The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The mastermind behind an $8.3 million scam centred on Bahamian real estate was this week sentenced to almost 13 years in prison, a judge branding the fraud perpetrated on more than 100 investors as “exceptional”.

Lawrence Foster, whose Paradise Is Mine company fraudulently promised international investors that it was developing land on Rum Cay, received a 152-month sentence from a south Florida judge following his conviction via jury trial on eight counts.

Tribune Business revealed last October how Foster was convicted despite numerous Bahamians attorneys testifying at his trial in Miami that he, and Paradise Is Mine, had good title to the Rum Cay real estate they were purporting to sell.

And Judge Donald Graham, in a ruling this Monday, threw out Foster’s bid to reduce both the length of his sentence and the loss suffered by those he defrauded, finding there was substantial evidence that victims were unlikely to recover “anything of value”.

Detailing how the scheme worked, Judge Graham said Paradise Is Mine, and Foster as its president, solicited unsuspecting persons to invest in a residential real estate development project purportedly located on Rum Cay.

This was supposed to be constructed on a 240-acre Rum Cay site known as the ‘Benjamin Lord Tract’, but the trial jury found Foster had no title to this land.

Investors were either invited to invest in Paradise Is Mine as a business, loaning funds to its marketing and sales operation, or by purchasing options in actual lots.

However, US federal prosecutors were able to convince the jury that Foster did not have good title to the real estate he was selling. And nor did he use investor funds in the manner advertised.

“Through Paradise Is Mine’s misrepresentations, the company collected approximately $8,3 million from investors,” Judge Graham found on Monday.

“Paradise Is Mine paid out approximately $280,000 in partial payments to investors. Less than 3 per cent of the funds collected were distributed as interest payments to investors.

“At the time of Foster’s arrest, the Federal Bureau of Investigation (FBI) seized the $1.1 million remaining in Paradise Is Mine’s bank accounts.”

The Foster/Paradise Is Mine saga again exposes how vulnerable the Bahamas’ reputation as a safe, attractive investment destination is to damage from the activities of unscrupulous foreign developers seeking to make ill-gotten gains.

Foster also used the ‘power of celebrity’ to induce persons to invest in the scheme. a host of celebrities to induce investors to hand over their money.

Among those whose names were touted as Paradise Is Mine buyers were ex-NFL quarterbacks Joe Montana and Warren Moon, former linebacker Ray Lewis, boxer Roy Jones Jnr, basketball star Clyde Draxler, and Olympic gold medallist Carl Lewis.

Tribune Business revealed last year how numerous Bahamian attorneys, either as witnesses or the writers of title opinions on the land ‘Paradise Is Mine’ was selling, were involved in the Foster trial.

Among those called as ‘witnesses’ to aid Mr Foster’s defence were:

• Philip McKenzie, managing partner at Davis & Co, the law firm of Deputy Prime Minister Philip Davis.

• Kenneth Toppin, a former law firm partner of ex-FNM Cabinet minister, Desmond Bannister, and former Bar Association president, Ruth Bowe-Darville. Neither of whom were involved in the Paradise Is Mine affair.

Those Bahamian attorneys whose title opinions were employed as Foster’s ‘defence exhibits’, suggesting that there was ‘clean title’ to the property he was selling, included:

• Thomas Evans QC

• Philip Lundy of Priderock Chambers

• Wayde Christie

And, also mentioned in the first trial’s transcripts, is FNM Senator and former attorney-general, Carl Bethel. There is nothing, though, to suggest that any of these attorneys have done anything illegal in relation to the Foster/Paradise Is Mine affair.

Mr Toppin said it was Mr Bethel who, in 2003, incorporated Sunward Holdings, the company that owned the Rum Cay property that Foster/Paradise Is Mine were purporting to sell to foreign investors.

At trial, Mr Toppin, a director of Sunward Holdings, said Paradise Is Mine/Foster were merely marketing the land Sunward owned on Rum Cay, and that there was otherwise no connection between the two entities.

However, in their indictment of Foster and at trial, US federal prosecutors alleged that Sunward Holdings was owned/controlled by Billy Wayne Davis, whose name has featured regularly in relation to ‘land speculation’ on Rum Cay on Long Island.

