The developer of the Banyan Cay Resort and Golf
was charged by the federal government last week with conspiracy to
commit health care fraud, raising questions about whether the charge
will affect construction of the long-delayed resort in West Palm Beach.
Domenic Gatto, a 46-year old Palm Beach Gardens resident, is one of five men charged in what the U.S. Department of Justice described
as a $65 million "nationwide kickback and bribery scheme" to order
medically unnecessary orthotic braces for Medicare beneficiaries.
Also charged was Thomas Farese, a 78-year old Delray Beach
man once described as the consigliere of the Colombo crime family in a
2012 affidavit from an FBI agent filed in a New York court.
Last
week, Gatto surrendered and, via video conference at the federal
courthouse in West Palm Beach, appeared before a U.S. magistrate in New
Jersey, the Justice Department said.
He has not entered a plea and has not been
formally indicted, though the federal government could take that step in
the next few weeks.
Banyan Cay will be largest West Palm development since Rosemary Square
Gatto
is the developer behind the $100 million Banyan Cay complex just east
of Interstate 95, off Congress Avenue and north of Palm Beach Lakes
Boulevard, near the Palm Beach Outlets shopping mall. When
complete, Banyan Cay will be the largest redevelopment in West Palm
Beach since Rosemary Square, formerly known as CityPlace, the popular
downtown mixed-use dining and shopping center.
The
250-acre Banyan Cay property used to be the site of the President
Country Club, but the club fell into financial trouble and was sold to
an investor group for $11 million in 2011. That investor group then
flipped the property to Banyan Cay Dev LLC, led by Gatto, for $26
million in 2015.
The hotel was expected to be completed by 2018, but construction on the
the resort has suffered stops and starts, as well as a change in hotel
brand. Originally a Noble House hotel property, Banyan Cay now is slated
to be part of Hyatt's Destination Hotels portfolio,
a boutique luxury brand making its first foray into Florida with this
property. A Hyatt spokeswoman did not respond to an email seeking
comment.
In the alleged health care fraud scheme, in addition to Gatto and Farese, three other men were charged.
Pat
Truglia, a 53-year old Parkland resident, faces one count of conspiracy
to commit health care fraud and three counts of health care fraud.
Truglia was convicted of money laundering in 2012 in a case where Farese, a co-defendant, was acquitted.
Also
charged were two men from Toms River, N.J. – Christopher Cirri, 63, and
Nicholas DeFonte, 72, face one count each of conspiracy to commit
health care fraud "in connection with paying and receiving health care
kickbacks and bribes," according to the Justice Department.
Seth L. Levine, an attorney representing Gatto,
said: "The allegations against my client are meritless, and we will
fight them aggressively in court."
A man
answering a telephone number associated with Farese hung up when a
reporter for The Palm Beach Post called to ask about the charges.
In
1998, Farese was convicted of hiding his interest in and laundering
money through strip clubs and sentenced to 87 months in prison. One of
those clubs was Club Diamonds, which Farese sold in 2012 to a holding
company managed by John Staluppi, himself once described by the FBI as a member of the Colombo crime family.
Staluppi,
who later bought the site of what was briefly known as the Double D
strip club on Southern Boulevard, has denied any connection to organized
crime, and he was not part of the fraud charges the federal government
released last week.
Feds: Men conspired to defraud Medicare, got illegal kickbacks
The
federal government's complaint "alleges that between October 2017 and
April 2019, Farese, Truglia, Cirri, DeFonte, and Gatto participated in a
nationwide conspiracy to defraud Medicare, TRICARE, Civilian Health and
Medical Program of the Department of Veterans Affairs (CHAMPVA), and
other federal and private health care benefit programs through the
payment and receipt of illegal health care fraud kickbacks in exchange
for orthotic brace orders that lacked medical necessity with a total
loss of approximately $65 million."
The
complaint also says Gatto "connected Cirri and DeFonte to other
co-conspirators and arranged for Cirri and DeFonte to sell orthotic
brace orders to orthotic brace suppliers in New Jersey and Florida in
exchange for illegal health care kickbacks and bribes."
"Gatto
and others paid Cirri and DeFonte kickbacks and bribes for each federal
health care beneficiary for whom orthotic brace orders were sold to
orthotic brace suppliers to be billed to Medicare, TRICARE, CHAMPVA, and
other federal and private health care benefit programs," according to
the Justice Department.
The Justice Department
said that, "to conceal the kickbacks and bribes, Cirri and DeFonte
created sham invoices labeling the payments as 'marketing' and 'business
processing outsourcing' expenses."
Gatto, the government alleges, "used a nominee
owner on forms submitted to Medicare and used shell corporations to
transfer the funds he paid in connection with the purchase of the
supplier."
Health care fraud and conspiracy to
commit health care fraud are punishable by a maximum penalty of 10 years
in prison and a $250,000 fine, or twice the gross profit or loss caused
by the offense whichever is greater.
What the charges mean for the Banyan Cay development
It's not clear if the charge filed against Gatto will matter to Banyan Cay's lender, Calmwater Capital of Los Angeles, Calif.
The non-bank commercial real estate lender provided a $62 million loan to Banyan Cay in 2018.
Calmwater officials did not respond to emails seeking comment on the status of the loan.
A
source close to the project, who requested anonymity to speak candidly
about it and the federal government's charges, said: "Our lender and
partners were informed of the situation, and there has been no change in
funding as the project continues towards completion."
Real
estate attorneys said it is unlikely a lender could, or would, halt
extension of credit once a loan has been made to a project.
Loan
documents often contain "bad boy" clauses that provide lenders with
protection in the event of a borrower's bad act. These acts are defined
and can include failure to pay taxes or the filing of a bankruptcy.
But
if the borrower is an entity and not an individual, a bad boy clause
might not apply, and therefore Gatto's conspiracy charge might not
trigger any clause in the loan documents, two lawyers said.
The
major concern for a non-bank lender such as Calmwater Capital is
"having their name affiliated" with a project whose principal is facing a
federal conspiracy charge, said Palm Beach attorney Guy Rabideau.
"It's public perception," he said.
Despite the charge filed against Gatto, construction of the Banyan Cay resort is moving along. The roof is even installed.
If the resort is finished as planned, that's good news for buyers at the Residences at Banyan Cay.
Boca
Raton-based SobelCo. built 94 homes next to Banyan Cay. The project
sold out earlier this year when the pandemic triggered big demand for
new single-family homes.
Prices range from the low $600,000s to the mid-$800,000s for the three- and four-bedroom homes.
The purchase of a Banyan Cay home entitles a buyer
to a three-year social membership at Banyan Cay and use of the resort's
amenities, including a golf course designed by golfing great Jack
Nicklaus.
However, with the property's
construction still ongoing, owners have been able to use
the Banyan Cay golf facility and clubhouse until the resort is ready,
said Angela Ippolito, SobelCo's director of sales and marketing.
Once the resort is complete, homeowners will switch to a three-year social membership, she said.
John
Stilley, a real estate agent with Keller Williams Realty, last year
represented a buyer who was considering a home purchase at the
Residences of Banyan Cay.
Although there were
concerns about construction delays at the resort, the buyer went forward
with the purchase and couldn't be happier.
"My client fell in love with the golf course," Stilley said.
https://www.palmbeachpost.com/story/news/local/westpb/2021/04/28/west-palm-beach-banyan-cay-owner-charged-conspiracy/7389283002/
