In re Sanctuary Belize Litig.

• Decision Date: 02 August 2019
• Docket Number: Civil No. PJM 18-3309
• Parties: IN RE SANCTUARY BELIZE LITIGATION
• Court: U.S. District Court — District of Maryland

409 F.Supp.3d 380

IN RE SANCTUARY BELIZE LITIGATION

Civil No. PJM 18-3309

United States District Court, D. Maryland.

Signed August 2, 2019

MEMORANDUM OPINION IN SUPPORT OF PRELIMINARY INJUNCTION

PETER J. MESSITTE, UNITED STATES DISTRICT JUDGE

On October 31, 2018, the Federal Trade Commission ("FTC") filed a Complaint in this Court, alleging that certain named Defendants were perpetrating a large-scale land sales scam on its consumer base of largely U.S. customers, seeking, as part of its requested relief, a Preliminary Injunction. Defendants are a web of corporate entities and individuals that, the FTC says, comprise, direct, and control what the FTC collectively terms the Sanctuary Belize Enterprise ("SBE"), located in Belize. The entities comprising SBE include Global Property Alliance, Inc. ("GPA"), Eco-Futures Development, Eco-Futures Belize, Ltd. ("Eco-Futures (BZ)"), Sittee River Wildlife Reserve ("SRWR"), Buy International Inc. ("Buy International"), Buy Belize, LLC ("Buy Belize"), Foundation Development Management, Inc. ("TDM"), Power Haus Marketing ("Power Haus"), Ecological Fox, LLC ("Ecological Fox"), Belize Real Estate Affiliates, LLC ("BREA"), Southern Belize Realty, LLC ("SBR"), Exotic Investor, LLC ("EI"), Foundation Partners ("FP"), BG Marketing, LLC ("BG Marketing"), Prodigy Management Group, LLC ("Prodigy"), Newport Land Group, LLC, and the Sanctuary Belize Property Owners' Association ("SBPOA," aka "The Reserve Property Owners' Association"). The FTC also sued Atlantic International Bank, Ltd. ("AIBL"), located in Belize, for allegedly assisting in the deceptive telemarketing, sales, and development practices of SBE.¹

The individual Defendants are Andris Pukke and Peter Baker, as well as Luke Chadwick, John Usher, Brandi Greenfield, Rod Kazazi, Frank Costanzo, and Michael Santos. The Complaint also names Angela Chittenden, Deborah Connelly, John Vipulis,² the Estate of John Pukke, and Beach Bunny Holdings, LLC ("Beach Bunny Holdings") as Relief Defendants. On February 13, 2019, Greenfield, Kazazi, Costanzo, Santos, Chittenden, Connelly, FP, BG Marketing, Ecological Fox, and Beach Bunny Holdings stipulated to the entry of the Preliminary Injunction.³ ECF No. 195. Pukke and Baker have filed written oppositions to the Motion for Preliminary Injunction. No other individual Defendants have stipulated to the entry of a Preliminary Injunction, but none have filed oppositions to the Motion. Chadwick, however, has moved to dismiss the claims against him for lack of personal and subject matter jurisdiction. ECF No. 475.⁴

From March 11 to March 22, 2019, the Court held an evidentiary hearing on the FTC's Motion. Based on the evidence, oral argument presented at the end of that hearing, and the Proposed Findings of Fact and Conclusions of Law submitted by various parties post-hearing, the Court GRANTS the FTC's Motion for Preliminary Injunction as to all Defendants who have not at this time settled their claims with the FTC.

I. Factual and Procedural Background

A. Alleged Concealment of the Belizean Parcel from the Receiver in FTC v. AmeriDebt

The case involves a large mass of land in Southern Belize, roughly the size of Manhattan, where individual lots in a planned residential and commercial community have been marketed to thousands of consumers and sold to residents of the United States.

Some critical history precedes the current litigation.

In 2003, the FTC sued Pukke under Section 5 of the Federal Trade Commission Act ("FTC Act"), 15 U.S.C. § 45(a), in connection with what it alleged were fraudulent activities related to two credit counseling companies he owned and/or operated. Civ. No. PJM-03-3317, FTC v. Ameridebt, Inc. et al. ("AmeriDebt ;" since consolidated with the present case). The Court entered a preliminary injunction against Pukke and other defendants in that case, FTC v. Ameridebt, Inc. , 373 F. Supp. 2d 558 (D. Md. 2005), following which Pukke agreed to a Stipulated Final Judgment and Permanent Injunction. AmeriDebt , ECF Nos. 408, 411, 473. Pursuant to the Final Order of Judgment in AmeriDebt , the Court appointed a Receiver, Robb Evans & Associates, LLC,⁵ to marshal and liquidate up to $35,000,000 of Pukke's assets in order to provide the FTC with funds to compensate Pukke's victims. AmeriDebt , ECF No. 473 at 13.

