DEVELOPER, LAWYER FACE CHARGES OVER PALM HOUSE
Pair accused of scheme to defraud foreign investors.
Palm Beach developer Robert “Bob” V. Matthews and real estate attorney Leslie Robert Evans were arrested early Thursday morning on charges of fraud and money laundering as part of a scheme that defrauded foreign investors in the still-unfinished Palm House hotel-condominium on Royal Palm Way, according to a news release issued by the U.S. Department of Justice.
A federal grand jury in New Haven, Conn., returned a multicount indictment, according to the U.S. Attorney’s Office for the District of Connecticut.
Both men were arrested at their Palm Beach homes early Thursday and then appeared in court in West Palm Beach. Matthews, 60, was held pending a detention hearing set for Monday. Evans, 70, was released on a $250,000 bond, according to Thursday’s statement.
The indictment accuses Matthews of eight counts of wire fraud, one count of bank fraud, one count of conspiracy to commit bank fraud and wire fraud, and 10 counts of illegal monetary transactions.
It charges Evans with eight counts of wire fraud, one count of bank fraud, one count of conspiracy to commit bank fraud and wire fraud, and one count of illegal monetary transactions.
Each count of bank fraud and conspiracy to commit bank fraud and wire fraud carries a maximum sentence of 30 years in prison. Each count of wire fraud has a maximum sentence of 20 years and each count of illegal monetary transaction carries a maximum sentence of 10 years.
Connecticut attorney Ross H. Garber released a statement to the Palm Beach Daily News on behalf of Evans.
“Mr. Evans is disappointed that he was also named as a defendant in this case by the government against a former client. But the allegations closely track those that have been made before in civil cases, and which Mr. Evans has been fighting vigorously. Once all this litigation ends, the truth will come out. Until then it is important for everyone to realize that allegations aren’t proof. None of this in any way interrupts Mr. Evans’s work for his valued clients,” said Garber, of the law firm Shipman & Goodwin.
An attorney for Robert Matthews couldn’t be reached.
This month, two other men — including Matthews’ brother, Gerry Matthews — agreed to guilty pleas in related cases. Both men played roles in the convoluted history of the long-shuttered Palm House.
The hotel has sat dormant for more than three years in the ocean block of the street known to locals as “Bankers Row” because of its many financial institutions.
Gerry Matthews, a Connecticut commercial real estate broker, pleaded guilty to a single felony count of conspiring to commit wire fraud, according to documents prepared by the U.S. Attorney’s Office for Connecticut, where Gerry Matthews has resided. Those documents were filed March 7.
Palm House construction executive Nicholas Laudano pleaded guilty to two felony counts: conspiracy to commit bank fraud and taking part in an illegal monetary transaction. Those allegations were brought by the same U.S. Attorney’s Office, and the documents relating to Laudano’s charges were filed Monday.
The conspiracy charge against Laudano, a resident of Boynton Beach, carries a maximum penalty of 30 years imprisonment, while the second charge could result in as much as 10 years in prison, among other penalties. Laudano did business in Connecticut and Florida, according to the federal charges.
Matthews was arrested at his home at 101 Casa Bendita and Evans at his home at 135 Seminole Ave., according to records at the Palm Beach Police Department, which assisted in the arrests.
The renovation project at 160 Royal Palm Way has been mired for years in legal troubles, including lawsuits, foreclosure proceedings and code violations. Construction ceased at the site in October 2014, and the project is today overseen by a court-appointed receiver, who has repeatedly told town officials work is underway to resolve myriad issues surrounding the property.
Robert Matthews purchased the Palm House property in August 2006 but lost it in foreclosure in 2009, Thursday’s release said. In August 2013, he reacquired control of the property through an entity named Palm House LLC, according to the statement. Gerry Matthews was listed in incorporation documents as owning 99 percent of that entity, the statement said. But the indictment alleges that while Gerry Matthews was the nominal 99 percent owner, his brother Robert actually controlled the company.
All of the counts leading to the arrests of Matthews and Evans and the pleas of Gerry Matthews and Laudano involve money related to the federal EB-5 program. The program offers foreign nationals and their families expedited permanent immigration visas — commonly known as “green cards” — into the United States in exchange for investing in U.S. construction projects under specific rules.
The Palm House development team solicited EB-5 money and said it would fund construction of the Palm House, according to the federal documents detailing the charges.
Those federal counts detail how the EB-5 program was applied to the Palm House project. To qualify for such a program, a foreign investor would make at least a $500,000 investment in a project that would ultimately employ 10 or more people. The Palm Beach-based South Atlantic Regional Center LLC (SARC) acted as a middleman between potential foreign investors and investment projects, according to documents detailing the charges.
A group of more than 50 EB-5 investors, mostly from China and Iran, filed in 2016 a lawsuit in federal court in West Palm Beach against Palm House developers, alleging they were defrauded out of more than $50 million.
Thursday’s indictment alleges “that Robert Matthews, Evans and others used EB-5 funding for purposes not related to the (Palm House) project, including for Robert Matthews personal gain,” according to the statement released Thursday.
The statement also said: “As part of this alleged scheme, Robert Matthews, Evans and others moved investor funds through various bank accounts located in Connecticut and Florida. The funds were used to pay Robert Matthews’ credit card debts, to assist in Matthews’ purchase of a 151-foot yacht, and to purchase two properties” in Washington Depot, Conn.