Third defendant who pleaded guilty in Palm Beach hotel-fraud case gets probation sentence

A third defendant who pleaded guilty in a felony fraud case involving the failed renovation of a Palm Beach hotel will serve no prison time, a Connecticut judge ruled Tuesday in a New Haven courtroom.

Connecticut real estate broker Gerry Matthews, 61, was sentenced to three years of probation and 200 hours of community service on a single charge of conspiring to commit wire fraud. He had entered his guilty plea more than five years ago in the case linked to the Palm House hotel property at 160 Royal Palm Way.

As part of their case, prosecutors said Matthews helped his brother, former developer Robert “Bob” V. Matthews, channel $1.3 million through Gerry Matthews’ commercial savings account in Connecticut. That money came from foreign investors who put money into the Palm House hotel renovation with the expectation that their permanent immigration papers to the United States — so-called “green cards” — would be expedited under the old federal EB-5 program.

Instead Bob Matthews illegally used the investors’ money for his personal gain, prosecutors said.

In all, Bob Matthews’ massive fraud and money-laundering scheme bilked more than $30 million out of about 61 foreign investors who put in $500,000 each, prosecutor said. Using some of that money, Bob Matthews bought two homes in Connecticut, one of which he previously had lost in foreclosure; a yacht; and a Maserati, according to the U.S. Attorney’s office in Connecticut. Among other expenditures, Bob Matthews, who is today 65, also paid off personal credit-card debt and local taxes.

Gerry Matthews assisted Bob Matthews in defrauding the investors by helping him maintain control of the Palm House project after Gerry Matthews learned about the Palm House fraud in 2014, prosecutors said.

After initially entering a not-guilty plea, Bob Matthews struck a 2019 deal with prosecutors to plead guilty. He was sentenced in July to serve more than five years in prison on reduced charges of one felony count each of conspiracy, illegal monetary transactions and tax evasion. He is scheduled to report to prison Nov. 27.

PALM HOUSE'S EX-DEVELOPER SENTENCED: Former Palm Beach developer Robert V. Matthews gets 65-month prison sentence in Palm House hotel case

Although Gerry Matthews pleaded guilty to the conspiracy charge, he “did not personally gain from his involvement in the offense” and his “actions were solely motivated by his loyalty to his brother, Robert Matthews,” said a court document filed in late October on behalf of Gerry Matthews by his attorney.

U.S. Attorney Vanessa Roberts Avery for the District of Connecticut had recommended a prison sentence for Gerry Matthews of between 33 months — or about 2 years and 9 months — and 41 months, or about 3 years and 5 months.

But Gerry Matthews argued in a “sentencing memorandum” to the court that he should serve no prison time and instead be granted “probation with appropriate conditions fashioned under the law,” according to the document signed by his attorney, George G. Mowad II and filed Oct. 30.

CELEBRITY LISTING IN PALM BEACH: Palm Beach home of 'This Old House' star Bob Vila enters the market at $52.9 million

Gerry Matthews, his attorney and a representative of Avery’s office declined to comment about the sentencing.

Gerry Matthews, of Middlebury, Connecticut, had been free on bond since he and another man pleaded guilty in the case in March 2018, a month before Bob Matthews’ arrest.

Charges in the case were brought by federal prosecutors in Connecticut because Bob Matthews had directed that money be wired between bank accounts there and in Florida. He had residences in both states.

ON THE MARKET IN PALM BEACH: Tommy Hilfiger and wife relist one of their two Palm Beach houses for nearly $36 million

Prosecutors: Millions of dollars were moved through Gerry Matthews’ account

Gerry Matthews’ facilitation of transfers of money to help his brother out predated the investor fraud related to the Palm House, prosecutors said. That EB-5 fraud took place generally between 2012 and 2014, according to court records.

But over nearly six years — between January 1, 2010, and December 2, 2016 — Gerry Matthews allowed his brother Bob to move a total of $3.9 million in and out of his commercial savings account, prosecutors wrote in their Nov. 6 sentencing memorandum. The $1.3 million in EB-5 funds was part of the larger amount, according to prosecutors.

Th government's sentencing memo was prepared by Avery’s office and submitted to U.S. Judge Victor Bolden, who has overseen other cases involving the Palm House and handed down Tuesday’s sentence in the U.S. District Court for the District of Connecticut.

