No one will ever believe you, Jew Boy,” Peanut said half jokingly. I simply listened as I prepared the food for his going-away party. By “food” I meant what we called the “prison special.” The prison special was prepared in clean, reinforced, unused plastic trash bags. In those bags I dumped two cases of Cup of Noodles and thinly sliced pepperoni, which was sold in the commissary; three tubs of soft cheese spread and tomatoes, garlic, and onions diced to perfection (I think Big Ron, who worked in the kitchen at the time, smuggled those items out).
I then added boiling hot water to the bags (always double bag if you are preparing this at home) and sealed the bags. I used my hands to massage the outside of the bag to make sure the ingredients heated through evenly. Ten minutes later the prison special was ready for consumption.
The party was being held in honor of Peanut’s departure from FCI Englewood to head back to Washington, D.C., for the pre-release program. I was assembling ten of his closest friends for the gathering in one of the upper east card rooms. Peanut was leaving, and I was heartbroken to lose the best friend I had ever had.
These types of going away parties are commonplace in prison. With a population of roughly a thousand inmates, FCI Englewood was always sending someone home or transferring him to another prison or pre-release program. The adjustment for me was mustering up enough sincere joy for those fortunate enough to be going home or moving to a facility closer to home while I was left behind with a twenty-five-year sentence in Colorado. Furthermore, and although I did not know it at the time, this would be the last time Peanut and I would ever talk. He interrupted my thoughts again.
“You hear me, Jew Boy?”
“Well, frankly you are hard to follow. Here I am preparing for your going-away party and out of the blue you come at me with this ‘no one is gonna believe you’ line, and somehow I am supposed to make a connection? I don’t know what you mean.” I shrugged and wrinkled my forehead.
Peanut smiled. This was the frustrated reaction he was seeking.
“What I mean is that I have been thinking of the last piece of advice I could give you before I left and that advice is this, No one is going to believe that you have changed.”
“Tell me something I don’t know,” I chuckled. He lightly grabbed my wrist to stop me in the middle of my culinary pursuit.
“No, I’m serious, Barry. And before everyone comes to the party tonight I wanted a chance to talk to you because I leave early in the morning.” His grip relaxed as I stopped and turned toward him. “You are destined to do great things when you get out of here. There is no limit to what you will do. I’ve met a lot of people over these past years in prison, and there are none as talented and gifted as you. Sky is the limit for you, Jew Boy.” He paused and searched my eyes for a glint of understanding.
“But despite all that—many people will simply not believe you,” he declared. “They will think you are the same old Barry Minkow running another con. Be prepared!”
“That’s impossible,” I protested. “Once I am out of prison and paying back victims and not being one of those ‘born again until you are out again’ prison conversion stories, people are going to believe that I have changed. You’ll see,” I replied with a tone of defiance. Peanut grew quiet. It was as if he was trying to prophetically warn me of something that I was just unwilling to comprehend.
“Okay, Jew Boy. Have it your way. But I want you to remember one thing. Can you do that? Can you remember one thing?” he pleaded.
“Sure I can,” I vowed.
“When you are hundreds of miles away from FCI Englewood and your prison years are long behind you, and you run into the reality of people who doubt your sincerity—remember this: I love you and I believe in you. That’s all I want you to remember.”
Despite our dream of one day opening a church together, we both knew there would be a period of time when we would not be together. Inmates are not allowed to associate with one another, even when released, until they are off probation or parole.
Peanut grabbed from the table some matches that I was going to use to light a few candles. Since inmates were allowed to smoke cigarettes, obtaining matches was not a difficult task. He switched the lights off and lit a match in the dark room. Our faces were barely visible from the light of the match.
“You see all the darkness around us?” Peanut asked.
“Yes,” I said softly.
“All that darkness represents all the people who will doubt your motives, sincerity, and ability to change. And that can get pretty dark at times. But this match right here,” he pointed out as he focused on the bright flame, “that is me in your life. And all the darkness in the world cannot overcome the power of one light, one person who wholeheartedly loves and believes in you. And I’m that person.” He flipped the lights back on and blew out the match.
“Never forget that, Jew Boy. Never forget that.”
“Barry, Steve Austin is on line one,” Barbara yelled. I grabbed the phone, anxious to speak with my valued associate.
“Hey Steve, thanks for calling.”
“I’ve got bad news,” he announced in a somber tone. “Our plans for the trip to Europe are cancelled.” He was right. This was not good news. The European trip had promised a high return for nine days. Steve and I were going to team up and do a fraud prevention boot camp for various accounting firms in Europe.
