Prosecutors seek reduced prison sentence for co-developer of Bahama Island condominium scam

01/17/2013 1:58 PM

01/18/2013 7:21 AM

Prosecutors have asked a federal judge to reduce the prison sentence for Tommy Hix – who pleaded guilty in 2010 to mail fraud charges related to the failed Bahama Island condominium project here – saying his cooperation has been vital in their indictment and upcoming prosecution of the alleged mastermind behind the condo scam that cost investors nearly $5.5 million.

Hix, who is serving a 40-month sentence for conspiracy to commit mail fraud, would be at least the second major player in a widespread Grand Strand mortgage fraud scheme to get a reduced sentence. Darin Epps, the former owner of Myrtle Beach-based Dunes Mortgage, has had his original 40-month sentence reduced twice – most recently to 21 months – because of his cooperation with authorities in ongoing fraud investigations.

Meanwhile, Hix and Epps are among 22 people – many of them from the Myrtle Beach area – who now have $31.5 million judgments filed against them as part of the conclusion of a civil lawsuit filed by RBC Bank against those who participated in mortgage fraud schemes. The bank obtained default judgments against the defendants earlier this month, although it is doubtful the bank will be able to collect all of the money it’s owed because most of the defendants are in prison or under criminal indictment for mortgage fraud.

“We are still reviewing the best way to proceed with the default judgment,” said David Dreifus, a lawyer representing RBC Bank. “We are considering all of our options but have not made any final decisions yet.”

The judgments are joint and several, which means the bank can collect the full amount from any defendant regardless of the defendant’s individual share of liability. The bank’s original $10.5 million judgment was tripled because the defendants were found guilty by default of violating racketeering laws.

While some victims oppose any reduction in prison sentences, Bill Day – the assistant U.S. attorney who prosecuted Hix and Epps – said the tactic is helpful in this case because it has encouraged the two men to provide information about other criminals, thus leading to more convictions.

“It’s not a perfect system, but in this case, victims might feel a little better because the person Hix got credit for is [Duwayne] Woods,” Day said, adding that Woods allegedly orchestrated the Bahama Island scam and stole most of the money. Woods, who was arrested in July on two felony charges of wire fraud, has pleaded not guilty. No trial date is scheduled, but Day said he expects the case could go before a jury within a couple of months.

Jarrod Ownbey, a lawyer who represents dozens of Bahama Island investors in civil lawsuits, said his goal all along has been to get his clients’ money back, not to put people in prison.

“The big fish here is the deposit funds,” Ownbey said. “If Hix can provide information that can assist in the recovery of deposit funds that we believe Mr. Woods has retained, we would not oppose a reduction in his sentence.”

Ownbey said Hix has been cooperative in civil lawsuits filed against him and Bahama Island co-developer Jeff Shoup, who is serving an 88-month prison sentence for conspiracy to commit mail fraud.

“You can do something wrong, but if you do nothing to resolve it there’s no redemption available,” Ownbey said. “If you do something to resolve it, you deserve some credit for that.”

Day said Shoup has been cooperative with federal investigators but not to the extent of Hix.

Woods, age 69, disappeared in 2007, allegedly with $3 million of condo deposits from Bahama Island and Crystal Palace, another failed condo project here. Woods had traveled outside of the country several times since his disappearance but had been living in San Diego since an indictment and arrest warrant was issued for him in 2011.

San Diego police initially questioned Woods on July 18 because he was loitering outside a public library. They then arrested him when they learned he was wanted in South Carolina on fraud charges. Woods is being held at the Florence County Detention Center while he awaits a trial.

A September 2011 indictment accuses Woods of making illegal bank transfers in 2006 of $4.5 million from deposits placed on Bahama Island units and $988,279 from deposits placed on Crystal Palace units. Those deposits, from people who planned to buy units at the unbuilt projects, were supposed to be kept in an escrow account. Prosecutors say Woods sent some of the money back to local developers Hix and Shoup but pocketed more than half of the cash. The condos were never built and Woods disappeared? just as depositors started to realize their money had been taken.

During a 2011 court hearing in Florence, Day told Judge Terry Wooten that Woods “was involved in an advance-fee scheme,” in which Woods promised to give Hix and Shoup about $100 million in construction financing in exchange for the condo deposits. Hix and Shoup have maintained they were duped by Woods, who they trusted to fund their condo projects after a pair of banks backed out of the deals.

Bahama Island was supposed to be a condo and marina project along the western bank of the Intracoastal Waterwa; y while Crystal Palace was supposed to be an oceanfront condo tower. Woods claimed to be able to fund construction through a bond his Atlewa Trust company had on Euroclear, a foreign bond clearinghouse based in Belgium. The bond document Woods showed to Hix and Shoup turned out to be a fake.

Ownbey said he was able to trace the deposit money Woods allegedly stole to several foreign banks, but he isn’t sure whether any of the money is still there.

The RBC Bank civil lawsuit stemmed from two dozen fraudulent real estate transactions that took place along the Grand Strand in 2008, most of them initiated by Epps and his Dunes Mortgage company. The scheme involved homes and condos that were overvalued by fraudulent appraisals and then sold to straw buyers who obtained inflated mortgage loans through the use of falsified income data. Those buyers split profits from the loans with developers and brokers and then allowed the properties to fall into foreclosure, costing the bank millions of dollars.

In addition to the 22 default judgments obtained this month, the bank previously settled or dismissed claims with 21 other defendants.

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