How to Spot a Ponzi Con Artist? Follow the Yachts

[Harvey Specter]

Interesting read...

With so many Ponzis and so little time to know if you've been hoodwinked, there are some red flags even the most trusting investors can bank on: yachts, mansions, jets and women. If your investment adviser is dabbling in any of the above, there's a good chance you've been "Ponzi-ed" or are about to be.

Creating the illusion of fantastic success, of course, is chapter one in the Scammer's Handbook. But many, like R. Allen Stanford and Bernie Madoff, among the most egregious alleged billionaire bamboozlers, are taking the art of thievery to the next level. Some don't even bother opening an investor account when new monies come in, they just go shopping. It's enough to make Gordon "$$$$$ is Good" Gecko blush. (See 25 people to blame for the financial crisis.)

Take Stephen Walsh and Paul Greenwood, operators of Westridge Capital Management, with $1.3 billion in assets, who last week were charged by The Commodity Futures Trading Commission for allegedly "misappropriating" at least $553 million for either personal expenses or to cover trading losses. The CFTC is the sister agency of the Securities and Exchange Commission and covers fraud in the commodities, futures, and foreign exchange markets. (See pictures of the demise of Bernard Madoff.)

The charge alleges Walsh and Greenwood gave themselves $8.2 million in employee "advances" and another whopping $160 million for personal expenses. The complaint detailed funds being used for buying rare books at auction, purchasing expensive horses, laying down $80,000 for a Steiff Teddy Bear and providing the ex-Mrs. Walsh with a $3 million residence.

Also last week, North Hills Management, a New York-based $40 million investment fund run by Mark Evan Bloom was charged by the same agency for "misappropriating for personal use" over $13 million from its clients' fund. (See the top 10 financial-crisis buzzwords.)

Bloom had the pluck to use other people's money to buy a $5.2 million New York apartment near the mayor's mansion in 2003 (coincidentally, the same building where Madoff's son, Andrew, lived) and then flipped it for $11.2 million in 2007, the CFTC charge states. In addition, it says Bloom and his wife owned multiple apartments in New York, beach homes in Florida and New Jersey, luxury cars and of course, boats. It also says Bloom used $1.2 million for interior design work and another $1.8 million for personal expenses.

Up until last month, Chuck Hays ran a fund called Crossfire Investment with $5.5 million in assets. What did he do with his clients' money? What else - went out and bought himself a $4 million yacht, from which he ran the alleged scam, according to CFTC and SEC complaints. In early February, the agencies dropped anchor on Hays. When the CFTC's Acting Director of Enforcement, Stephen Obie, was asked what the most outrageous use of investor money he's come across has been, his list is appropriately wacky. (See pictures of luxury yachts.)

"The craziest things we've found recently," Obie said, "are a bust of Julius Caesar, an extensive garden gnome collection, a $300,000 Mickey Mouse drawing, bejeweled ink pens, several of which cost more than $100,000, $4 million worth of custom tailored clothes, a silver set allegedly belonging to Paul Revere, and two purple Jaguars with hand painted leopard skin roofs." It should be noted that Ruth Madoff once gave her husband a $14,000 cigar humidor.

But you know you've really been "Ponzi-ed" when your investment guru has his own Caribbean island, a $10 million moated castle in Miami, $100 million fleet of private jets, three or four "outside wives" along with his real one, and calls himself "Sir," when not officially knighted.

Of course, the above describes financer R. Allen Stanford's lavish world, a near Madoff who, according to the SEC, allegedly pulled off a 15-year Ponzi based on suckering investors with so-called high-yield certificates of deposit, some $8 billion or more worth. According to the SEC, he has yet to hire a lawyer of record, and he could not be found for comment.

This week, Antigua officials confirmed Stanford owned a nearby island, Guiana, as well as hundreds of acres on Antigua. Stanford is one of the largest private employers in Antigua, where his businesses include a real estate company, a cricket stadium, a newspaper and two restaurants. (See pictures of expensive things that money can buy.)

A well-known womanizer, Stanford has been caught on giant video screens at cricket matches flirting indiscreetly with players' wives and girlfriends. In an interview with London's The Mail, Stanford's father, James, 81, detailed his son's many "outside wives," of which he said there are three, and four children. But he told Reuters that his son has six children "from several women." It's hard keeping it all straight.
James Stanford could not be reached at his home in Mexia, Texas.

After news broke of Allen Stanford's alleged Ponzi, he went missing. Stanford was ultimately found by authorities with Andrea Stoelker, his girlfriend, at her home in Fredericksburg, Va.

His real wife, Susan, filed for divorce in November 2007, and though the case is still pending, lawyers have asked her husband for $225,000 in attorney's fees. In state court filings in Texas, Mrs. Stanford asked the court to award her "exclusive use and control" of two Mercedes, a Porsche Boxster, a home in Houston's upscale Tanglewood neighborhood and a Houston condominium. She's also asked for access to all the estates in Antigua and St. Croix, all jets, yachts and access to VIP suites for events including Houston Rockets basketball games. But like her husband's investors, she may have a hard time collecting now. (See pictures of the top 10 scared traders.)

In comparison, Madoff's life was as dull as an old penny, having just the one wife, Ruth, who after withdrawing an emergency $15 million late last year before her husband confessed to his decades-long lie, is fighting to hold on to what is now "her" $7 million E. 64th Street penthouse, and other cash and assets totally $62 million.

Of course, the Madoffs have a yacht too, called Bull, as well as a Montauk beach house, a villa in the South of France, half ownership in a $24 million jet, a palm-studded Palm Beach estate and three or four golf club memberships. Madoff has, however, agreed to give up to investors his artwork and entertainment tickets.

Once we get a line on Bernie's taste in art, we may have yet another clue for spotting Ponzis.

Robert Chew is a former investor with Madoff via a feeder fund. He lives in Colorado.

http://news.yahoo.com/s/time/2009030...08599188320500