“How can that be?” I stammered with disbelief. “These people begged us to come out and do those four fraud prevention presentations in France, England, Eindhoven, and Germany. How did they go from begging us to come out to canceling us?”
There was a long pause on the other end of the line. Immediately, I could tell there was something Steve was not telling me so I pressed him further.
“Look, Barry, it’s because of you . . . all right?” I could tell this was difficult for Steve. He was a gentle man who never wanted to make someone feel bad. “The members of the fraud association in America refused to participate in the conference with you as the main speaker. I’m truly sorry.”
I sank deeper into my chair as the shocking reality of his words filtered through to my brain. After I hung up the phone, I tried to shake off the shackles of my past. Despite having a lot of practice at being disliked, I still wasn’t very good at it. Immediately, the phone in my office rang again.
“This is Barry,” I said flatly.
“What did you ever do to the editor of Week in Business magazine?” Chris Roslan demanded. He was the publicist for the Fraud Discovery Institute who helped bring our fraud reports to the media.
“I haven’t done a thing!” I exclaimed. “Don’t even know the guy.”
“Well, he hates you! I just talked to him about being an outlet for some of these frauds that you are uncovering and he said he did not care if you caught Osama bin Laden—he was never going to write something positive about Barry Minkow.”
I struggled to process the two antagonistic calls. The devastating reports from Steve and Chris exploded like shrapnel in my mind, leaving a torrent of pain. To divert my attention, I glanced at incoming e-mails and noticed one that was entitled: “Been looking for you.”
Cool, a speaking gig to replace the lost revenue in Europe, I thought. I double-clicked the bold message and it was from a college student in the Midwest who wanted me to speak at her university. As an aside the student also mentioned that to locate me, she went to a reporter who used to cover the ZZZZ Best crime back in the 1980s. The reporter’s words of advice for the student trying to contact me? “Don’t bother with Barry Minkow, he’s still a con man.”
Before I had time to sink into a deep depression over the e-mail and phone calls, my 2:00 p.m. appointment strolled in. It was my longtime friend Rod Bleakley. I thought he needed some spiritual counseling of some kind but instead he wanted investment advice.
“Don’t come to me for investment advice, Rod,” I moaned. “I have failed in every business I have ever been in.”
“I’ll take my chances,” he responded. Someone from his church had asked him to invest in TC Enterprises—also known as Triple Crown Enterprises. The company sought investor money to purchase broodmares (female horses) that would be impregnated by studs (male horses with good genes) and subsequently sold off the foals to racehorse speculators. The returns being offered were astronomical: 30% to 40% annually.
I tried to explain to Rod that I did not know the horse racing industry and that because we were close friends, I felt uncomfortable looking into the case. Additionally, the church he attended was so close to mine.
“That’s exactly why you should look into this deal, Barry,” Rod urged. “There are lots of people at my church who are already invested in TC Enterprises. And before I invest, I want you to tell me if it is a good deal or not.”
“Who runs the company?” I asked.
“His name is Tim Disney,” Rod said.
“Tell me he’s not related to the Disney family,” I said as I rolled my eyes. Rod smiled.
“Of course he is,” Rod answered perfunctorily. As he rose from the chair he dropped the green glossy dossier from the TC Enterprises investment opportunity on my desk. “If this were some easy task, I would have done it myself.”
Mr. Minkow,
Thank you in advance for taking the time to read my email. I found your name in a document that a friend shared with me regarding the MX Factors investigation. My friend forwarded me the document because I have expressed concerns about some investment activities that a close friend of mine is involved in, and the details of MX Factors (government contracts, stock certificates, guaranteed 12% return in 90 days, etc.) sounded very similar.
About a year ago, my dear friend’s brother met a “private investment broker” and, since that time, he has been putting his day job aside completely and has been focusing all of his time and energy on recruiting new private investors for this broker.
I am in the entertainment industry, and investment terminology is very new to me. However, I have been skeptical of this deal and the broker since the beginning and, after reading the reports on MX Factors that you issued, I am increasingly nervous and concerned. I’m not going to go into much more detail at this time, because I’m not sure that this is still a current email address. However, I would sincerely appreciate any opportunity to speak with you regarding this broker that my friend is involved with (who is also located in Riverside, CA), and how I would go about hiring you to check this deal out. It seems that there are many “gray areas” when it comes to investments and my concern is how does one find out which investors are on the up-and-up and which ones are crossing the line.
I look forward to hearing from you soon.
