As Daniel Prewett sits in an Italian jail on drug charges, client lawsuits and bank foreclosures stack up in U.S.

Daniel Prewett, who is sitting in an Italian jail awaiting extradition to the United States on drug-trafficking charges related to a cocaine deal, thought he had the Midas touch when it came to investing in real estate.

During the past 10 years, he laid out $39 million of his own and investors' money to buy 97 Southwest Florida properties. He then sold 55 of them at a $14 million profit.

The profits alone prove that Prewett was a savvy investor, but former investment clients claim in lawsuits that Prewett engaged in numerous questionable transactions along the way.

The most questionable, they say, was the deal in which Prewett sold the 46-unit Bermuda Apartments to an investment team led by Prewett's former property manager and business associate, Warren Hickernell, for $10.23 million.

That sale came just nine months after Prewett paid $5 million for the property, and the inflated price tag allowed Hickernell to get a $9.4 million loan from Sarasota's Bank of Commerce -- a loan that is now in default.

But the Bermuda Apartments deal was not the only questionable transaction Prewett was involved in.

Lawsuits filed by his investment clients point to four more deals involving homes in the Phillippi Gardens neighborhood of Sarasota.

At one point, those homes belonged to Sarasota developer Melissa Demarco. But Demarco had trouble making interest payments on her more than $2.7 million loans in 2004, so Prewett agreed to help out.

In return for receiving title to her properties at no cost, Prewett agreed to pay Demarco's outstanding debt, cover ongoing construction costs and split profits from the ultimate sale of the properties.

Though no cash changed hands between Prewett and Demarco, deeds filed at the Sarasota County Court show the properties were transferred at a value of $2 million.

Court records also show that Prewett used new appraisals for all four properties to get a $3 million line of credit from Peoples Community Bank in Sarasota.

Then, on May 4, 2006, Prewett transferred one of the four properties into his own name.

Property records show that he paid $700,000 for the property and received a $630,000 mortgage from RBC Centura Bank.

Investors claim Prewett had no right under joint venture agreements to transfer property himself.

"Prewett directly received proceeds from a pattern of criminal activity by conveying properties originally purchased under the joint venture agreements with joint venture funds from JH Investment Services (Prewett's company) to his name and then either selling them or removing all equity from the property by mortgage and converting the same for personal use," said Steven Wieder in a lawsuit filed March 19.

Following the money

A search through court records reveals that Prewett made a habit of transferring property to himself over the years at no charge, completing a dozen such transactions since 1999.

In October 2005, for example, JH Investment bought two condo units at Blackburn Harbor for $1.5 million. The company transferred the units to Prewett in June 2006 at no charge, and Prewett got two loans totaling $1.65 million from the First Bank of Arizona.

On other occasions, Prewett sold properties to himself in order to generate profits.

In 1999, he garnered $251,500 by selling three of 11 lots in on Beneva Road to himself before reselling the lots to JH Investments.

At the same time, Prewett engaged in numerous deals with clients and business partners that yielded large profits in short periods of time.

On Oct. 4, 2002, Graphic Property Holdings, a company owned by Prewett's chief accountant at JH Accounting Services, Natalie Swaney, sold two building lots at University Park of Commerce to Prewett's company for $475,000.

Prewett's company sold the property two weeks later for $699,000, netting a $224,000 profit.

Since February, clients have won a series of judgments against Prewett, demanding repayment of of $19 million in invested funds.

At the same time, eight lenders -- Deutsche Bank, Peoples Community Bank, Century Bank, Aurora Loan Services, Citibank, LaSalle Bank, RBC Centura and the Guardian Limited Partnership -- have won $14 million more as the result of successful foreclosure proceedings.

Fortunately for creditors, Prewett and his company still own 42 parcels of land in Southwest Florida that were purchased for about $21 million.

Lawsuits filed by investors say that Prewett also bought golf course property in California and mountaintop home sites in Costa Rica and North Carolina that are not included in the $21 million figure.

But one investor, New York resident Dimitrios Pistikos, questions whether Prewett ever used money raised from investors to buy properties outside the state.

He either did not buy the properties or "those properties were transferred to Prewett or companies controlled by him for his own personal enrichment," Pistikos' April 3 lawsuit states.

http://www.heraldtribune.com/article/20070702/REALESTATE/707020482/1438