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
By Greg Farrell, USA TODAY

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?)."