Palm Beach Developer Gets 5 Years In Prison For Defrauding Investors, Lenders
Developer Robert Matthews was sentenced to 65 months in prison Monday for crimes tied to a West Palm Beach hotel redevelopment fundraising scheme that defrauded investors and financial institutions of tens of millions of dollars.
Matthews, 65, pleaded guilty in 2019 to charges that he misled investors about the redevelopment of The Palm House Hotel and used investor funds to pay off credit card debt and purchase properties in Connecticut.
Matthews, who maintains residences in Florida and Connecticut, used an intermediary company to raise money for the hotel redevelopment from foreign investors looking to take advantage of the EB-5 visa program, which allows foreign nationals to apply for permanent resident status in the U.S. if they invest in development projects in the country.
Between 2012 and 2014, Matthews defrauded around 61 EB-5 investors of more than $30M, according to a release from the Department of Justice.
Matthews raised the funds through South Atlantic Regional Center, a Palm Beach company that advertises EB-5 projects to foreign investors. The funds were moved to bank accounts in Connecticut and Florida that Matthews used to pay off credit card debt for himself and his wife, Maria Matthews, and purchase two properties in Washington Depot, Connecticut, including one that he lost in foreclosure.
Investors in The Palm House Hotel project were not only misled about how their funds would be used but also the level of interest in the project. Matthews told them that certain well-known individuals would be on the hotel’s advisory board and that high-profile entertainers, business people and politicians would be part of the hotel’s club — including Donald Trump and Bill Clinton, according to an AP report — but federal investigators found no evidence to support the claims.
Matthews was convicted in 2019 of conspiracy to commit bank fraud and wire fraud, making illegal monetary transactions and tax evasion. He was sentenced Monday by U.S. District Judge Victor Bolden in Bridgeport, Connecticut. After serving his 65-month sentence, Matthews will also be subject to three years of supervised release.
Maria Matthews pleaded guilty to tax evasion related to the scheme in April 2019 and awaits sentencing.
The 54K SF Palm House Hotel at 160 Royal Palm Way was built in 1961 and had fallen into disrepair when Matthews acquired the property in 2006. He lost the property to foreclosure in 2009 but reacquired it in August 2013 through an entity called Palm House LLC.
The hotel was sold in May 2019, a month after his conviction, for $39.6M to an affiliate of the real estate investment firm London + Regional Properties. Proceeds from the sale, which was handled through a court-appointed receiver, will go to repaying around 80 investors and creditors.
In addition to deceiving EB-5 investors, Matthews also admitted to conspiring to defraud TD Bank of the proceeds of a construction loan for the development of the Point Breeze Hotel in Nantucket, Massachusetts.
Matthews defaulted on the loan and misled the bank in June 2010 about his ability to foreclose on another parcel he owned in Nantucket that would have allowed TD Bank to recover around $12M in debt owed on the construction loan.
He also pleaded guilty to conspiring to defraud JPMorgan Chase by misappropriating insurance proceeds for repairs at one of his Washington Depot properties between December 2010 and January 2013.
Matthews also used limited liability companies, his attorney’s trust account and a company bank account to evade paying around $2.8M in federal income taxes in 2005 and 2007.
Matthews had been out on bond and has been ordered to report to prison on Oct. 23.
