A Miami-Dade town’s city attorney pulled a $4.1 million fraud. It cost him everything
Craig Sherman spent 45 years as a Florida lawyer, 43 of them as the city attorney for Bay Harbor Islands. He ran his own law firm in Boca Raton, where he shared a 2,517 square foot, three-bedroom, three-bathroom condominium with his wife.
Since November 2019, Sherman has lost all that and more, the “and more” soon being his freedom after pleading guilty to two counts of wire fraud last week in West Palm Beach federal court. The sentencing of Sherman, 80, hasn’t been scheduled.
The lawsuit and investigation that started the disintegration of Sherman’s life stems from his misuse of money loaned him by a former longtime client Barry Smith, who sued Sherman, and a friend-sometime client.
READ MORE: The $4.1 million that has Bay Harbor Islands former city attorney under FBI investigation
“A financial analysis showed that Sherman was running a Ponzi scheme, using money from [Smith] and Victim 2 to pay back each other, or on some occasions paying back the same investor with his or her own money,” Sherman’s guilty plea admission of facts said.
Money for nothing and loans for free
In June 2016, Sherman convinced Smith to invest in coming Bay Harbor Islands’ development with loans that would bring Smith 6% to 8% interest annually. Smith would get his principal when the projects were done, according to promissory notes.
Smith’s lawsuit says Sherman quelled his concerns about conflict of interest by saying the city was aware of his role with Smith. Smith also believed Sherman was putting his own money on the line in these projects.
So, Smith’s lawsuit said, he sent 17 wire transfers to Sherman’s law firm’s trust account from June 2016 through March 2019 for investment in projects Grand Beach Hotel, Casa Verde, Bijou (La Boutique) and Wharton Kane Concourse.“
“Instead of using [Smith’s] money to fund the construction projects — like he claimed he would — Sherman used it to pay for his personal expenses and to try to keep his law firm running,” Sherman’s guilty plea said.
Sherman made the same promises to the friend-client and used the money the same way. Also, he used some of that money to make payments to Smith.
But when Sherman tried to give himself a little more time in 2019 by telling Smith that Bay Harbor Islands put a moratorium on one of the projects, thus delaying interest payments, Smith smelled something.
“[Smith] decided to contact the Bay Harbor Islands Building and Zoning Department and learned there was no moratorium, and the projects were going forward as planned,” Sherman’s guilty plea said. “One of the projects was almost compete yet [Smith] had stopped receiving interest payments months earlier.”
Eventually, when Smith “confronted Sherman about the investments, Sherman told him that he “screwed him.”
Sherman also “admitted that he never purchased any rights or provided any loans for the construction projects in Bay Harbor Islands. Sherman told [Smith] that the money went to pay off his personal debts as well as pay his personal expenses.”
In late 2019, Sherman’s other victim read an article on Sherman’s devolving situation. Sherman told her “the media mischaracterized the situation and assured her that her investments were safe.”
She said she wanted her money back. Sherman said he’d give her the money when the promissory notes said he would.
Disintegration of a fraud
▪ November 2019: Sherman resigned as Bay Harbor Islands city attorney after 43 years.
▪ December 2019: Smith filed a civil suit against Sherman in Palm Beach County Circuit Court. Bay Harbor Islands asked the Florida Department of Law Enforcement to look into Sherman’s actions. Anticipating a Florida Bar investigation into ethics violations, Sherman petitioned for disciplinary revocation. If a disciplinary revocation petition is granted, the attorney gets ejected from the Bar and can’t apply for readmission for at least five years, if ever. In return, the professional discipline and ethics cases go away. Civil or criminal cases are not affected. “Disciplinary revocation is tantamount to disbarment,” the state Supreme Court says.
▪ March 2020: Sherman’s disciplinary revocation petition is granted.
▪ May 2020: Smith’s lawsuit results in a $4.175 million judgment against Sherman and the Sherman & Sherman law firm.
▪ November 2020: Sherman and his wife sell their Boca Raton condominium for $1.295 million, according to Palm Beach County property records.
▪ September 2021: Sherman’s wife files for divorce.
▪ May 2023: Sherman is indicted on eight counts of wire fraud.
▪ August 2023: Sherman pleads guilty to two counts of wire fraud.
