Friday, February 5, 2010

Filed Court Documents Prove that Sun Village Is Not A Ponzi Scheme

The use of the term "Ponzi Scheme" was used by Catledge and his PR firm for the Plaintiffs to use to influence the media and courts in an effort to deflect their severe liability that the Elliott Group had held Catledge and Impact accountable to for and, ultimately termintated them for in June 2008.

It has also been mentioned that the PR Firm Proby and Associates that prepared all of the libel and slander for Michael Diaz and Hilda Piloto is also the PR Firm for Thomas Scott 's (Special Master) law firm Cole, Scott and Kissane.

Detailed Excerpts are taken from court filings: Sun Village is Not a Ponzi Scheme

23. As for the Special Master’s "Ponzi" allegation, this merely parrots the unsubstantiated allegations in the Hofmann Plaintiff’s original Complaint (as well as in the Aguilar and Hofmann Plaintiffs' defamatory publicity campaign that followed), which attempted to fabricate a civil RICO claim. The Special Master provides no substantiation, no particulars and no explanation as to his rationale for parroting this allegation. In fact, there was no Ponzi or "Ponzi-style" scheme. There was no doubt reckless disregard shown for the interests of all parties by Catledge/Impact, but for the Special Master to assert that the Corporate Defendants engaged in a Ponzi-style scheme without affording due process is indicative of his bias in this matter..

24. A "Ponzi scheme" is defined (by The American Heritage Dictionary of the English Language, Fourth Edition c. 2009) as: "A fraud disguised as an investment opportunity, in which initial investors and the perpetrators of the fraud are paid out of funds raised from later investors, and the later investors lose all funds invested."

25. This definition was never applicable to the fractional ownership and timeshare products offered by certain of the Corporate Defendants, for the following reasons:

a. All Sales Were Covered by Inventory – There was no "fraud" (a necessary component of a Ponzi) because all fractional and timeshare sales at both Cofresi and Juan Dolio were fully covered by inventory. All purchasers were specifically allocated timeshare intervals or fractions in units that matched their purchases.

b. The Juan Dolio and Cofresi Properties had Enormous Value – According to the Cofresi appraisal [DE 508] and the Juan Dolio appraisal (attached hereto as "Exhibit A"), which were commissioned to be done by certain of the Corporate Defendants by independent appraisers, these two properties had an April, 2009 value, net of mortgages, of over $100,000,000. Both projects were viable. Cofresi was virtually 100% complete and it was an operating resort with an excellent reputation. Juan Dolio was 75% complete (discussed infra at ¶ 75). The Juan Dolio business plan, filed at DE 241, demonstrated that there was a viable plan for completing the Juan Dolio project and meeting the project’s obligations. It was not the actions, inactions or "scheming" of the Corporate Defendants that destroyed these businesses and their value. Rather, it was the deliberate strategy of the Hoffman Plaintiffs, the Aguilar Plaintiffs, their respective attorneys and, most importantly, their true "puppet master," James Catledge, (utilizing the litigation, the publicity campaign, direct contacts with suppliers, customers and banks and the improper Dominican injunctions in an effort to obfuscate his own misdeeds) to drive these businesses and the so-called "Elliott Defendants" (including the Corporate Defendants) out of business and into the ground. This they have virtually succeeded in doing, destroying over $100,000,000 worth of assets and any real hope of any recovery by any such Plaintiffs. The Special Master added insult to injury through his mishandling of his "Monitor" duties (pursuant to the July 17, 2009 Order [D.E. 528], which is under appeal), which was the final nail (or series of nails) in the coffins of these projects.

c. Non-Use Fees were not Guaranteed – Any references to "guaranteed" payments were concoctions of the rogue Catledge/Impact sales force, as more fully discussed infra at ¶¶ 39-42 herein.

d. Non-Use Fees were Budgeted – The payment of non-use fees during the construction period at both Cofresi and Juan Dolio was budgeted as essentially the equivalent of the cost of construction financing. The overall amount actually paid ($12,068,382, as set out at page 12 of the Report) was consistent with what the Corporate Defendants reasonably believe construction financing interest costs would have amounted to.

e. Residence Sales were Intentionally Stopped – It became apparent, in May-June, 2008, that the Cofresi and Juan Dolio projects were experiencing financial difficulties, partially due to the deteriorating economy and ongoing financial meltdown, which began in late 2007. It was recognized that these projects would have difficulty continuing to pay non-use fees (which were beginning to exceed anticipated and acceptable levels). As a result, the sale of Residence timeshare interests was halted and the payment of non-use fees was suspended (in anticipation of a restructuring). These steps are hardly consistent with the carrying on of a Ponzi scheme. In fact, they are diametrically opposed to the steps that a Ponzi perpetrator would have taken.

f. The Plaintiffs Refused to pay on their Promissory Notes – As discussed in the Juan Dolio business plan [D.E. 241], Juan Dolio was owed approximately $32,000,000 in promissory notes, taken as part of the sale price for fractional interests. Commissions had been fully paid to Catledge/Impact on these notes. Collection of the notes would have generated sufficient proceeds to fully pay out the Juan Dolio banks and complete the project. Therefore, at the outset, when the notes were received, Sun Village Juan Dolio Inc. had every expectation that it would be able to fully deliver on all sale obligations. It could not have been foreseen that the Catledge/Impact masterminded litigation and business destroying strategy would essentially repudiate the notes (without, of course, a concomitant refund of the commissions paid thereon). A loss of this magnitude would have been devastating to any enterprise. It is disingenuous in the extreme for the Plaintiffs (and the Special Master) to re-characterize the Juan Dolio and Cofresi projects as a "Ponzi-style scheme" in the face of their very significant contribution to the failure of the business model.

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