“There is no dispute that the defendant was unaware of the origin of the funds his brother moved through his account until October 2014,” the government’s memo said.

Yet Gerry Matthews “admitted” to having helped his brother move money through his account to avoid creditors, prosecutors wrote. He also knew his brother “was having financial difficulties” and creditors “had secured judgments against Robert Matthews’ properties,” the sentencing memo says.

Gerry Matthews also was aware his brother “had access to money in connection with the development of the Palm House Hotel.”

But in October 2014, Gerry Matthews learned for the first time that his brother Bob had been stealing funds from the EB-5 investors, the memo said. His brother also had “fraudulently listed (Gerry Matthews) as the 99% owner” of the hotel property in October 2014, prosecutors wrote.

That’s when Gerry Matthews “joined the conspiracy,” the memo said.

And from that month through January 2016, EB-5 investors wired an additional $2 million to be invested in the Palm House project.

In October 2014, Gerry Matthews “took affirmative steps” to try to maintain control of the Palm House, “including executing a power of attorney as the nominal ‘99% owner’ so his brother could act in his name in connection” with the hotel project to “further perpetuate the fraud.”

Gerry Matthews’ statement said he provided “substantial assistance” to prosecutors

Gerry Matthews’ own memo to the court said a sentence of probation was appropriate because he was a “minimal participant” in the Palm House case; had accepted responsibility for his actions; had not benefited personally from the wire fraud; and had no prior criminal record.

The document also said he had provided “substantial assistance” to prosecutors about “other potential co-defendants in other cases, as well as potential targets of interest.” That assistance “was ultimately utilized by the Government in its prosecution of other Defendants,” Gerry Matthews’ memo said.

Gerry Matthews also had provided $301,111 to EB-5 victims’ counsel in civil lawsuits “in exchange for releases against him,” his memo said.

In any event, the EB-5 victims could not be considered “particularly vulnerable” but were instead “wealthy foreign investors with substantial disposable income, seeking to buy their way into the United States,” Gerry Matthews’ memo said.

The Matthews brothers’ cases simmered for years, as did the ones involving other defendants. People familiar with the case say the delays can be blamed, at least in part, on the coronavirus pandemic, because of the many Palm House investors live in China and Iran and could not visit the United States because of travel restrictions.

Only one Palm House defendant is still awaiting sentencing

The only Palm House defendant who has not been sentenced is Bob Matthews’ ex-wife, Maria “Mia” Sneden Matthews. She was charged with one count of tax evasion in the case and pleaded guilty in April 2019 but has not been scheduled for sentencing. The couple divorced in June after 26 years of marriage.

Nicholas Laudano, a former construction executive at the Palm House, was sentenced in June to supervised release and time served after he pleaded guilty in 2018 to two felony counts — conspiracy to commit bank fraud and taking part in an illegal monetary transaction.

Another man, Palm Beach attorney Leslie R. Evans, pleaded not guilty after being charged in the case in 2018 on multiple counts. Last April, the judge dismissed all of the charges against Evans and cleared his criminal record in the Palm House case after he completed a so-called “pre-trial diversion” program.

Bob Matthews bought the Palm House property in 2006, announced renovation plans for the existing hotel and, in 2009, lost the property in foreclosure. In August 2013, he reacquired defacto control of the property, although his ownership role was cloaked in public records. Construction came to an abrupt halt in late 2014 and did not resume until after the property was sold in May 2019 for nearly $40 million in a sale sanctioned by a bankruptcy judge.

FROM THE 2019 ARCHIVES: New owner plans will turn Palm Beach’s Palm House into ‘spectacular’ destination hotel, executive says

The new owner — an affiliate of the international hospitality and real estate firm London & Regional Properties — is renovating the 79-room building and grounds.

Before it sold, the Palm House was mired for years in legal troubles, including lawsuits, foreclosure proceedings, investigations by the Securities Exchange Commission, town code violations and bankruptcy.

*

Darrell Hofheinz is a USA TODAY Network of Florida journalist who writes about Palm Beach real estate in his weekly “Beyond the Hedges” column. He welcomes tips about real estate news on the island. Email dhofheinz@pbdailynews.com, call 561-820-3831 or tweet @PBDN_Hofheinz. Help support our journalism. Subscribe today.

This article originally appeared on Palm Beach Daily News: Judge: No prison time for defendant in Palm Beach hotel fraud case