SEC charges Palm Beach developer and EB-5 regional center with fraud

The Securities and Exchange Commission has charged a Palm Beach developer, EB-5 regional center and its managing director of defrauding foreign investors in a failed Palm Beach hotel-condo development.

The federal regulatory body alleges that Palm House developer Robert Matthews as well as the director of the South Atlantic Regional Center, Joseph Walsh, defrauded investors participating in the federal visa program known as EB-5, the Palm Beach Daily News first reported. The visa program allows foreign investors to gain a green card if they invest $500,000 into certain projects.

The lawsuit adds to Matthews’ legal woes, who is also facing ongoing criminal fraud charges brought by the U.S. Attorney for the District of Connecticut. The troubles stem from a failed luxury project in Palm Beach that stopped construction in 2014.

In a complaint filed in the United States District Court of the Southern District of Florida, the SEC alleges Walsh, his Palm House Hotel LLP, the South Atlantic Regional Center, and Matthews misappropriated a significant portion of the $43.9 million of investor funds to at least 88 foreign investors. The lawsuit also alleges the defendants made false and materially misleading statements to the investors.

Some of the misappropriated funds went to fund Mathews’ Connecticut home, his 151-foot mega yacht, as well as to save his Palm Beach mansion from foreclosure.

Matthews’ former attorney, Leslie Evans, who is facing facing criminal fraud charges from the U.S. Attorney’s Office of Connecticut along with Matthews, was not named in the SEC lawsuit.

The company behind the Palm House Hotel, 160 Royal Palm Way, also filed for Chapter 11 bankruptcy earlier this month with creditors claims totaling $115 million. The bankruptcy filing likely marks a step forward in paying back creditors of the project, who claim they were misled into investing in the project. Matthews and Evans no longer control of 160 Royal Palm Way and the court has appointed former Delray Beach mayor Cary Glickstein as the receiver.

In total, the debtor has $83.7 million in unsecured claims, $31.1 million in secured claims and only $16.1 million in total property assets. Creditors include the town of Palm Beach, which claims $2.8 million, as well as a Wellington-based company led by Craig Galle, which claims a total of $27.46 million in claims, according to court documents.

According to the lawsuit, the plaintiffs falsely claimed that famous celebrities and politicians such as Bill Clinton, Donald Trump, Celine Dion and Bill Koch – would serve on the Palm House’s advisory board. The investors were allegedly seeking green cards through the EB-5 program. 

Attorneys for Matthews and Walsh did not immediately respond to requests for comment.