At the time of the AmeriDebt action, Pukke and Baker, along with several other associates and family members, owned interests in two Belizean entities: Dolphin Development, LLC ("Dolphin") and Sittee River Wildlife Reserve ("SRWR"). PX 358; PX 359; PX 361. Through Puck Key Investments L-8, LLC ("Puck Key 8"), an entity he wholly owned, Pukke held a 60% interest in Dolphin (Baker, his mother, and his stepfather held the remaining 40%). PX 358. While serving as an SRWR director, Pukke loaned it $1.5 million to buy 11,755 acres in southern Belize and loaned Dolphin $1.5 million to buy 350 adjacent acres. PX 356 ¶ 11. In May 2005, SRWR also bought a five-acre island, now known as "Sanctuary Caye." PX 378; PX 192 ¶ 3, Att. 24 at 11 (copy of the minutes of the 2016 Annual General Meeting of SRWR, signed by "Peter Baker, Chairman"). These land acquisitions collectively formed the parcel of land (the "Belizean Parcel") on which Pukke, Baker, and the other Defendants in the present case have collaborated to develop and market the community at issue today—Sanctuary Belize (also known as Sanctuary Bay Estates or the Reserve). In 2005, throughout the United States, Dolphin commenced telemarketing lots on the Belizean Parcel as part of the Sanctuary Belize residential and commercial development plan, and in August 2005 Dolphin sold its first lot in the development. PX 363 (lot sale contract for Dolphin, dated August 1, 2005).

After the Final Order of Judgment in the AmeriDebt case was entered, Pukke apparently retained control of the Reserve, but actively concealed his interest in the property from the Receiver. Pukke was alleged to have misrepresented to the Receiver both his ownership stake in and the fiscal solvency of Dolphin. Pukke also transferred Dolphin's development rights and a portion of the Belizean Parcel to two entities controlled by Baker in an apparent effort to make SRWR appear to be without assets. PX 361; PX 371; PX 372; PX 373; PX 374; PX 375; PX 376; PX 377; PX 379; PX 380. When the Receiver became aware of this legerdemain, it moved to have both Pukke and Baker held in contempt of court for, among other things, refusing to turn over the land and for taking steps to remove it from the Receiver's control.

On March 30, 2007, following an evidentiary hearing held in February and March of 2007, the Court found Pukke and Baker in civil contempt for their refusal to turn over receivership assets and ordered them to immediately turn over control of the Belizean Parcel to the Receiver. AmeriDebt , ECF No. 571. To facilitate the Receiver's ability to control the Belizean Parcel, the Court issued a second order unwinding the alleged sales of Pukke's interests in Dolphin (i.e., his interests in Sanctuary Belize) and ordering these assets re-vested in Dolphin (which the Receiver controlled). AmeriDebt , ECF No. 572.

Pukke and Baker, however, failed to comply with the Court's Orders, i.e., to purge their contempt. Accordingly, on April 30, 2007, the Receiver moved to have both men incarcerated in order to coerce their compliance with the Court's Orders directing the turnover of their interests in the Belizean Parcel and related documents.⁶ AmeriDebt , ECF Nos. 596, 597. On May 4, 2007, the Court again found Pukke and Baker in Contempt, remanded them to custody of the U.S. Marshal and had them incarcerated. AmeriDebt , ECF No. 604. Baker and Pukke were eventually released from custody after serving approximately two weeks and one month in custody, respectively. Their release was conditioned on cooperating in the turn-over of Pukke's assets to the Receiver, including the Belizean Parcel AmeriDebt , ECF Nos. 614, 622, which, in part at least, they did do.

Approximately one year later, on March 27, 2008, realizing that it would be exceedingly difficult and costly to enforce its rights to control the Belizean Parcel, the Receiver undertook to cash out its claims to ownership over it. AmeriDebt , ECF No. 682. In consequence, an agreement was reached whereby the Receiver would sell the land to SRWR for $2 million. Id. No party objected to the sale, and on April 15, 2008 the Court approved it without comment. AmeriDebt , ECF Nos. 684, 686.

Notwithstanding the foregoing, the FTC alleges in the present litigation that it was Baker who raised the funds to purchase the Belizean Parcel from the Receiver, and that Pukke, through Baker, retained effective control of the development and marketing operations for Sanctuary Belize, which, after the Receiver's involvement terminated, allegedly continued to operate under the name Defendant Eco-Futures Belize, Ltd. PX 192 ¶ 3. Att. 24 at 12 (2016 SRWR General Annual Meeting minutes, detailing the 2008 purchase of the Belizean Parcel for $2 million from the AmeriDebt Receiver); PX 395 (emails between Baker and Greenfield discussing sales tours of the Reserve scheduled for February 2009, also forwarded to Pukke in 2011); Baker Dep. Tr., 2/19/19, 123:17–124:1 (Baker testifying that Pukke's ownership and involvement was reinstated "[a]s soon as we were ready to go to, call it, start marketing and sales").

In short, the FTC contends that at all relevant times Pukke effectively controlled the Belizean Parcel—the land on which Sanctuary Belize has been developed—as well as the associated marketing and sales operations, all the while concealing the fact of his affiliation with the enterprise from the AmeriDebt Receiver. The nexus between FTC v. AmeriDebt and the Belizean Parcel purportedly gave rise to a multitude of violations the FTC says characterize the present litigation.

B. Marketing and Development of Sanctuary Belize

Through his control over the SBE entities,...