The party's over. Consumers are way in over their head in debt and the financial markets are overstretched for having stretched the lending rules. When the cards begin to fall, confidence games are exposed. Multi-million dollar Ponzi Scheme prosecutions are up because wherever there is greed, there's the potential for fraud.
The history of the one of the world's largest ponzi schemes of 7 years prior, the Reed Slatkin Investment Club, included a lax SEC and hundreds of greedy investors with an abundance of money to invest. Many of the investors who benefitted from the scam included members of the Church of Scientology and the Church of Scientology itself. In then the end, those funds received in excess of contribution to the 'club'were deemed avoidable and recoverable as fraudulent transfers. This resulted in millions and millions of dollars in recoverable judgements against or settlement agreements with the Scientology entities and it's involved members and staff. It's not surprising to see the cult of greed, as Time Magazine called Scientology, involved in the receipt fraudulent transfers.What is surprising is how Scientology managed to keep this information from hittin g the front pages of the media in 2006.
Recent news is rife with Ponzi cases and convictions, where some investors made out like bandits while the rest lost every cent they invested. Among them is the the Tom Petters 3 billion dollar investment scam; the SEC vs. Hu case where the SEC just charged former Democratic fundraiser Norman Hsu with "operating a $60-million Ponzi scheme in a civil lawsuit filed Monday in Los Angeles." . In another, a Fargo, ND insurance agent has been charged with 78 felony counts, for stealing over $5 million in client funds, engaging in fraudulent practices and selling unregistered securities. These are just a few of the multiple ponzi schemes that have emerged as we grapple with a collapsing economy build with to much greed and encompassed with weak regulations that invite fraud and deception.
7 years ago Business Week asked "The Reed Slatkin Case: Did the SEC Drop the Ball?" and here we are again today, asking the same question about a what appears to be a ponzi scheme of worldwide proportions.
When will America learn to protect itself and it's comsumers from such destructive scams? Sadly, greed seems to get in the way of logic time after time and history repeqts itself. There is a technology of sorts to understanding the mechanics of how one becomes a victim of fraud and how to avoid it ( for starters try Fraud Tech expert and author Dennis Marlock's site); Detecting deceptive trade practices is not as complicated as one would think. This applies to institutions as well as to individuals. Perhaps there are still more lessons to be learned from how the Reed Slatkin ponzi scheme case is being resolved in US Bankrupcy Court by one of the most skilled forensic accountants and persistent court appointed bankrupcy trustees in the US today, R. Todd Neilson.
On April 30th,2000 many hundreds of dismayed investors with a combined total of nearly $600,000,000 of invested funds were gathered together and informed that their "money manager", Earthlink co-founder and Scientology minister Reed Slatkin, was filing for bankrupcy. You would have thought that investors would have checked up on whether Slatkin even held a broker or advisor license but apparently none had or cared until it was too late. The shock had not yet set in when on May 11, 2001 the FBI and the Internal Revenue Service agencies raided Slatkin's home office in Santa Barbara, CA to locate assets and documentation that would become the subject of multiple subpoenas of people and organizations including the noninvesting Church of Scientology.
Slatkin was charged with, among other things, running a ponzi scheme: collecting monies from new investors to pay the "earnings" and prinicple owed to earlier investors. You see, most of the investors who gained high profits from the ponzi scheme just happened to be * scientologists or employees of the church of Scientology.
So, what has Scientology itself have to do with this and the recent "bail out" of financial institutions? Well many have likened the "bail out" to a pouring of money into an already out of control ponzi scheme and the Slatkin ponzi scheme was evidence of a church and it's members consistently benefitting financially at the expense of those who lost all they'd invested. Keep in mind that Scientology is the only religious organization in the United States whose members are allowed by the IRS to deduct as charitable contributions for all religious instruction fees and material costs, in violation of the first amendment. Despite that favored position, the
'chickens had finally come home to roost' on this Slatkin matter as bankrupcy trustee R. Todd Neilson persisted over the last 7 years in making sure the church, it's involved members along with a minority of nonscientologists who gained in this ponzi scheme are held responsible for repaying avoidable and recoverable fraudulent transfers of funds received directly or indirectly from Slatkin pursuant to US and CA state civil codes.
This was not an easy task by any means. Trustee Neilson had to deal with many of the ponzi scheme 'winners' who did not want to repay the favorited illegal gains received, despite the threat of adversarial rulings that would have raised the rate of interest due and had potential to refer cases for criminal charges. The court is still in hearings related to recovery of funds that will be split according to preset percentages amongst those who lost their investments or benefit because of the ponzi scheme.
