The title of this blog has nothing to do with a sports score. It’s symbolic of a very sad story. I usually try to avoid sad stories in my posts, but this is an important one. Let’s just say it’s a cautionary tale.
Earlier this week I received an e-mail from a reader expressing his disappointment in Clawback, the Ali Reynolds book dealing with the Ponzi scheme. His position was that the “happy ending” in the book was totally unrealistic. He went on to explain that he had been caught up in one of the largest Ponzi schemes in California, one in which he had lost the majority of his assets. Unlike the Ponzi victims in my book, he didn’t get his back. He was writing to me in the hope that I’d be wiling to tell the non fiction story of his—a story, he said, that needs to be told.
I wrote back to explain that Bill and I, too, had been taken in a Ponzi scheme to the tune of $500,000. I explained that writing Clawback the way I did—where the bad guy gets caught and the people get most of their stolen monies back—as a way of finding … well … closure. The bad guy in my book was going to prison with a lot more charges hanging over his head than just the financial ones. Back in real life and in our case, the bad guy was charged with white collar crimes only and went to prison at Club Fed for a mere 17 years. He’ll be out on good behavior in 8. His money (OUR money and his other victims’ money) has never been found. Once he’s out, he owns it free and clear. Some of his victims are back at work in their seventies and eighties.
I ended my e-mail by telling my correspondent that, having revisited that time in my life and those events in fiction, I had no desire to do so by writing a non-fiction work. I suggested instead, that he consider contacting the production folks at the television series American Greed. At the end of the note I asked if he would like to be added to my new book notification list.
His reply is why I’m writing this post. He said no thanks, to the book notification list because he is no longer able to buy books. He reads books borrowed from his local public library. He said he was sorry to hear of our loss. His was more than four times our loss and included almost all of his assets. He went on to say, “I rarely use my heat in winter nor my A/C in the summer. Not many people see their thermostat read from 51 to 92.”
Whoa! No wonder he was offended by my fictional ending. Here’s someone who was left destitute. He went on to say that he’d never heard of American Greed. I suspect that not only is he living without heating or air conditioning, he’s also living without cable TV which, come to think of it, might not be such a bad thing.
As you’re sitting there sipping your Friday morning coffee and reading this, you may be wondering how smart people end up being caught up in Ponzi schemes. In our case, it was suggested to us by our “wealth management advisers,” people from a firm we’d worked with for years. (Wealth MIS-management would be more like it!) They told us what a great guy the Ponzi fellow was—how smart and what a terrific golfer. They somehow failed to mention that he’d been accused of financial improprieties while still in college. Wait, they didn’t know about any of that? Where was THEIR due diligence?
We were given three funds to choose from. The projected earnings were not outrageous—sightly above market. Since we weren’t expecting to get rich quick, we chose the middle one. The accounting firm auditing the funds was one we had worked with before, and that gave us confidence. What we didn’t know was that each time they were going to audit a particular fund, someone would call Mr. Ponzi guy up and let him know in advance, allowing him time to move funds around so that, on the day the audit took place, the money in that fund would be there.
So why am I writing this today? As a word of warning. The money we worked to earn is gone, and it’s not coming back, but we were lucky. The amount lost wasn’t a huge part of our assets—and we were young enough, or at least able enough to keep working and earning. That means we’ve been able to recover. We can still turn on the heat and the AC, so the old admonition about not putting all your eggs in one basket still holds true.
I’m offended that the only people who seem to have made any money out of this situation are the bankruptcy attorneys. I’m sure they’re getting paid for their services on an on-going basis, but none of the Ponzi guy’s seized assets are trickling down to the people on the bottom of the heap—the ones he victimized.
When the scheme blew up and we knew our money was gone, Bill and I didn’t stand around blaming each other. We had made the investment decision together, and we took our lumps together—the same way my correspondent is doing—only he’s doing it without heat or air conditioning. It is what it is.
Here’s my word of caution for the day: If someone—even someone you know—tells you, “Boy do I have a deal for you,” BUYER BEWARE!
As for my reader? He isn’t in my newsletter list, so I don’t know where he lives, but wherever that is, he’s in my thoughts and prayers. And I hope the weather there isn’t too ungodly hot. You can add layers to help warm up, but taking off layers doesn’t help you cool down.
Thank you for sharing this story. As a faithful reader of your books, I enjoyed the ending. It is hopeful. We need hope.
I hope there is a special place in Hell for people who operate these Ponzi schemes. I believe if they are not sufficiently punished in this life that they will be in the next or wherever they go after dying.
I’m sorry for that man and hope he has access to some help. I’m assuming he is in a large city where there are services available. He should not be shy about looking .
Thank you for writing about your experience, too. It is good of you to alert others.
It’s nice to think there are services available, there are some. Services have to stretch funds between far too many people. Crisis services can help in a pinch, but it’s not that easy or straightforward.
