FLORENCE -- Jeff Shoup and Tommy Hix, the two men behind one of the S.C. coast's biggest real estate frauds, pleaded guilty in federal court here Wednesday to felony charges that they conspired to commit mail and wire fraud.
Shoup and Hix admitted they stole millions of dollars from investors in two failed North Myrtle Beach condominium projects - Bahama Island and Crystal Palace - as well as other projects along the Grand Strand and the British Virgin Islands.
The former partners in T&J Development of North Myrtle Beach will be free on bail until they are sentenced at a later, unscheduled date.
The men, who pleaded guilty to one felony apiece, face a maximum $1 million fine and a prison sentence of up to 20 years. Prosecutors, however, have recommended reduced sentences for Shoup and Hix because they have signed plea agreements and are cooperating with investigators.
The plea agreements will let prosecutors question Shoup and Hix by polygraph to determine whether the men have any assets that can pay back investors who lost millions of dollars in deposits on the condo projects. Instead of using the deposits to build the condos, Shoup and Hix spent the money on personal expenses and unrelated businesses.
"Hopefully, polygraphing them on their assets will give investors at least some comfort that they won't do their time and then go off somewhere with millions of dollars," said Bill Day, the assistant U.S. attorney who is prosecuting the case.
Under federal sentencing guidelines, Hix faces a minimum prison sentence of 41 months without parole. Shoup faces a minimum prison sentence of 46 months without parole. Those minimums likely will increase by the time a pre-sentencing report is completed and adjustments are made for such factors as the number of victims involved and the amount of money stolen. Judges, however, are not bound by the guidelines.
Both men also will be ordered to pay an as-yet-undetermined amount of restitution, and they will face three years of supervised release after their prison sentences.
Hix, who signed a plea agreement last month, had been scheduled to enter that plea in court Wednesday. Shoup, however, had repeatedly turned down plea agreements and was scheduled to stand trial next week before reaching a deal late Tuesday.
Even though they pleaded guilty to the felony charges, Shoup and Hix downplayed their roles in the scheme during Wednesday's hearing.
Shoup would not admit to stealing condo deposits under direct questioning from Judge Terry Wooten. Shoup told the judge he is only guilty of sending an investor a false financial statement, not in an attempt to fool the investor but to save money.
Shoup said a North Myrtle Beach accountant previously had done work for T&J Development, so he used that accountant's letterhead to fashion a new financial statement to solicit money.
"[The accountant] charges a substantial fee for an updated financial statement," Shoup said. "Instead of paying him, I did it."
Kirk Truslow, a lawyer representing Hix, said his client had a successful track record with projects along the Grand Strand and initially believed he was spending money from loan advances instead of investors' deposits. Truslow said Hix was duped by a purported financier named Duwayne Woods, who tricked the developers into giving him the condo deposits.
Woods kept some of the deposit money and returned the rest to Shoup and Hix as "loan advances," according to bank records. It wasn't until after Woods failed to come up with the money to build the condos that Hix learned he had been the victim of a complicated scam, Truslow said.
"We didn't take care of people's money," Hix told Wooten. "We gave it to someone who wasn't a legitimate bank source. The money got gone, some of it came back and we used it for other things. The money was given to us in trust, and we didn't hold it in trust."
Wooten said the details of the case might be complicated, "but stealing money is not that complicated."
"If you take money for one project and convert it to another project, that's stealing money," Wooten said.
Wednesday's denials by Shoup and Hix ultimately will have no impact on their guilty pleas, Day said, although their lawyers could use the information to argue for a lighter sentence.
"There might be some mitigating issues that come into play at sentencing," Wooten told the men during the hearing. "But any kind of explanation that this is all some kind of misunderstanding - that's not what this is about today."
Wooten allowed Shoup and Hix to remain free pending their sentencing, and he added a condition to Shoup's bond agreement that prohibits him from operating a motor vehicle. Shoup has been charged with driving under suspension and driving under the influence of alcohol in two separate incidents since his indictment last year. He has been on house arrest since a hearing this summer in which court officials said he also failed a drug test.
"Driving is not going to do you any good," Wooten told Shoup. "It will only hurt you."
All told, prosecutors say Shoup and Hix stole about $10 million from investors in condo projects they were supposed to build. Shoup also faced six felony charges stemming from alleged mortgage fraud. Prosecutors dropped those charges in exchange for his guilty plea.
In the mortgage case, prosecutors say Shoup and two others conspired to defraud banks out of nearly $2.4 million by obtaining fraudulent mortgages on condos that Shoup owned at Cherry Grove Villas II in North Myrtle Beach. Instead of being used to purchase the condos, prosecutors say, the loan proceeds were split by Shoup and the others.
Darin Epps, a former Myrtle Beach mortgage broker, and former North Myrtle Beach real estate agent Tiffany Travis - who worked at an agency owned by Shoup and Hix - already have pleaded guilty to one felony charge apiece related to the mortgage fraud.
Epps and Travis face maximum 30-year prison terms and $1 million fines. They also have been promised possible lighter sentences as part of their plea agreements. No sentencing date has been set for either person.
In addition to the criminal charges, Shoup and Hix are facing dozens of civil lawsuits filed by the Mullins Law Firm on behalf of investors who lost deposits averaging $35,000 per unit while the Bahama Island and Crystal Palace projects were being marketed.
Jarrod Ownbey of the Mullins Law Firm said he was happy with Wednesday's guilty pleas and hopes the civil cases soon can move forward. Those lawsuits have been on hold while the criminal cases proceed.
The Bahama Island case first was outlined in a series of reports by The Sun News. The newspaper's investigation and the civil lawsuits uncovered much of the evidence that prosecutors eventually used in their cases against Shoup and Hix.
"At least we didn't give up," Ownbey said Wednesday. "We sent a message that you can't do this kind of thing and get away with it."
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