Yahoo Finance Carillon developer Eric Sheppard catches big break on potential prison sentence
Carillon Hotel developer Eric Sheppard may be headed for prison after being found guilty of bilking a federal loan program during the COVID-19 pandemic, but he just got a big break from a judge that will spare him at least four years behind bars.
U.S. District Judge Beth Bloom threw out his two jury convictions for aggravated identity theft after finding that while Sheppard forged the name of his corporate accountant on tax forms submitted with two loan applications, that misrepresentation was not critical to the developer’s convictions of fleecing the government’s relief program.
Bloom found that Sheppard’s forgery was not “at the crux” of the developer’s crime of wire fraud, so she threw out the identity theft convictions in a 44-page order filed Monday in Miami federal court.
With her decision, the judge reduced Sheppard’s potential sentence by four years. Bloom kept intact the jury’s guilty verdicts on four counts of wire fraud, which carry up to 20 years in prison for each offense, though the 55-year-old developer from Bal Harbour is expected to receive far less time.
His sentencing is scheduled for Friday before Bloom in Miami federal court.
Convicted in January of loan fraud
In January, Sheppard was convicted after a three-week trial of falsifying paperwork and forging signatures on applications to obtain about $900,000 in government-guaranteed loans under the emergency COVID-19 relief plan for struggling businesses during the pandemic.
Sheppard, who records show lives in a $4.2 million home in Bal Harbour, first drew attention as a real estate developer 15 years ago when he renovated the historic Carillon in Miami Beach and turned it 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, atop Miami Beach’s real estate world.
The U.S. Attorney’s criminal case against Sheppard, the first South Florida real estate developer accused of defrauding the U.S. government’s Paycheck Protection Program, has yielded mixed results.
The 12-person Miami federal jury’s verdict against Sheppard was decidedly split. Jurors unanimously found Sheppard guilty on four out of nine wire fraud charges but acquitted him of the other five. The panel also found him guilty of two aggravated identity theft charges but acquitted him of the other three.
Prosecutors depicted Sheppard as a conniving developer who cheated the system to line his pockets, while his defense team portrayed him as a businessman who needed the government’s help to pay his employees during a public health crisis.
“He lied about things big and small,” prosecutor Aimee Jimenez told jurors. “All of the money went to the defendant for his benefit, for his use.”
Not true, countered Sheppard’s defense lawyer.
“He wasn’t looking to cheat people or steal money,” Jayne Weintraub said.
She pointed out to jurors that unlike most business owners who received government benefits during the pandemic, Sheppard has been paying back the relief loans that he used for construction workers and others while developing a store for an anchor tenant in an Orlando shopping center.
“These are real people getting real money when they could not support themselves,” Weintraub said. “Eric did not use this money for any inappropriate purpose.”
Sheppard was charged with COVID-19 loan relief fraud under the Small Business Administration’s Paycheck Protection Program approved by Congress, which authorized $800 billion in loans through private banks to companies across the country. The loans under this and other pandemic programs were forgiven by the SBA as long as they were used for legitimate purposes, such as employee wages, leases and utility costs.
READ MORE: Lambos. Jewels. How ‘easy money’ from Uncle Sam made Miami a feast for PPP fraudsters
Sheppard’s loan applications were in the $150,000 range, reviewed by three lenders and disbursed during the pandemic, according to an indictment. Four of Sheppard’s pandemic relief loans were included in the indictment.
Jimenez and fellow prosecutor Ana Martinez said his loan applications for three different companies — HM Management and Development, HM-UP Development Alafaya Trails and HM Four — were “false and fraudulent.”
They contended he used the nearly $900,000 in proceeds for his mortgage, American Express card and jewelry bills, among other personal expenses — though Sheppard’s lawyers argued that the commingling of his funds was proper. The prosecutors also said only one of his companies had any employees — HM Management and Development — and that business employed only a few workers besides him.
READ MORE: Former Miami TD Bank manager gets 10-year sentence for swindling pandemic loan program
Prosecutors said the main problem with Sheppard’s pandemic loan applications was that they contained purported benefits for full-time W2 employees, but his business hired only independent contractors. That was not allowed under the SBA’s Paycheck Protection Program.
In response, Weintraub downplayed the difference between the two definitions of workers, saying the Florida State University business graduate was a smart, self-made millionaire but “unsavvy with a computer.”
She also challenged the prosecutors’ claim that Sheppard forged the signatures of others without their knowledge on a bank letter, a lease agreement and three IRS tax forms.
“This is not aggravated identity theft,” she said. “He has no intent to defraud anybody.”
Weintraub, who worked on Sheppard’s defense with attorneys Jonathan Etra and Christopher Cavallo, stressed that the developer sought economic assistance from the SBA program at a critical time during the COVID-19 pandemic.
She said Sheppard used the federal loans to pay workers and buy materials to rebuild a vast space left vacant by the bankruptcy of anchor tenant Toys ‘R Us to make way for another major retailer, Burlington Coat Factory, at a shopping center that he developed off Alafaya Trail in Orlando.
As the nation’s No. 1 fraud capital, South Florida has led the financial crime wave that followed Congress’ passage of the CARES Act during the pandemic.
About 200 South Floridians have been charged with defrauding the PPP program, submitting hundreds of millions of dollars in applications deemed bogus by federal prosecutors. Almost all have been convicted, while a small number still await trial.
Of those convicted: a businessman using PPP money to buy a $318,000 Lamborghini; a nurse alleged to have lied about his business to get $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.