Thank you for clearing this matter up. I too have wrote fiction stories that expose the bad guy and give him his due. Unfortunately in real life the people still are doing their thing. Closure in writing is my way to move on.
Ps. I always try to catch your talks at the Tucson FOB. I love your stories
I already subscribe to your newsletter
Nancy
I agree with what your last two readers wrote. It is a shame intelligent people use their skills to steal from others rather than contribute to society.
I’m so pleased you and Bill were able not to blame each other and recover from the experience as much as one can.
And, as always, thank you for your wonderful books.
I remain a big fan of your writing.
Judy: My family was impacted by a New Mexico Ponzi scheme. My father died in 2002, and my mother was nicely provided for with his FBI retirement. Dad retired in 1974 as Deputy Assistant Director for Domestic Intelligence. He never believed in investing his funds. He kept everything in their bank checking account–not even savings! My mother immediately began purchasing CDs to earn interest. Then a friend of hers told her about this fabulous investment where they earned large interest payments each month. My mother cashed in her CDs and invested to the tune of $120,000 over the course of about five years. She told other people about her “good fortune investment” and they also went in with their funds. Fast forward to 2009 when she turned 90 and had to undergo a hip replacement for a 10 year-old failed replacement. It was a seven-month recovery and during that time her mental condition deteriorated. Fortunately, she had set up a trust fund for all her assets, and she made me her Power of Attorney. Right at the time of her confinement, the interest payments stopped coming, and five months later, the man behind the scheme Doug Vaughn, declared bankruptcy. That’s when everyone discovered that each time someone invested, it went to make interest payments to the others in the plan. Eventually, he went to federal prison for 11 years, and my mother received some of her investment back. But so many people were left with very little. We watched as his elaborate expensive home and furnishings were auctioned off to pay off the debts he owed. It was so sad.
In Minnesota we had our Tom Petters. He did get 50 years in Leavenworth with investors recovering 10 to 14%.
The appointed recovery attorneys were frankly, another money grabbing scheme. His take of $3.8 billion was peanuts compared to Madoff’s but localized. A big part of his ruse was generous donations to well known big charities that put him on their boards. Model citizen.
Diversiffy, as J. A. says.
I am amazed, If it is true, that the Feds recovered much of Madoff’s victim’s $$$$. I lost a lot of fun money with a former employer’s bankruptcy. Not all my eggs were in one basket and there is only myself to consider so I run the AC and heat. So many people judge by personalities, etc. My adult/retired kids are trying to find a financial guy. Every one they have interviewed has almost the same spiel. Finally, they found one whose background they “checked out” and my son-in-law has been taking classes, reading everything, etc. Cautious, just like their lives. Hopefully, their investments will be as successful. I know of someone in Club Fed for “using the mail” to swindle people. He had been an upright model guy for 60 years! Had anyone searched his name they would have found he had been in trouble 10 years before and lost his license to trade. Playing golf with or going to church with is no guarantee. Buyer beware. Thanks for sharing this. I feel this man is definitely not alone and hope his issues can be remedied. If he is truly destitute, perhaps the utility companies can give him a break.
That’s sobering. I had always assumed Ponzi schemes were more enticing with at least 2-3% above normal interest rates to get people salivating! And here it is just “a middle” of the road choice. Makes me more sympathetic to those caught up in such things.
I should also warn my friends who invest!
One question to anyone, if you don’t mind….
Why isn’t there any way to go back and sue your investor for not doing his “due diligence”? Isn’t that what he gets paid for? Doesn’t he have some responsibility or accountability?
My dad invested a small amount in a program that paid a good rate of return. After a few years it went south and the ‘independent auditor’ turned out to be a housewife who only signed the checks. While it was bad to lose the principal, he probably came out close to even.
Great monthly blog! Unfortunately, it is a sad day when these vicious Ponzi thieves ruin/destroy so many lives. I actually caught that American Greed segment when it was rerun earlier this year and about fell out of my chair when I saw you interviewed about being one of the many victims of Darren Berg. Yes, folks, it can happen to anyone as it did my parents (different criminal). Thank goodness they did not “invest” a large amount but never received one cent back.
I feel terrible about the gentleman in this blog and can only pray he has a strong support of family and friends who can assist him with the resources he needs to be comfortable and happy.
I’m sorry you don’t like the attorneys who worked on your cases. I think your contempt is misplaced. Their work is quite involved, takes a lot of time, knowledge, and thought, and you couldn’t do it for yourself. They deserve to be paid for their work, just like other workers. USA law is complex. Whether it’s necessarily so – I don’t know. I’m not a lawyer. I’m also not wealthy. I appreciate the work doctors, lawyers, and other highly trained professionals do on my behalf.
I agree with Ms Elder to a point. There are many honorable attorneys just as there are many honest and legitimate investments available however, Bankruptcy attorneys get paid from the assets of their client first and then there is a pecking order for distribution of what ever is left. Having been involved in attempting to get my employers monies due I tend to put bankruptcy lawyers lower on my list of potential pals.