Sincerely,
Ken Arnold
The e-mail arrived early Saturday morning in July of 2004. I had my newly-adopted fifteen-month-old son, Dylan, balanced in one hand while I navigated the computer with the other. Lisa and I had gone to Guatemala and picked up Robert Irwin Minkow and Dylan Gene Minkow three months earlier. We spent five days in Guatemala and left with our precious boys for California.
On that long plane ride home, I remembered sitting and thinking that I was finally a father. Steroid abuse had closed one door, but another had opened and I was exceedingly grateful. Robert was sleeping quietly on the chair next to me, and Lisa held Dylan delicately in her arms in the aisle directly across. The moment was surreal. I thought back to how God really did have His hand on me, even during the difficult times.
I remembered back to the night when I had almost committed suicide and Bob Shank called me just in time.
I thought back to Frank Gulla and the kindness he showed me when I first got out of prison—when I needed it most.
I remembered how the church, after my many failures including the tire store debacle, did not fire me but instead gave me the gift of Dr. Gene French. I sincerely wished Peanut could see me flying home with my wife and children. Dylan slapped his hand down on the keyboard, disrupting my flashback.
I shot an e-mail to Ken Arnold and asked him to call me that afternoon. He did. I learned that his friend was involved with a company called Financial Solutions operated by Chris Hashimoto. According to Ken, who was already an investor, Financial Solutions provided financing for a company that had millions of dollars in government contracts. That company was called Gentech and was based in Riverside, California. Gentech apparently made scaffolding for the C-5 aircraft. The company was willing to pay investors 10% per month to finance millions in government contracts.
I told Ken to fax me all the materials relating to the company and copies of the monthly checks he received from Financial Solutions.
By Monday afternoon I had two cases in front of me, TC Enterprises from my friend Rod and Financial Solutions from Ken Arnold. Both totaled millions of dollars, and both needed my immediate attention. However, I still needed to prepare a sermon for the upcoming weekend and perform a wedding in four days.
As I sat in my office and studied the offering memorandums for both investment opportunities, doubt gradually began to creep into my mind. The criticism from the two reporters and the fraud association was taking its toll on my confidence. Although I had been out of prison for ten years, criticism remained my constant companion. I tried to act like people’s hatred and the subsequent self-doubt did not bother me, but it rarely worked. After all, my downfall from the corporate world had been intrinsically linked to wanting people to like me. Back in the days of ZZZZ Best, I was convinced that the three “P’s” would be the answer to meeting my deepest needs.
Through position (CEO of a public company), possessions (Ferraris and big houses), and popularity (all the publicity that came with the first two P’s), I was convinced that I had a sure-fire recipe for being liked by people. Almost twenty years after watching that theory fail, I still struggled with the preoccupation of acceptance—dangerous if you are in the fraud exposure business.
Peanut had been right. No matter how many financial crimes in progress that I uncovered and brought to justice, or how many years I pas-tored a church, to many I was still Barry Minkow, the con man. I had been out of prison nearly ten years. When was doing good ever going to be good enough?
I thumbed through the two packets of information from TC Enterprises and Financial Solutions. I don’t need this, I whined silently.Why keep trying to do good if no one is ever going to believe that you changed? Barb barged into the office as my self-pity was reaching an apex.
“Here’s the matches you will need for the wedding this weekend. They want a unity candle in the service, and if I don’t give them to you now, you’ll forget later,” she said. Barb noticed I was in deep thought, dropped the matches on my desk, and started to leave. Working with me for almost eight years had given her the uncanny ability to read my moods.
“Hey Barb, before you leave, would you turn out that light for a minute?” I asked. She had intelligently stopped asking questions about my unusual requests years ago. She turned the lights out, closed the door, and left. As soon as she was gone, I grabbed a match from the box and lit it. The smell of sulfur ignited my memory of the time Peanut had lit a match to show his belief in me. As the tiny flame extinguished, I was rejuvenated, ready to take on the world no matter what people thought of me.
“The company, Gentech Fabrication Inc., currently has thirteen million in government contracts but has been promised by the Air Force another hundred and five million in contracts if they perform on the original thirteen million in a timely manner,” Chris Hashimoto said proudly.
“Gentech builds the scaffolding for the C-5 aircraft,” he continued as he showed pictures from a notebook binder of scaffolding surrounding an aircraft. The pictures were laminated and displayed neatly in a three-ring notebook.
The presentation was clearly well rehearsed. I knew because I was Chris Hashimoto years earlier with ZZZZ Best at potential investor meetings. It’s almost as if someone presses play and we make a canned presentation delivered with the appropriate enthusiasm and passion regardless of the fact that what we were saying was not true.
