Article Courtesy of The Tampa Bay Times
By Tracy McManus
Published December 6, 2016
CLEARWATER — When Wayne Chase retired from his nuclear
plant job in 2012 and bought a waterfront condo overlooking Tampa Bay, he
knew he'd pay the typical fees that come with gated community living.
But when he got his tax bill that year for his two-bedroom unit in Grand
Venezia off U.S. 19 and Belleair Road, he was surprised to see $1,600 in
assessments on top of the $1,000 in property taxes.
It wasn't until he started asking neighbors that he discovered most of that
$1,600 bill was an assessment to pay off a debt run up by a convicted felon
who ran the development as a Ponzi scheme years before Chase settled there.
Although the mastermind of the failed Grand Venezia luxury resort project in
the Clearwater Cay Development District is serving a 40-year federal
sentence for fraud, residents of the 336-unit complex are still paying for
his crime. Former developer Dave Clark's company took out a $30 million note
for his promised resort in Clearwater, one of 14 Cay Clubs from Las Vegas to
the Keys, but a decade after the plan crumbled, residents are still paying
back the debt through assessments.
The bonds were issued to build a water park, high-end retail, a spa, canals
with gondoliers and other amenities around the existing apartments that were
converted into condos — but the infrastructure was never built. And likely
never will be.
Safety Harbor lawyer Bruce Barnes filed a lawsuit this year on behalf of the
homeowners' association to essentially dissolve the Community Development
District and free residents of the burden. His argument is the Community
Development District serves no public purpose required by law and never
built the development it was created for in the first place.
"He's still inflicting harm on people," Barnes said of Clark. "The law firm
that represented his (company) that went before the city and convinced the
city to approve this, they're still serving as CDD council. They're still
Community Development Districts are special entities approved by local
governments that have power to borrow money through bonds for construction
and roads and repay the debt by assessing property owners within the
district. CDDs are also responsible for maintaining their own
The Clearwater City Council approved Clark's Clearwater Cay Community
Development District in 2005 after he told city officials his "ambitious
project will revitalize the entire area," according to minutes from a work
session that year.
But Cay Clubs went on to run a fraudulent scheme by using funds of lenders
to purchase condos and flip the units to buyers at inflated prices. Clark
and his associates promised investors who bought the condo units that they
would receive steady rental income and upfront "lease-back'' payments of up
to 20 percent of the purchase price at the time of closing.
Federal investigators said the company raised more than $300 million from
buyers, but the operation turned into an illegal Ponzi scheme when it began
using money from new buyers to pay the lease-back fees to earlier ones.
The outfit crumbled around 2007, and most of the original buyers, who bought
units upwards of $500,000, unloaded their properties through short sales or
foreclosures, Barnes said.
Although current residents, many of whom bought the units for their location
on the bay at prices around $100,000, came in with no expectations of a
future resort, they didn't understand their assessments until after their
Of the overall bond debt, residents are responsible for repaying about $5
million, which will bloat to more than $10 million with interest by the time
the bonds mature in 2037.
"I felt very angry and confused and frustrated because I didn't know
anything about it," said Tom McAnulty, a Canadian pharmacist who bought two
units in Grand Venezia as investments in 2009. "All of a sudden, I and
everybody there owe a bunch of money to people we don't know anything
While McAnulty didn't hire a lawyer for the purchase, he said he used a
title search company to evaluate any liens. "Would I have still bought if I
knew? Maybe not," he said. "I certainly wouldn't have bought two."
But David Smith, managing shareholder for Gray Robinson law firm in Tampa,
which represents the CDD, said the entity is legally required to make good
on the bonds and repay this debt to the financial market.
"Bonds do not disappear," Smith said. "It's devastating to the financial
market if they wipe this out."
He said a portion of the funds from the initial bond offering was used to
purchase the land within the district, not just to fund the infrastructure
that was never built.
And property owners would have been aware of the nature of the assessment
and knew what they were getting into by reading property documents.
"I know a lot of people don't have an understanding of what development
districts are, but it's on the public record," Smith said. "You can't buy
and act like you're blissfully ignorant. You can't just undo it because you
don't like it."
This summer, the CDD filed a motion for the Grand Venezia and Barnes to pay
its attorneys fees based on Barnes filing a "frivolous" lawsuit.
And some Grand Venezia residents are worried they will be stuck with paying
the legal fees of this case, on top of the assessments, if their lawsuit is
"They don't have a snowball's chance in hell of winning this," said Jerry
Lancaster, CDD assistant secretary and Grand Venezia resident. "There's no
question these guys were crooks and they're in jail as a result of it, and
you can argue (the lender) should have been more judicious in loaning the
money, but the process is set up. The judge certified it."
But Barnes said the CDD, as it stands now with no public benefit, is in
violation of the statute.
"The CDD is a government, and it is a government that was created by a
convicted felon and a government that has been perpetuated where no benefits
have been conferred on the people who are paying for that government," he
said. "Nobody can justify it staying in existence or rationalize it."
The case is scheduled to go to mediation in late January.