NORTH MYRTLE BEACH -- Jeff Shoup and Tommy Hix, the would-be developers of the failed Bahama Island and Crystal Palace condominium resorts here, were indicted this week on fraud and conspiracy charges as part of a federal crackdown on mortgage fraud along the Grand Strand.
The indictment accuses Shoup and Hix of stealing about $10 million from investors in those and other condo projects during the height of this area's housing boom. The two men will be arraigned next month in Florence on charges that could put them in prison for up to 30 years.
The alleged fraud is among several mortgage-related criminal cases involving Horry County developers, mortgage brokers and bankers, including:
Surfside Beach developer Kenneth Paul Holmes, who pleaded guilty Wednesday to a felony bank fraud charge. Court documents show Holmes and six unindicted co-conspirators inflated home appraisals and provided misleading financial information to banks to help customers get mortgages. Holmes and the others split nearly $1.7 million in closing proceeds generated by the fraud, according to court documents.
Former Bank of America employee Jill Diane Brennan, who signed an agreement this week to plead guilty to a bank fraud charge. Brennan is accused of providing home loan companies with false information about the amount of money in depositors' accounts while she worked at the Myrtle Beach branch of Bank of America. She faces a maximum $1 million fine and 30-year prison sentence.
Former Myrtle Beach mortgage broker Darin Epps, who pleaded guilty Wednesday to one felony charge of bank fraud related to real estate transactions with Shoup and Tiffany Travis, a former real estate agent. Shoup and Travis still face six felony bank fraud charges in that case.
All of the cases are part of a long-running investigation into mortgage fraud in Horry County, according to Kevin McDonald, the acting U.S. attorney in South Carolina.
"There will certainly be other charges with other individuals involved," McDonald said Wednesday.
McDonald said sentencing hearings will be scheduled for Holmes and Epps. Each man faces a maximum fine of $1 million along with possible prison sentences of 30 years for Holmes and 20 years for Epps.
"In the meantime, they are cooperating with the government and we will be interviewing them on matters involving the investigation," McDonald said.
The Bahama Island case has been one of the highest-profile mortgage fraud cases along the S.C. coast, with most of the allegations uncovered through an investigation by The Sun News and dozens of pending civil lawsuits filed by the Mullins Law Firm.
Shoup and Hix were partners in T&J Development of North Myrtle Beach, which was supposed to build Bahama Island along the Intracoastal Waterway and Crystal Palace on the oceanfront.
This week's indictment accuses Shoup and Hix of taking more than $7 million in deposits from condo buyers. Although the deposits were supposed to be kept in an escrow account, Shoup and Hix are accused of spending the money on personal expenses and unrelated debts. Bahama Island and Crystal Palace never were built and the depositors' money is gone.
In addition, Shoup and Hix are accused of submitting false financial statements to an Arizona group that loaned the pair about $3 million for Bahama Island and a proposed condo resort in the British Virgin Islands. That resort never was built and the loan money is also gone.
Jarrod Ownbey, a lawyer who represents about 70 people who lost deposits the Bahama Island and Crystal Palace projects, said this week's indictment is good news for people who lost deposits averaging $35,000 per unit while Shoup and Hix marketed the condos from 2004 to 2006.
"It may not lead to the recovery of any money for our clients, but it could lead to a change of address for Shoup and Hix," Ownbey said. "This will prevent them from doing the same thing to anyone else, and that's the main thing we are charged with."
Mark Weiss, an Arizona lawyer who was part of an investment group that loaned money to Shoup and Hix for the Bahama Island project, said he was happy to hear about the indictment after working for nearly five years to recover some of the money.
The Arizona group also has filed a malpractice lawsuit against Myrtle Beach lawyer Bob Gwinn, who handled real estate transactions for Shoup and Hix. That lawsuit is pending in state court.
The bank fraud charges involving Epps, Shoup and Travis stem from the sale of three condominiums at Cherry Grove Villas II, another North Myrtle Beach project that Shoup and Hix developed.
An indictment in December alleges that Shoup, Travis and Epps falsified loan documents to obtain six mortgages totaling nearly $2.4 million. Travis - who worked at Shoup's Ocean Front Real Estate agency - purportedly used the mortgages to pay for condos that were owned by Shoup, but the three individuals split the money instead, the indictment states.
"The bottom line is, I'm thrilled," said Sharon Clark, who lost $60,000 in deposits on two condos at Bahama Island. "I don't foresee getting my money back, but something needs to happen to make sure they don't ever do this again."
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