Los Angeles Jewish Journal
A quadriplegic is one of 800 victims in an alleged investment scheme.
Reed Slatkin is accused of running a Ponzi scheme that allegedly took in $593
million.
After being left a quadriplegic in a car accident in 1993, 53-year-old Alice
Wintz received an insurance settlement that she thought would, with careful
investing, leave her financially secure for life.
So she asked money manager Reed Slatkin to invest her settlement. Wintz and her
ex-husband had met Slatkin in 1986 through a business associate, and considered
him a friend. Impressed with his charm and financial acumen, and, having had
what Wintz describes as a "good experience" investing a small amount of money
with him in 1986, they thought they could trust him with the insurance
settlement.
The Securities and Exchange Commission (SEC) had accused Slatkin of running a
Ponzi scheme shortly after he filed for bankruptcy in May 2001. (A Ponzi scheme
is a phony investment plan in which money provided by later investors is used to
pay artificially high returns to the initial investors, with the goal of
attracting as many investors as possible.) Slatkin’s alleged scheme is said to
be one of the biggest cases of investment fraud in American history.
Last week, Slatkin agreed to be barred from investment management as part of
ongoing settlement negotiations with the SEC, the Los Angeles Times reported.
But, whatever the results of the SEC case, Wintz may not recover her funds.
Over the years, Wintz had received periodic statements from Slatkin’s office
saying that her money was making a certain percentage every year. Over time, she
had made withdrawals of what she believed was the interest on her account, and
used the money to pay for her medical expenses and her living expenses.
At the end of December 2000, Wintz said she received a statement from Slatkin
telling her that she had more than $1 million in capital left in her account.
However, when she requested a withdrawal of some $15,000 in April 2001 to pay
her taxes, her mortgage and her nursing care, she was unable to withdraw the
money or to reach Slatkin on the phone, she told The Journal.
Her security suddenly disappeared.
"I’m about to be thrown out here on the street and I don’t have income to pay
for my nursing care and my other expenses," Wintz, a divorced mother of two,
said. "According to the creditors committee and the attorney for the trustee, it
had been a fraudulent scheme from the beginning,"
Slatkin would not comment on the case, his lawyer said.
Slatkin, 52, lives in Santa Barbara. He was born Jewish but turned to the Church
of Scientology when he was a teenager, eventually becoming a minister for the
church, according to news reports. When Slatkin saw that he could not live off
the salary he was getting as a minister, he started investing to help his family
and other members of the church earn some extra money.
He experienced a financial windfall in 1994 when he was asked to put up some
money to help a fledgling Internet company. That Internet company was Earthlink,
and Slatkin’s $75,000 investment grew to be worth more than $100 million.
Slatkin allegedly used his fortune to buy his way into Santa Barbara society,
becoming a benefactor of the Santa Barbara Opera and a member of the yacht club.
Along the way, he convinced many to invest with him, including celebrities such
as lawyer-turned-news host Greta Van Susteren and actor Peter Coyote. Slatkin
allegedly used the money he received from the 850 investors to make large
payments to a select group of 75 investors, who collectively received $151
million more than what they put in. The rest of the investors found out on May
1, 2001, that Slatkin was filing for bankruptcy, and that they would not be able
to retrieve their capital investment, let alone the inflated interest and
dividends that Slatkin had promised them.
In subsequent meetings with the other creditors, Wintz discovered that she would
probably not be able to make a claim on Slatkin’s estate, because she had been
withdrawing funds from her account for six years. Although she believed that was
only taking out the interest, due to Slatkin’s alleged fraud, she was actually
living off her capital.
Now, with no nest egg and no income, Wintz’s situation is dire indeed.
Richard Wynne, an attorney representing the creditors, noted that Wintz’s
situation was "complicated" and said in an interview with The Journal that he
"believed she was a net debtor," (meaning she had possibly taken out more money
than she had put in). This sentiment was echoed by Todd Neilson, the Chapter 11
trustee, who told The Journal that Wintz was in an "unfortunate situation, and
we genuinely feel sorry for her and her condition, and we empathize with her,
but that doesn’t change the numbers."
Rabbis have already helped out Wintz, whose 16-year-old attends Shalhevet High
School. "I want to thank the Jewish community for all the support they have
given me," she said, adding that she hopes others in the community will assist
her, either by finding her a low-rent apartment or by helping her find some
bookkeeping work.
Wintz is also in the process of setting up a charitable foundation designed to
help handicapped or otherwise impaired victims of fraud, she said. "We were in
shock and disbelief when we found out what had happened," Wintz said.
"I sat in his house in Santa Barbara at the end of 1994 and he said, ’Don’t
worry, I’ll take care of you,’" Wintz recalled.
"He was not the great friend we all thought he was, that’s for sure."
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January 11-17, 2002
By Gaby Wenig
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