Harsh Lessons In Modern Con Art

There have been a lot of articles about the fact that Seniors are often the subject of financial fraud, and it’s true.  But you don’t have to be old to get scammed.  Most of Bernie Madoff’s victims were rich, successful and relatively sophisticated.

Here is the story of financial writer, public speaker and financial thought leader, Mitch Anthony, who was scammed out of $1 million and whose mother lost her life savings.  It’s an object lesson.

As I sit down to write this article, I know it will likely be the most difficult composition of my writing career—difficult because it dredges up a miasma of regret, embarrassment, sadness and anger like nothing else I’ve experienced in life. I was conned out of almost a million dollars.

I will survive. But my mother was also conned—out of every penny she had. Her journey would prove much more difficult. The recollection of what I’m about to detail makes me feel stupid and gullible, like a sucker who should have known better. Then there’s the exasperation and indignation of watching someone skirt justice for one simple reason: There wasn’t ample time to hold him accountable for the fortunes he destroyed and the lives he crushed.

The federal statute of limitations on financial crimes is five years. Once you discover you have been defrauded, very likely two to three years have passed. Legal proceedings will chew up a year or two. By the time prosecutors decide there is merit in proceeding, the time has almost run out, and they will cease their efforts knowing they are up against the statute. This was our exact experience. By the time I brought the fraud to the attention of the FBI, they informed me that the perpetrator was already “on their radar”—but at this point, there wasn’t enough time left to do anything, and they couldn’t afford the time and resources to waste their efforts.

The man’s name is Wendell Corey, and he touted himself as a “developer.”

I had heard the name long before I ever dealt directly with him. He had developed some commercial properties in Iowa for a reputable grocery store chain. I had been invited to invest in those properties in the early stages by my trusted advisor, an accountant, who had served me faithfully for decades. For seven years, I received uninterrupted monthly dividend checks from those investments (note the Madoff similarity there).

The first time I met him face to face, I must admit I was underwhelmed. He had the visage, comportment and cadence of a snake oil salesman. If not for the impressive returns of the real estate investments, I would not have given him the time of day. Not only did he talk too fast, he would talk over the top of me. He boasted matter-of-factly about his various developments in burgeoning cities and suburbs. He offered, as casually as he could, to pick me up in his private jet and do a flyover of a development project in Dubuque, Iowa. I declined, growing increasingly more skeptical.

He employed a “developer’s” nomenclature that was hard to follow. He said all the right things, but there was something about the delivery that lacked credibility. All of this “wind” blew across me, and red flags popped up in my brain. But because he had come on the recommendation of my advisor––and because I had been paid handsomely from a lease for years—I had no substantive reason to doubt him.

He was seeking $200,000 for a development in Dubuque that was located on a prime piece of real estate at the edge of town. Dubuque, at the time, was the fastest growing commercial center in the state. Later, he sought another $400,000 for a commercial development in Tarpon Springs, Fla., during the retirement migration toward the Gulf side of the state. I loaned Corey the $600,000, and he gave me promissory notes and “economic interest” agreements in the projects with due dates three years out. He promised returns of 18% (that should’ve given me pause), but I was new at this and he came highly recommended. I later learned that one can offer any return under the sun when one has no plans to pay anyone back, and when one’s “agreements” are nothing more than liens on hot air. I was given liens on both properties—only to later discover that I was too far back in the lien line.

Once I smelled trouble, I contacted my attorney and asked him to do a mortgage search. All the liens combined far surpassed the resale value of the building where he had offered the lien. The long and short of it was that Corey offered me a worthless lien in the hopes that I would be placated by official-looking collateral documents. I was about to learn that this is an M.O. of certain operators: provide official-looking documents that are not worth the paper they are written on.

“You idiot,” I can hear some of you thinking. “Why didn’t you do the lien search before you invested?” And, yes, you would be correct. I can’t defend myself there. I was too caught up in the track record to suspect any problem and failed to do my homework on time—and this is only the beginning of regrets.

Then Mom decided to get involved.

My mother and her husband had already invested in one of Corey’s properties and were receiving consistent monthly payments. I began wondering how deeply they were involved. She had told me about the Florida investment but not how much it was. I called her, and my worst suspicions were confirmed: They had invested their entire life savings in these developments.