Foster’s indictment noted that Mr Davis “purported to own real estate” on Rum Cay, but said he had been convicted in the north Alabama federal court in 1994 for “providing false information on a loan application concerning land he purportedly owned in the Bahamas”.

And the indictment added: “Various websites on the Internet contained information that reflected poorly on the character and truthfulness of B. W. D. (Billy Wayne Davis), and contained information that raised doubt about B. W. D’s claim to own land in Rum Cay in the Bahamas.”

Mr Davis, in an e-mail sent to Tribune Business in March 2015, said the FBI appeared to have been fooled by an Internet smear campaign against him that was subsequently halted after he took legal action in the US courts.

However, somewhat bizarrely in light of Monday’s sentencing, Mr Davis suggested that the second trial had shown “the innocence of Mr Foster” and that the Bahamian attorneys “really did know what they were talking about” in their title opinions on the Benjamin Lord tract.

He also denied owning land whose title roots could be traced to the so-called ‘Estate of the late Effie Knowles’, which many land speculators on Rum Cay and the southern Bahamian islands have relied upon.

Mr Davis denied paying money to the Effie Knowles estate for Bahamian real estate, adding that the latter never had any land to sell, and that it was “a scam on the Bahamas”.

This assertion matches the contents of a 1994 interview he personally gave to the FBI, in which he admitted to “never having” paid $1 million to the Effie Knowles estate for land in the Bahamas.

However, US federal prosecutors were able to successfully convince the second trial jury that the real estate being marketed via Paradise Is Mine was purportedly owned by Mr Davis via his Sunward Holdings vehicle.

In a sentencing memorandum on Foster issued earlier this year, prosecutors said: “The jury properly found that the decision to conceal Billy Wayne Davis’s ownership of the land was ‘calculated to deceive another of money or property’.”

Foster was ultimately tried twice for the same offences, the south Florida district court granting his motion for a 2014 re-trial on the grounds that inadmissible evidence had been placed in front of the first jury.

There was no change in outcome, though, with the second jury also returning a unanimous verdict that found Foster guilty on all counts.

Suggesting that Paradise Is Mine had several characteristics of a typical ‘Ponzi’ scheme, in which older investors are paid with new investor monies, Judge Graham said there was substantial evidence that Foster “intentionally defrauded” both categories of investors.

Those lending funds to Paradise Is Mine received documents pledging the Rum Cay real estate as collateral, while actual real estate buyers were given purported ‘purchase options’.

All, though, were advised that they would have to pay 10 per cent Stamp Duty to the Bahamian government on the purchase price to obtain title to the property.

“None of the investors who engaged in the land option investment vehicle received the final document of conveyance because they were hopeful they could sell their option and make a profit,” Judge Graham found.

He added that Stamp Duty payments would have been as high as $35,000, something that would have diminished the investment returns for the ‘land option’ purchasers. There was no evidence, the judge added, that any of the investors had been willing to pay Stamp Duty to obtain clean title.

Judge Graham found that Foster placed “the full amount of money received from investors at risk”, and the latter received nothing in return except a nominal payment of 3 per cent.

While Foster had argued that the value of the Rum Cay land offered as collateral to the ‘land option purchasers’ should be used to offset their losses, the court said various appraisals for the property “varied greatly” between $1.8 million and $2.6 million.

Judge Graham said it was thus impossible to determine any collateral value, adding that Foster “may not receive credit for value that is provided to his victims for the sole purpose of enabling him to conceal or perpetuate the scheme”.

And, with investors required to make further expenditure to realise on their collateral, via a 10 per cent Stamp Tax payment, “investors were in essence required to throw good money after bad, thus incurring additional loss”.

Judge Graham noted that 50 per cent of the sums Paradise Is Mine received went towards sales commissions, with the balance being taken by Foster and his associates.

“Up until the arrest of defendant Foster in January 2013, there is no evidence that any investor funds were used towards the development of the Rum Cay land,” he said. “In fact, fund loaned by victims of the fraudulent scheme seemingly disappeared into thin air as a result of substantial withdrawals by Paradise Is Mine.”