matt straka file photo
Ponzi King Due Back from Slammer
He Took the Greed Highway
Thursday, February 28, 2013
REED SLATKIN: He’s Santa Barbara’s Ponzi king, and he’s coming back — from prison.
Reed Slatkin, who told tall tales to 800 victims while reeling in nearly $600 million, is in an L.A.-area halfway house after a 10-plus-year jolt behind bars and due to be released July 6.
Slatkin may be our own flamed-out Ponzi star, but he’s beaucoup bucks behind the champ, New Yorker Bernard Madoff, who’s cooling his heels in the slammer on a 150-year sentence for a $64.8 billion fraud.
Whether the 64-year-old Slatkin, previously at Lompoc federal prison, will return to Santa Barbara and whether he secretly stashed away any of his ill-gotten gains to gild his golden years isn’t known. Many of his investors made bogus millions; others lost real millions. Does he feel remorse for callously ruining so many lives? To find out, I emailed the federal prison system’s Residential Reentry Center in San Pedro asking for an interview with Slatkin, but he declined, not surprisingly.
After stealing so many people’s life savings, their kids’ college funds, their homes, hopes, and dreams, he might not want to run the risk of bumping into his victims on State Street. “He stole my dream,” one complained. Bakersfield might be a better idea.
Slatkin ripped off Hollywood celebs and fellow Scientology members but handed unearned millions to a favored few, including friends in Scientology, where he was a minister before he took to tricking people out of their money. About half his hopeful investors lost money, while others hit the jackpot, big-time. The top 75 winners invested about $128 million but got back a whopping $151 million. Since Slatkin wasn’t really investing most of the money, it’s not clear how he decided who won and lost.
Rachael Walton, of the Wal-Mart family and surely not hurting for cash, invested $174,000 but got $1,246,410 back, according to authorities. Actor Peter Coyote invested $393,000 and reaped $1,330,442. A Santa Ynez Valley man ventured $551,825 and gained $3,343,131 within a few years.
But when Slatkin’s bankruptcy referee moved to legally claw back some of the phony profits and ill-gotten gains, the winners usually denied suspecting any hanky-panky, despite the size of their outsized windfalls. They screamed to the high heavens at the thought of handing anything back to help repay those who’d been swindled.
A former attorney who once represented Slatkin was paid $5.9 million more than he invested, according to the bankruptcy court report. Five members of one family received bogus profits of more than $10 million. Bankruptcy officials sued 430 people for funds they received beyond their investments.
Among those who returned money were attorney John Coale and TV personality Greta Van Susteren, who repaid $700,000.
A number of Slatkin associates spent time behind bars. His bookkeeper, accused of cranking out false reports, was sentenced to 21 months. A man who hustled suckers to invest told officials that he was chosen for the job because he was “amoral.”
Pretending to have vast investments in Switzerland, Slatkin set up a phone switch, wherein investors dialing in heard a fake European-sounding phone signal but were really talking to Slatkin at his Goleta office.
Typical of Ponzi swindlers, Slatkin promised fantastic returns to lure the unwary. But he just used the new investors’ money to pay the earlier ones. For about 15 years, until 2001, when his house of cards collapsed, all went well for Slatkin. He moved from his Kellogg Avenue tract house in Goleta to a Hope Ranch four-acre home, buying expensive cars and airplanes, valuable paintings, and a wine collection, and traveling widely. He belonged to the elite La Cumbre Country Club and owned millions of dollars’ worth of property. He and his workers churned out impressive statements attesting to the extraordinary returns from his nonexistent “investments.” Actually, Slatkin did make some high-risk investments, but most turned out to be big losers. Except for one.
Slatkin’s main claim to credibility was that he was cofounder of EarthLink, the Internet service provider. After tossing $50,000 into the start-up pot in 1994, he watched the value of his shares skyrocket to about $200 million in 1999. I’ve been told that if he’d cashed out then, he could have come close to repaying all his investors (though not their phantom profits) and been out of the woods before he crashed.
If Slatkin had done that, he no doubt wouldn’t be sitting behind bars right now. We all get choices in life and face forks in the road. Slatkin took the Greed Highway.