Since the inception of this case and those related to it, much money has been recovered and there are multi-million dollar judgements on record and being pursued. But more than money was at stake here. To my knowledge, at least 2 relatively young defendent / scientologists died within weeks of each other while enduring the lengthy court process: businessman Ivan(Ike)KEZSBOM and attorney Michael KANANACK. Another scientologist, Arthur D Gordin aka Arlo Gordin, DC turned in his license and fled the country with his gains - over $4 million worth - refusing to pay back anything at all to the bankrupcy estate. And yet another, Anthony Hitchman and wife, are in the process of being busted for using other people to funnel undeclared income to and for himself.
Many of the investors were audited by the IRS because of discrepancies found or in bankrupcy cases filed by the investors themselves. Scientologist and former Grateful Dead manager Ron Rakow is currently in prison on tax fraud charges which resulted indirectly from the Slatkin case. Anthony Hitchman may well wind up in prison because the trustee has witnesses and evidence that he was funneling unreported income via friends and relatives while under bankrupcy to avoid paying on his Slatkin case judgements. All of these these people are Scientologists, Hitchman being one of the most influential and earliest devotees of founder L Ron Hubbard's cult.
On September 25, 2006, the Church of Scientology entities, including it's front groups Narconon, Criminon, Celebrity Center, CCHR as shown below, agreed to pay back $3,500,000 after the church refused to allow the trustee access to theit'd financial records to effect a better settlement. The church was not cooperating in supplying financial records and documents and Trustee Neilson knew a hyperlitigious company when he saw one and he negotiated what he could use to settle the case rather than tying the case up in court. Neilson has faired alot better than the many who have challanged this controversial organization in a court setting. The former FBI forensic accountant is ever pesistent and discontented investors can be assured that Neilson will do all he can to recover the fraudulent transfers. Take a look at the links provided below for the individual PDF files and further information and documentation.
Lermanet.com 's Index of Fraud Slatkin-related files include names of Scientologists such as Arthur Hubbard ( son of Scientology founder L Ron Hubbard)former Grateful Dead manager and Jerry Garcia business partner Rakow, Anthony "Tony" Hitchman, former chiropractor to the stars, Arthur D "Arlo" Gordin (who fled the country rather than pay back his illicit gains), Rakows girlfriend, Denise Del Bianco, CoS = Church of Scientology, Joseph Mancuso and Christopher Mancuso of World Wide Telecommunications Corporation and Clear World Communications Corp, author James Monroe Justice who is still fighting having to repay his gains, along with attorneys John Coale & wife Greta Van Sustern (who quietly repaid their illegally gotten gains despite claiming they would fight it ), Michael & Anne Kananack, Rosser Cole et al, Joel Kreiner and wife Stina Hans, and Scientology attorney Helena K Kobrin, George W Murgatroyd III and spouse, James Q Fisher & spouse, who settled or were judged guilty and ordered to repay. These scientologists are among the many other scientologists considered themselves among the most ethical people on the earth because Scientology taught them they are entitled to anything they can get away with, as long as they don't get caught and it's Fair Game to anyone who opposes them.
The real victims of Slatkin's fraud where those who believed in his ministerial collar, his use of Scientology 'communication routines' and skill as a trained "counselor" ( which really is about using mild but consistent amounts of hypnosis to gain cooperation of the counselee ) and his association with Earthlink and the power that association implied. he was a con man and some of the players in his ponzi scheme were con men as well. Scientologist Ron Rakow, in particular, had a history of ripping people off, including Jerry Garcia, and yet Garcia never wiped his hands of him. It take a good deceptor to make something like that happen, and happen over and over again. Scientology gave Slatkin the means and methods of conning others and the connections to get away with it. In his ear was Ron Rakow, encouraging him to go for more and bringing more victims into the fold. Both are in prison. Will they be better people when they get out? That remains to be seen.
In the meantime, consumers need to get a grip on greed and stop allowing themselves to be conned by weakly regulated con men and institutions. Learn how fraud & deception works and consider what you have learned as you watch this worldwide recession unfold, wherever the cards may fall.
Lermanet/ Scientology related Fraud Files
YouTube Video: Reed Slatkin 1/3
YouTube Video: Reed Slatkin 3/3
Estate of Reed E. Slatkin U.S. Bankruptcy Court Central District of California Northern Division Case #: ND 01-11549RR
More on Ron Rakow
Esquire mag October 1, 2001, "An incredibly strange and complex tale involving Scientology, EarthLink, Hollywood, and this man, REED SLATKIN "
SlatkinFraud.com Early history of the Slatkin Fraud case with lots of earlier court documents.
~ Mary McConnell
formerlyfooled at yahoo dot com
Tags: Scientology, fraud, bail out, ponzi, Reed Slatkin, Tom Petters, Norman Hsu, DNC, Santa Barbara, CA, Narconon, Criminon, IAS Members Trust, Association For Better Living and Education, cult, con game, fraudtech.org, Dennis Marlock, Arnie Lerma