Ex-owner of Daufuskie’s Melrose Resort lived lavishly by scamming investors in Ponzi-like scheme, feds say
An earlier version of this story incorrectly stated that the four business partners were arrested.
The former owner of Daufuskie Island’s Melrose Resort and three of his business partners were sued for carrying out a long-running and complex fraud on the resort’s investors that federal investigators have described as a “Ponzi-like” scheme.
The Securities and Exchange Commission’s complaint charged J.T. Bramlette, Anthony Hartman, Travis Kozlowski and Aaron Wernli Sept. 26 with violating anti-fraud provisions of the federal securities laws, according to an SEC press release.
The suit alleges that from January 2014 to mid-2017 the four business partners raised more than $10.8 million from investors through their fraudulent scheme, which involved providing investors with false progress reports, misleading account statements and inaccurate information during visits to the resort.
Bramlette, the resort’s former owner, is accused of “falsely portraying the Melrose Resort as a successful project” and using investors retirement money to fund his “lavish lifestyle” despite the resort’s deteriorating state due to his inability to pay the daily bills.
Melrose Resort, which was developed on Daufuskie in the 1980s, includes an inn, a Jack Nicklaus golf course and rental cottages. But if you visit the resort today, you will find an abandoned version of its original shell — complete with broken windows, shredded curtains and dilapidated roofs.
Bramlette, 40, purchased the resort through his Utah-based firm, the Pelorus Group, in 2011.
By January 2014, it was “a failing enterprise,” according to the suit.
“Beginning in January 2014 and continuing through 2017, the need to find money to pay the daily bills was a regular topic of communication among Bramlette, Kozlowski, Hartman and Wernli,” the lawsuit states.
The SEC’s complaint, which was filed in federal court in Salt Lake City, alleges that Bramlette was the “ringleader of the fraud” and that Hartman, Kozlowski and Wernli helped raise funds for the project.
Hartman, 58, owns and manages a Colorado investment firm called Private Placement Capital Notes II LLC, or PPCN. In 2008, Hartman and PPCN began participating in several loans associated with Bramlette, according to the lawsuit.
Kozlowski, 38, is the founder and owner of Synergy Capital Management, LLC. The Pelorus website identifies Kozlowski as “an investor and advisor for a number of the firm’s private real estate and private equity projects,” the lawsuit states.
Wernli, 39, is the director of acquisitions for the Pelorus Group. Prior to working at Pelorus, Wernli worked as a construction manager for another one of Bramlette’s companies, Nu Way Development, LLC, the suit states.
The suit alleges that investors were encouraged to invest in the resort with their retirement savings and were promised returns of up to 24 percent.
But in reality, the resort was “uninhabitable” and “suffering significant losses each month,” according to a news release from the SEC.
Despite evident financial problems, the business partners continued to solicit investments for nearly three years “without any viable source to repay the investors” and “without any disclosure to investors about the dire financial condition of Melrose Resort,” the suit states.
Bramlette eventually lost ownership in the resort in 2017 after defaulting on a series of loans.
Yet, the four business partners continued to raise money from “unsuspecting investors” by making “Ponzi-like payments” to them “without disclosing that they had lost everything,” the lawsuit states.
Bramlette used at least $1.5 million to “pay for his lavish lifestyle,” including trips to Disneyland, shopping sprees on Rodeo Drive, stays at the Wynn and Bellagio hotels in Las Vegas and buying a Land Rover, the suit states.
Wernli is cooperating with the SEC and has agreed — without admitting to the allegations — to pay a fine of $40,000 and adhere to a court order prohibiting him from issuing or selling any unregistered security.
The SEC’s investigation into the other three businessmen and their companies is still ongoing, according to the press release.
In April 2017, Jacob Keith Cooper, owner of the Total Wealth Management investment firm, was arrested on 18 felony charges for allegedly defrauding investors out of as much as $65 million.
Some of that money may have ultimately flowed to the Melrose Resort and its owner Bramlette and the Pelorus Group, SEC investigators alleged at the time.
Documents from the SEC showed that was Cooper allegedly connected to Bramlette through Hartman, who runs PPCN.
However, lawyers representing Bramlette denied any direct connection to Cooper.
In April 2018 — about a year after the Pelorus Group filed for Chapter 11 protection — the bankruptcy filing was dismissed. The motion for dismissal was made because it was in the “best interests” of the creditors and the estate, court documents said.
Robert Heim, the attorney representing Hartman, said Wednesday that his client “strongly denies the allegations in the SEC’s lawsuit and we’re looking forward to defending the case in court.”
Efforts to reach the attorneys representing Bramlette and the Pelorus Group were unsuccessful Wednesday.
This story was originally published October 3, 2018 at 1:59 PM.