I stared at Juan Lopez who was sitting to my left in the small conference room. We had been invited to a potential investor presentation for the Financial Solutions business opportunity. Before I went to the meeting I spent two days doing background homework on Financial Solutions, Chris Hashimoto, and Gentech Fabrication Inc. It was not just the 10% monthly returns that were problematic. Gentech was not registered with the SEC, the California Department of Corporations, or the NASD. Neither was Hashimoto.
There were about ten people at the meeting, including Juan and me. “The more money the company can raise, the more contracts they can perform. That is why they are offering investors a 10%-per-month return,” Chris Hashimoto droned.
“Do you have a copy of any of those government contracts?” one of the prospective investors asked. Hashimoto pulled out several copies of a government contract and handed one to each of us at the meeting. He was well prepared. Yet I was skeptical. Why? Because fraud is the skin of the truth stuffed with a lie. Sure Gentech probably had a government contract, but there is no way they had millions in contracts that could possibly be earning them enough money to offer 10% monthly returns to investors. I made a mental note to thoroughly research just how many and what size contracts Gentech had with the government.
“I’m retired Air Force and am now a parole officer for the state of California,” a man said after briefly examining the contract. Hashimoto smiled.
“You’re a parole officer? I’m a recently retired prison guard,” Alex Martinez added with a grin. Martinez was one of the people that had invited Juan and me to the potential investor meeting. Juan flashed me a suppressed smile. The irony was downright laughable. Here I was, an ex-convict working undercover to bring a fraudulent financial crime to justice into which a parole officer and prison guard were investing.
I covertly returned a knowing smile to Juan. But then I thought about Frank Gulla and what an awesome parole officer he had been to me. There was no way I could let this parole officer invest his life savings in Financial Solutions.
When the meeting was over, Juan and I made sure we got the parole officer’s home phone number. We did not tell him that we were investigating the company but rather asked to join forces with him in performing due diligence on Financial Solutions and Gentech as potential investors.
“You go visit the company,” we told him, “and we will call the investors currently in the deal to confirm that they are getting their 10% per month. Then we can compare notes, but let’s all hold off on investing until we talk.” Thankfully, the parole officer agreed.
When I got back to the office I checked out the government contract that Chris Hashimoto had passed out at the meeting. After several calls and faxes to the Defense Contract Management Agency, I was told that the contract given to me at the investor meeting was for $391,424. I also learned that the other contract Gentech had with the government had been terminated; currently, the Gentech Fabrication Inc. had a total of $391,424 in government contracts. Not a penny more. The company and Hashimoto failed the independent proof-of-profitability test.
It took another day to contact all the current investors. These investors ranged in profession from state employees to teachers to small business owners. They were the kind of people that could not afford to lose their principal investment. I realized that I had to act quickly.
I called Peter Delgreco at the Securities and Exchange Commission in Los Angeles. Peter was a staff attorney with the SEC whom I had worked with on a few cases. He was aware of the many cases I had brought to the SEC in the past year. But unlike some of the other lawyers at the SEC, Peter was always appreciative of my work and what I submitted to the SEC. He never doubted me when I made representations about what I thought was behind a certain case. He never held my past against me. As far as he was concerned, ZZZZ Best was a distant memory, and it was what I was doing today that mattered most.
“Peter, it’s Barry.”
“Hi, Barry.”
“I think I’ve got something that you need to know about,” I stated. I told him about Financial Solutions and Gentech and the government contracts. I told him about the 10%-per-month returns and the many investors whom I had talked to that had put hundreds of thousands of dollars into this deal. “It’s a financial crime in progress,” I alleged.
Peter told me to fax him the government contract I received at the meeting and my report when I had finished writing it.
“I know you will want an affidavit from Juan Lopez about what Mr. Hashimoto said at the investor meeting,” I said. The SEC normally and regularly compiles sworn affidavits and includes them in the injunctions with the federal court to strengthen their case. It was a common practice.
“I’m sorry, Barry. I thought you said that you were at the meeting and that you spoke with the investors?” Peter asked.
“That’s true, Peter, but I don’t look very good on a sworn affidavit. I’m a convicted felon,” I said despondently.
“Not as far as I’m concerned,” Peter interjected. “As far as I’m concerned you are a reliable source for the commission, and I have no problems with filing a case with your sworn affidavit.”
The words sank in slowly, but they sank in. The fraud association may not have believed that I had changed; the reporters may not believe that I had changed but a single SEC attorney in Los Angeles did, a law enforcement official of all people. I relished the moment and glanced over to the picture of Peanut before responding to Peter.
“Thanks, Peter,” I said hoarsely, masking the tears I fought back. “I’ll get that stuff to you right away.”