More Bad News

“The odds are,” my attorney informed me, “that you and your parents are out all your money.” He offered to call an attorney in Mason City, Iowa, where Corey operated from. This lawyer promptly informed us that Corey was a client, and the discussion would be a conflict of interest. Subsequent calls to several attorneys in the area revealed that he had retained almost every notable attorney in the city for his various projects, thereby insulating himself from suits being brought by local attorneys. Here we see one more of his strategies: Legal insulation and maneuvering chews up valuable time against the statute of limitations.

My attorney then called a tenured banker in Mason City and brought up Corey’s name. We were greeted with derisive laughter. “I hope you didn’t give him any money!” the banker said.

Next, we called a reputable commercial developer in the North Iowa area and were told, “I gave him money 20-some years ago and never saw a cent of it again. Corey never has a penny on him, if you ask him.”

I began to push harder. My accountant told me the company name I should have the lien drawn against, so I had my attorney draw up promissory notes and liens against this entity, Recovery Energy-Danville LLC (which supposedly was going to be receiving multi-million-dollar grants to build tire disposal plants in Illinois). Corey grudgingly signed the promissory note to me, legally acknowledging his debt of $964,522 as of February 2010. Months of waiting have turned into seven years. No end is in sight because I am not the only victim. The last legal search we conducted on judgments against Corey numbered 120—and the number’s growing. The suits ahead of me were brought by banks including BNY Mellon and Norwest, municipalities, builders, contractors and investors.

None of them will ever see their money again, and none of them have any more recourse than my mother and I do.

One tragic judgment I discovered in my research was filed in Dubuque County, where an excavator named Jerome Simon filed suit against Corey and won a judgment for $671,000—which, as of this writing, is still unpaid. The judgment shows in heart-wrenching detail how Simon was bankrupted as he exhausted every resource to keep the work going. He was forced to move from his home of 28 years, where he owed only $11,000 on his mortgage. When I questioned Corey about this story, he did not dispute that he owed the money to Simon and then let loose with a soliloquy of self-justification.

Corey seems to be fully immunized from the pangs of having ruined another person’s life. He is utterly comfortable vaporizing savings that took a lifetime for honest, hardworking people to accumulate. He is not a convicted criminal; he learned deft skill sets in the paper-chase and litigation stalling game. As I sought counsel to sue him, I was told the same discouraging story again and again. Paraphrased, it goes something like this:

“You will spend $50,000 to $100,000—maybe more—and you will probably win the judgments you seek, but you will spend the next few years and untold sums trying to collect on those judgments.”

The person taking advantage of the legal system knows the game: “I have taken so much of their money that they won’t be able to afford to come after me.”

Through my extensive search, I learned that Corey had built a confusing and dizzying maze of LLCs. He had assets shielded in other people’s names. He had local counsel tied up. He had back-end deals in place that would bring him back into the money once everyone else had lost theirs. His projects were designed to fail, eventually, for one simple reason—he didn’t have to pay anyone back that way. In fact, he had learned a different version of the American dream: There’s more money in failure than success. He’s in the money and off the hook, and out pitching another development.

Corey will admit he owes you, vehemently reaffirm his full intention to pay you back. He actually seems to believe his own far-fetched stories, and this is what makes him so convincing and helps him gain the confidence of those with money to invest. This is the oldest motif of the confidence man: convince yourself to the point that others want to come along for the ride.

Below is my confession of the painful lessons I learned about the modern game of the financial con—lessons that have come out of great personal cost, the least of which is dollars lost. Seeing my mother not be able to sleep well for years in what should be the peaceful twilight of life is a far worse consequence than seeing hard-earned money evaporate.

The M.O. of the Modern Con Art

  • Establish yourself with “solid” investments and a history of payments.
  • Partner with credible professionals in the financial industry, and play off their established reputations to meet new marks for your schemes.
  • Provide official-looking documents that are not worth the paper they are written on.
  • Create multiple entities and keep assets moving between them.
  • Retain multiple attorneys to decrease the odds of strong lawsuits.
  • When confronted, offer viable “economic environment” excuses and continue to confirm your “full intention” to repay.
  • Play the legal system to your advantage. If you take enough of people’s money, they won’t be able to afford (or will be reticent) to invest tens of thousands more on judgments they will never be able to collect.
  • Ride out the five-year statute-of-limitations on financial crimes and get to work on your next con.

Doing Something About It …

Mitch Anthony then goes on to suggest a new law extending the statute of limitations.  The problem is that fraudsters like Madoff and Corey will not be able to pay back the people that have been defrauded.   But putting them in jail would at least discourage them.

 

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