism ore than $300 m illion. This is nota

fictionalnumber,asSchwarz'snamedco-conspirator,DaveClark,wasconvictedafterajurytrial
before U .S.D istrictJudge Jose E.M artinez ofrelated charges,and thatw asthe figure used forhis

sentencing. The actual,outofpocketlosses forrestitution purposes,was approxim ately $178
m illion. There were m ore than l,400 investorsvictim ized by thisschem e and num erousfinancial

institutionsand otherlenders.Clark,whowasthe2/3 owner(Schwarzwasthe l/3 owner)was
sentenced in April2015 to 480 m onthsin prison.
A calculation ofthe guidelinesifconvicted ofany ofthebank fraud offenses,isasfollow s:
Base:7

+28loss(morethan$250million)
+6 substantialhardship 25 orm ore victim s

+2sophisticatedmeans(numerousshellentities'
,straw persons'
,concealing
ownership/controlofproceedsbyprincipals)
+2 m orethan $1m illion from financialinstitution

+2(Specialskill/abusetrust;defendantwasaCPA,andwasttaxmatters
partner'forentities,usingthispositiontocommitfraud)
+4 role (leaderorganizerof criminalactivity,more than 5 participants
(participantsincluded Clark,hissecretary;bookkeeper(both ofwhom admitted
falsifyingdocumentsl;morethan3straw borrowerswhogotpaidfortheirselwices;
Stokes'
,Graham anddefendant(atleast)
Total:Level51;guidelinerange:life(43ismaxontable).
Bond R equest

The govenzm entrequests a $250,000 corporate surety bond,with a Nebbia condition,
because:

The defendantreceived m illions ofdollars in cash thatare notaccounted for.
The defendant has apparently been unem ployed for years but continues to lead a
lifestyle thatappearsto be funded by sources otherthan those thatarereadily apparent'
,

3) Thedefendantfacesalargepotentialcriminalsentenceofimprisonment;strongcase;
co-conspiratorconvicted attrialand got40 years,and tw o otherconspiratorshavepled
guilty.

Case 4:16-cr-10039-KMM Document 9 Entered on FLSD Docket 10/14/2016 Page 4 of 4

Defendantis experienced and sophisticated athiding funds,creating shellcom panies
and using shellcom pany bank accounts.
Furtherm ore,as alleged in the indictm ent,defendantfor m any years did not file a tax return;he
has w ired m illions of dollars to num erous shell entity bank accounts and overseas. The
governm entand the Courtdo nothave an adequate picture ofthisdefendant'sfinancesatthisstage

to im pose a bond thatisless stringentthan thatrecom m ended by the G ovenunentgiven the facts
and circum stances of this case. For these reasons,the governm entrespectfully requests thatthe
Courtstay the issuance ofthe M agistrate Judge'sbond orderand im pose and appropliate bond in
this case that take into account this defendant's financial resources,the strength of case and
potentialsentence.

Respectfully subm itted,
W IFRED O A .FE ER
I D TA T A TTO RN EY
By:

J ob u fy
C ul't o.:A 5501106
A sslstantUnited StatesA ttonzey

Email:Jerrob.Duflk@ usdoj.gov
Tel:(305)961-9273
Fax:(305)536-5321
United StatesA ttonzey's Office
SouthenzD istrictofFlorida
99 N E 4th Street
M iam i,Florida 33132
C ERTIFICA TE O F SER VIC E

I certify thaton October l3,2016,I caused a copy of this pleading to be electronically
em ailed to HectorFlores,Esq.,who has inform ed the undersigned thathe iscounselfordefendant.

/s/JerrobDulty

Jen'ob Duffy
A ssistantU nited StatesA ttorney