“Mr. Engel, this is Barry Minkow. I got your name off the Internet. My research reveals that when it comes to the Thoroughbred industry, no one knows more about it than you.”
“Well, that depends on who you ask,” he joked. I knew right then that Don Engel from the Thoroughbred Information Agency in Northern California was the right man for the job.
I needed his expertise to evaluate the TC Enterprises, LLC investment package. I explained the investment opportunity and confessed my absolute inexperience in the Thoroughbred industry. “But investment fraud I know,”
I said as I launched into an explanation of my past.
Don agreed to evaluate the deal by examining the offering memorandum, reviewing the TC Enterprises official Web site, and making some calls to the company as a potential investor. While he did that, I began my research.
The first item on my list was to meet with Bret Lageson, the national sales and marketing person for TC Enterprises, LLC. We met in my office at the church. I disclosed my past criminal activities at ZZZZ Best but later found out that he attended the same church as Rod Bleakley and knew all about my past. He explained that I could earn 30% to 80% annually by investing between $50,000 and $500,000 in TC Enterprises.
“And if you don’t have that kind of cash, use your IRA money,” Lageson recommended. “We have all kinds of people investing in our company who are doing so with their retirement funds because they are dissatisfied with the returns they are making on Wall Street.”
That reminded me of the Financial Advisory Consultants fraud case, where James P. Lewis had lasted twenty years and perpetrated one of the longest-running Ponzi schemes in American business history by convincing people to invest using their life savings. This solved a lot of problems for Lewis because people could easily put money in, but they could not withdraw it until they were fifty-seven and a half. This meant he only had to show the supposed almost 40% annual profits on paper in monthly statements as opposed to coming up with the actual cash. By using people’s retirement, you get the best of both worlds. You obtain people’s money and do not have to worry about giving it back for years—and by then there would most certainly be a cure for the crime.
The other advantage to this method was psychological: any investment entity that is allowed to accept IRA money must be legitimate. There is an imputed credibility to companies that can accept retirement money, and that fact did not escape Lageson’s presentation. Perpetrators exploit any kind of credibility, just as Lewis did for twenty years. The implication is that the IRS “blesses” the authenticity of certain investment products when in reality the IRS only confirms compliance with withdrawals and deposits and does not perform due diligence on the veracity of an investment. But there was no denying this new trend in investment fraud: targeting qualified money.
Lageson went on to tell me that there would always be a demand for horse racing and he likened my investment to the gaming industry by saying, “Hey, people are always going to bet on horses. All you are doing is putting the slot machines in the casinos.”
He left me with a list of investors and an investment package. I made the usual calls to the California Department of Corporations, the NASD, and the SEC to see if TC Enterprises was a registered security in Tennessee, where the company had its corporate headquarters, and in California, where it boasted of a San Diego location. There was no registration in either place. Just to make sure that this offering did qualify as a security under the law, I had Mike Jones, our general counsel at Higgs, Fletcher & Mack, examine the prospectus and provide me with his analysis. It took him three hours to concur that it appeared that TC Enterprises was offering a security that was apparently not registered.
I called the investors and learned that one of them owned a yacht and worked out a deal with TC Enterprises whereby they would charter his yacht and tour perspective investors around the San Diego harbor in hopes of impressing them and getting them to invest in TC Enterprises. Apparently, it worked like a charm. Each investor I talked to also confirmed that Tim Disney was related to either Walt or Roy but was definitely a “Disney.” In fact one investor told me “right now Tim Disney is on Air Force I in Tennessee with President George Bush.”
I hung up the phone and put the pieces together. First, Bret Lageson and other company officials wanted investors to know that Tim Disney was related to the Disney family. Then, they used the imputed credibility of accepting IRA money. Next, they used a yacht chartered especially to impress new investors. And to top it off, Tim Disney, the chairman of TC Enterprises, eats lunch with President George Bush. These guys will stop at nothing to divert attention from the investment deal to the people involved, the yacht, and any other diversion they can think of, I thought. This has to be because the deal itself is weak and inconsistent and could not hold up to strict scrutiny.
So I called Roy Disney’s office in Burbank, California, and talked to his assistant. She told me that she would immediately check the family archives to see if Tim Disney, whom she did not recognize, was related to Walt or Roy. An hour later she e-mailed me and said that Tim Disney was not related to Roy or Walt. I was not surprised. My next call was to Don Engel. He had completed his analysis. The news was not good for those already invested in TC Enterprises.
