Feds charge developer Eric Sheppard with COVID-19 loan fraud
During the COVID-19 pandemic, developer Eric Sheppard — best known for redeveloping the historic Carillon Hotel in Miami Beach as well as building adjoining luxury condo towers with the Canyon Ranch spa — received around $900,000 in federal loans meant to keep his businesses afloat.
Instead, he used the money for personal expenses, according to a federal indictment accusing him of submitting false applications to a US loan program approved by Congress just after the pandemic hit. in 2020. The economic relief program was intended to help small businesses cope with payrolls and survive during the public health disaster.
Sheppard — the first South Florida real estate developer to be charged with COVID-19 loan relief fraud — was released on bail and pleaded not guilty during his arraignment in federal court in Miami on Tuesday. Sheppard, 53, said through his attorneys that he “can’t wait to clear his name and be exonerated.”
“Mr. Sheppard, a leading developer, has contributed greatly to his community,” attorneys Jon Sale, Jayne Weintraub and Jonathan Etra said in a statement. “There was nothing false or fraudulent about the claims. of any of the loans, and the proceeds were used for the intended purpose.
“At all times, he acted legally to keep a multi-million dollar construction project open, allowing workers to be paid, despite significant challenges posed by COVID.”
Although Sheppard has never faced criminal charges before, he once had a legal dispute with a private lender over the Carillon Hotel project and was also involved as an investor with the notorious schemer. Ponzi schemer and disgraced University of Miami football propellant Nevin Shapiro. Shepherd ended up being sued in connection with the scandal.
Sheppard, who is saving lives in a $4.2 million home in Bal Harbour, first gained attention as a property developer 15 years ago when he renovated the historic Carillon Hotel and the ‘has transformed into an upscale resort complex with a pair of condo towers and the Canyon Ranch Spa. The Collins Avenue project put Sheppard and his company, WSG Development, at the top of the Miami Beach real estate world.
But the Great Recession hit real estate and financial markets hard in 2008, including his high-profile Carillon project. Sheppard was sued by his company’s lender, Lehman Brothers, who accused him of failing to pay millions of dollars in loans for the redevelopment of the Collins Avenue hotel and resort. The dispute was settled confidentially. Sheppard no longer has a financial interest in the project.
The indictment, filed in June, charges Sheppard with six counts of wire fraud stemming from half a dozen Small Business Administration loans under the Paycheck Protection Program and another program disaster relief.
Prosecutors say his loan applications for three different companies – HM Management and Development, HM-UP Development Alafaya Trails and HM Four – were “false and fraudulent” and that he used the nearly $900,000 in proceeds “to personal use and benefit”. The six loan applications, submitted between April 2020 and March 2021, ranged from $146,457 to $149,900 and were reviewed by three unidentified lenders under the SBA program and disbursed during the pandemic, according to the indenture. indictment filed by Marty Elfenbein, an assistant US attorney in Miami. .
Compared to other COVID-19-related criminal cases, the indictment charging Sheppard lacks specifics, such as what he actually claimed on SBA loan applications for his development companies, including the number of employees, payroll expenses and income taxes. There is also no mention of how Sheppard spent the money, other than the allegation that he used the loan proceeds for himself.
Some of the loan money may have been used for Sheppard’s Alafaya Trails shopping center project in Orlando, but that’s not clear from the indictment. His lawyers have not confirmed this information.
As the nation’s No. 1 fraud capital, South Florida led the wave of financial crime that followed Congress’ passage of the CARES Act during the pandemic. As of 2020, the legislation injected $650 billion into the national economy through the SBA’s Paycheck Protection Program, with banks reviewing loans for a fee and the US government canceling loans as long as the money was used to pay employees or other overheads.
So far, more than 65 South Floridians have been charged with defrauding the U.S. government’s emergency loan program, submitting more than $80 million in claims deemed false by federal prosecutors. Among them: a businessman using PPP money to buy a $318,000 Lamborghini; a nurse suspected of lying about her business to obtain $474,000 that was used in part to pay a Mercedes-Benz lease and child support; and a North Miami suburban couple who claimed to be farmers to qualify for $1 million in relief benefits.
Sheppard, who earned a bachelor’s degree in economics and finance from Florida State University, describes achieving a solid career in real estate development on his LinkedIn page. It highlights the development and construction of commercial and residential projects in 13 different states, including hotels, condominiums and malls “valued in excess of $1 billion.”
Before his 40th birthday in 2008, Sheppard brought the Canyon Ranch resort to Miami Beach’s Carillon Hotel and earned a reputation as a deep-pocketed and dependable philanthropist.
But around the same time, Sheppard’s close relationship with Shapiro, a childhood friend from Miami Beach. caused controversy, financial loss and legal trouble, according to court records. Sheppard, according to court records, was sued by a trustee of Shapiro’s bankrupt company as the trustee tried to recover money for his investment victims.
One of South Florida’s most infamous con artists, Shapiro sold investors on the idea of buying cheap groceries in one part of the country and selling them in another part for a profit – a wholesale distribution business that collapsed at the same time Sheppard had completed his signature resort project on Collins Avenue.
Sheppard lost about $2 million, including $1.3 million in investments in Shapiro’s business and another $700,000 in a settlement with the bankruptcy trustee tasked with recovering funds for victims of Shapiro’s Ponzi scheme. $930 million from Shapiro.
The settlement resolved a federal lawsuit that found Sheppard had not been duped by Shapiro’s elaborate scam, but had instead actively participated in it. The lawsuit claimed that Sheppard was using his real estate company, WSG Development, as a personal piggy bank, diverting nearly $40 million to Shapiro’s Capitol Investments USA. He claimed to be in the wholesale food distribution business, but in reality, this was just a front for Shapiro’s scheme.
The trustee lawsuit said Sheppard used WSG Development funds to make loans to Capitol. Instead, Shapiro would pay off Sheppard at extremely high interest rates, according to the suit. But Sheppard’s attorney said the accusation was false. His client admitted no wrongdoing in the settlement.
“Our view from the start was that Eric was a victim in this Ponzi scheme, based on a long and trusting friendship,” said his then-defense attorney Peter Russin.
In September 2010, Shapiro pleaded guilty to securities fraud and money laundering. He was sentenced to 20 years in prison and ordered to pay $82.7 million in restitution.
The University of Miami propellant gained even wider notoriety when he went public with damning stories of donating $170,000 in inappropriate gifts to Miami players and rookies, prompting an NCAA investigation. UM imposed a two-year bowl ban on themselves and voluntarily reduced their recruiting tours. In 2013, the NCAA placed the university on probation for three years and withdrew nine football scholarships and three basketball scholarships.
In 2020, Shapiro was released early from prison amid the pandemic. Citing health conditions, he was allowed to complete his sentence in home confinement due to the spread of COVID-19 in the prison system.
This story was originally published July 20, 2022 1:18 p.m.