http://www.usatoday.com/money/consumer/2001-12-18-ponzi-slatkkin.htm
12/18/2001 - Updated 07:37 AM ET
Report: Scheme took in $600M
Reed Slatkin, a Scientologist minister turned investment adviser, was
a mediocre stock picker who ran a "fraudulent Ponzi scheme" that took
in nearly $600 million, a bankruptcy trustee says.
In a report filed with the U.S. Bankruptcy Court in Santa Barbara,
Calif., trustee R. Todd Nielson says that Slatkin persuaded hundreds
of investors to give him $593 million between 1986 and 2001. While 75
investors profited handsomely--their $128 million netted them $279
million in payments--the majority of the investors were left
empty-handed.
Slatkin told creditors that their money had increased as much as 20%
to 50% a year, Nielson says. Investors who lost $255 million were led
to believe that their money had grown to $778 million through 2000.
Slatkin's reputation grew in the mid-1990s, when his $75,000 EarthLink
investment soared to $122 million. Slatkin had many celebrities among
his clients, such as CNN legal expert Greta Van Susteren, movie
producer Armyan Bernstein (Air Force One) and actor Giovanni Ribisi
(Boiler Room and Saving Private Ryan).
But the EarthLink investment was an aberration, Nielson says. The
Securities and Exchange Commission shut Slatkin down in May, freezing
his assets.
The report describes various documents that suggest Slatkin had been
covering his tracks for years. In one note, written in 1988, Slatkin
says, "Instead of working on stocks, I was working on fabricating
statements." The Wall Street Journal first reported the note's
existence Monday.
Slatkin's attorney, Brian Sun, says he hasn't seen the trustee's
report but points out that his client is cooperating with all
investigations, regulatory and criminal. "We are going to be
responsive and cooperative with all investigations," he says.
When the SEC originally started probing his finances, Slatkin said
that he had $300 million deposited in Swiss bank accounts. The report
shows that Slatkin set up a telephone number in Switzerland that would
be automatically forwarded to an office in Santa Barbara.
Christopher Mancuso of International Telecommunications Consulting
described the service in a note to Slatkin: "You will notice when you
dial the number the line has been conditioned to provide a truly
genuine European ring (nice touch, huh?)."
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By Greg Farrell, USA TODAY
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