“To put it simply, Barry, the horses they are selling, the broodmares, are not worth a fraction of what they are selling them for. Additionally, the foals they are projecting to sell for between $100,000 to $150,000 each are materially inflated. In an industry where most breeders struggle to survive, there is no way that this company can generate 30% to 80% annual returns to investors.”
I called Karen Patterson at the California Department of Corporations. She is a lawyer in the enforcement division whom I had worked with on several previous cases of companies like MX Factors, Chicago D&P, and Financial Solutions. I was always impressed with Karen’s tenacity and depth of knowledge in securities law. She took her job personally and hated when people were ripped off in investment scams and unregistered securities— especially the elderly. She had my complete respect.
It took an hour, but I finally finished explaining the TC Enterprises deal to Karen. I told her about the high returns, the unregistered security, the IRA money, the Tim Disney discrepancy, the yacht in the San Diego harbor, and the alleged Bush luncheon. She took copious notes, asked follow-up questions, and instructed me to overnight her all the materials. While we were on the phone she asked me if I knew that the corporate address for TC Enterprises listed on their Web site was really a Mail Boxes, Etc. P.O. Box.
“No, I did not know that, but I would have figured it out,” I lied. She laughed. Over the next few days Karen and I talked at least twenty times. She also interviewed Don Engel.
The next call I made was to Peter Norell, my contact at the FBI in Washington,D.C., to ask him to check out the claim that Disney had lunch with George Bush on Air Force I in Tennessee.
“Hey Barry, great to hear from you,” Peter said. “I wanted to tell you how impressed I was with your report on Chicago Development and Planning and on Financial Solutions.”
“Thanks, Peter. Now I have a question. Are you my handler at the FBI?” I asked. “Should all my case referrals go through you?”
“No,” he replied.
“Why, you don’t like me?” I asked.
“No, I like you. But you don’t need a handler because you know what you’re doing. You’re a credible source for the Bureau and submit research and reports that contain independent corroboration that we can confirm,” he said. “But if you want to use me for your referrals, please do. And don’t forget you’ve got training to do for us at the end of August.”
I told Peter Norell about TC Enterprises, the annual returns, the yacht in the San Diego harbor, and what Don Engel had concluded. I then told him to check out Tim Disney’s President Bush lunch meeting. He thanked me for all the information and told me to immediately get him the report on TC Enterprises. Within two days he had my report. I sent Peter an e-mail to see if he had received my report, and I will never forget what he added in his written reply. After thanking me for the report he said, “No one works harder for the Bureau than you, Barry.”
First Peter Delgreco and then Peter Norell. Two men from the arena least likely to encourage and believe in me—law enforcement. God certainly has a sense of humor, I thought as I read his words.
I also learned that Tim Disney had not met with President Bush for lunch on Air Force One in Tennessee. Surprise, surprise.
“I’m calling you as a courtesy,” Karen Patterson said about two weeks later. “Today the California Department of Corporations is shutting down TC Enterprises and charging them with using fraud to sell an unregistered security,” she declared. Man, that was fast!
“I also wanted to thank you for all the hard work you put into this case. Your cooperation was invaluable, and I may have to call you as a witness later on.”
“But, Karen, I’m an ex-con,” I exclaimed. “A defense lawyer would tear me apart on the witness stand!”
“I know all about your background, and I also know that you are more than capable in defending your findings,” she said. “Good work, Barry.”
And with that the conversation ended. I called Lisa immediately. Working on Financial Solutions and TC Enterprises simultaneously meant I was putting in too many hours. Naturally, the church still needed to be pas-tored. That meant less time for Lisa and the boys. But Lisa never complained. She was my biggest fan.
“I’m so proud of you, honey. I hope you know that. And there is no doubt in my mind that if Peanut were here, he would be equally as proud.” I knew she was right.
THOROUGHBRED INVESTMENT FIRM SKIPS HEARING,
DENIES IT’S A SCAM
By Don Thompson, Associated Press
October 7, 2004
SACRAMENTO—Although California regulators shut it down in July after accusing it of bilking investors out of $15 million, a Tennessee company claiming to invest in thoroughbred racehorses is continuing to operate under a different name as its lawyers say company did nothing wrong.
TC Enterprises LLC or Triple Crown Enterprises is still doing business as Thoroughbred Champions Enterprises LLC, but it will no longer sell horses in California to comply with the July desist-and-refrain order by the California Department of Corporations, said attorney Gayle Mayfield-Venieris.
Mayfield-Venieris denied the company’s activities are a scam, as the state and some investors claimed, but she wouldn’t say if the company is working in other states. Messages left on the firm’s answering machine in Tennessee were not returned over two days.
The firm, on its now discontinued Web site, said investors could participate in the “sport of kings” by breeding horses instead of betting on them, earning “a king’s ransom” by selling broodmares and their foal. The state says the firm illegally sold unregistered securities and overstated the value of its horses, while investors complain they haven’t seen the promised profits.
The state cited claims by San Diego salesman Bret Lageson that the firm collected about $15 million from American investors, 80 percent of whom were in the San Diego area. That included members of a church congregation in Rancho Bernardo who were solicited by fellow churchgoers who had previously invested, in what the department alleged was an example of affinity fraud.
The company’s mailing address is a Mail Boxes Etc. drop in Alcoa, Tenn., though Mayfield-Venieris said it also has offices in nearby Maryville, Tenn.; San Diego; and Bangkok, Thailand.
After initially challenging the state’s July order, the company dropped its appeal last week. Still, company officers have been falsely telling investors the now-final order isn’t significant, said Corporations Department spokeswoman Susie Wong.
Dropping the appeal was a business decision, Mayfield-Venieris said, and the company did nothing wrong.
In a letter to regulators Tuesday, Mayfield-Venieris offered several responses that include:
—Selling horses doesn’t count as selling securities, so it shouldn’t matter that one of the firm’s former salesmen had his securities license revoked. Not so, said Wong: “We’ve determined that this investment did involve the sale of securities. Our order stands.”
—Denying that co-founder and managing partner Tim Disney ever suggested he or the company has ties to the Walt Disney family. Investors and the state say such claims were made repeatedly. Mayfield-Venieris wrote that Disney “was told as a child that he is distantly related to the Walt Disney empire.”
—Mayfield-Venieris denied Lageson was ever a member or officer of the company, though she acknowledged company materials identify him as the firm’s national sales manager. The state says Lageson and the company promised 25 percent to 50 percent returns on investments. Lageson did not return a telephone message, and Mayfield-Venieris said he’s no longer with the firm.
—”Mr. Disney is also very active in the Republican party, as evidenced by his appointment as an Aide-De-Camp of the 21st Legislative District in the Tennessee House of Representatives and his appointment in 2003 as an Honorary Chairman of the Business Advisory Council by Majority Leader U.S. Rep. Tom DeLay.”
But any Tennessean can get an aide de camp certificate, suitable for framing, just by filling out a form on the governor’s Web site, and aides to Tennessee Gov. Phil Bredesen or 21st District Rep. Russell Johnson said there’s no record of such an appointment.
Being called an honorary chairman of the Business Advisory Council is meaningless as anything other than “a fund-raising tool,” said Chris Paulitz of the National Republican Congressional Committee, which gives out the titles. Federal campaign finance records show Disney contributed $1,500 last year and $2,500 this year; “he has not had a long history of interacting with the party,” Paulitz said.
The state investigation began after disgruntled investors contacted Barry Minkow, a former federal convict turned fraud investigator who turned over his findings to the Department of Corporations. Mayfield-Venieris’ letter attacked Minkow, who has helped federal and state agencies uncover several Ponzi schemes over the last year. One, Orange County-based Financial Advisory Consultants, allegedly swindled investors out of more than $814 million.
Investor Mike Uyematsu said he was guaranteed an almost immediate profit of 25 percent to 50 percent on his $22,000 investment in a broodmare and her foal in June 2003. He said he was told this spring he could sell the mare and foal for $10,000 to recoup a portion of his investment.
“Back in June I said, ‘Go ahead and sell it and give us our 10 grand.’We’re still waiting,” Uyematsu said.
Instead he got a letter from Mayfield-Venieris’ office recommending he wait until next year to get a better price, and noting there is no profit guarantee in the horses’ bill of sale.
Another investor, who spoke on condition he not be named, said he was refunded his $27,000 investment, partly by Lageson and partly by the company, though what he wanted was the extraordinary profits he had been promised. That investor says he has since talked with the FBI.
California securities regulators also are continuing their investigation, Wong said.
The fallout from the closing of TC Enterprises was dramatic. The perpetrators and the people who went to Rod Bleakley’s church who had invested in the company accused me of investigating the fraud so I could make their church look bad which would in turn somehow make my church look better. Others accused me of “seeking headlines” as the reason for investigating TC Enterprises. And instead of blaming the people who profited from their investment and holding them accountable for offering an unregistered security through misrepresentation, the investors went after me. They usually do. But Rod was happy—happy that he had come to me before he invested. Besides, I was used to the reactions by now, and rather than spend a lot of time defending myself, I just carried a book of matches in my pocket as a constant reminder.
It took Peter Delgreco until November 4, 2004, to finally file an injunction and a cease-and-desist order against Financial Solutions. He included my six-page affidavit in his filing. The SEC alleged that Hashimoto had taken in eight million dollars. As for the parole officer who met Juan and me at the investor meeting, I e-mailed him our thorough report on Financial Solutions (it was a fifteen-page, written report that provided law enforcement with a road map to the fraud) before he invested. Not only was he thankful, he cooperated with Peter Delgreco and the SEC. “Thanks, Barry,” he said after reading our report and speaking to the SEC. “It’s hard to believe that an ex-con saved me from investing my life savings in a fraud.”
PONZI SCHEME TARGETS BLACKS IN LOS ANGELES, SEC SAYS
By Don Thompson, Associated Press
November 4, 2004
SACRAMENTO—A Southern California investment scheme took at least $8 million mostly from the Los Angeles area’s black community, the Securities and Exchange Commission alleged Thursday as it shut down two Riverside-based companies.
The alleged Ponzi scheme targeted black investors since at least July
2003 by offering them what the federal agency says are $150 million worth of fraudulent promissory notes in companies it said had or were in line for lucrative federal defense contracts.
Investors were told the notes paid 10 percent to 20 percent a month and were secured with a $100 million government bond, the SEC said.
Ultimately, investors in several states purchased at least $8 million worth, the SEC said. Some investors were allegedly solicited through some of the Los Angeles area’s largest black churches, the SEC said.
But it said the firms may have collected millions of dollars more by soliciting hundreds of mostly African-American investors at “lavish” sales events—including a lobster and prime rib dinner Oct. 22 at the Ritz-Carlton hotel in Marina Del Rey that attracted nearly 500 people.
Those invited to the event were told Mike Tyson, Magic Johnson and other black celebrities would attend. Tyson actually attended as the guest of honor, said Lisa A. Gok, an SEC assistant regional director.
Potential investors at an Oct. 29 event in Chicago were told they would be lending money to a contractor who was going to build “invisible walls” for the FBI, the SEC alleges.
A federal judge on Wednesday granted the SEC’s request for a temporary restraining order and asset freeze for Ohana International Inc., Financial Solutions, and 44-year-old Christiano Hashimoto of Riverside, the president of both companies. The judge also appointed a temporary receiver for the two companies, with a decision on permanent sanctions set for Nov. 12.
Hashimoto allegedly told potential investors that they were lending the money to government contractors, including Gentech Fabrication Inc. of Chino, which he said had $13 million in government contracts and was in line for $105 million more.
In fact, Gentech has 19 contracts worth less than $1.4 million, the SEC said. The Air Force canceled one $10.6 million contract in May after aircraft scaffolding built by Gentech proved to be unacceptable, the SEC said.
Investors were paid not in profits from the contracts, but in fees collected from their fellow investors, dozens of whom were paid extra for bringing in new clients, the SEC alleges.
“This is the first time I’ve seen a legitimate government contractor named in a fraud,” said Barry Minkow, a convicted con artist himself who went undercover with a private investigator to help expose the alleged Ponzi scheme. Minkow is co-founder of the for-profit Fraud Discovery Institute in San Diego and has helped break up several alleged scams in the last year.
However, there’s no evidence Gentech received any of the money or violated any securities laws, and the company cooperated in the investigation, said Gok.
The telephone at Financial Solutions rang unanswered Thursday. An e-mail to Hashimoto brought no immediate response. The company’s corporate attorney, David Michael, did not immediately return a telephone message from The Associated Press.
It is November 2004 as I write these words. I just met with Dr. French, and he told me I should to take a weekly day off. Can you imagine?
Tony Nevarez once told me that in life there are five balls that we juggle in the air. Three are glass balls, and if they drop and break there is no replacing them. Your relationship with God is one of those glass balls, your health is another, and your relationship with you family is the third.
The other two balls are rubber and can be dropped. One is your career and the other is, well, according to Tony Nevarez, it differs from person to person. However, I think that fifth ball is failure in general. You can bounce back from failure. It is everyone’s fifth ball. Admittedly, some health failures are irreparable, but no failure-with-God ball is. My experience is that God always lets you bounce back with Him. He did with me.
And as for those who may doubt you in the comeback-from-failure part of your life? Find one person who believes in you, and carry some matches in your pocket.
Oh, and one more thing. Someone has just sent me a proposed business opportunity that is offering them 37.5% annual returns if they invest a hundred thousand dollars or more. I’m looking through it right now, and it is neatly packaged in a high-gloss, four-color dossier.
Wanna invest?