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Defrauded Investors Have Stories to Tell

Slatkin's victims, who thought he was a friend, want no leniency at his sentencing today.

September 02, 2003|E. Scott Reckard | Times Staff Writer

During more than 15 years of fraud that cost his investors $240 million, Reed E. Slatkin seemed as much trusted friend as money manager. He schmoozed clients with tips on how to landscape their estates, attended funerals of their family members and all the while offered assurances that he would protect their college and retirement funds.

His victims have asked to tell some of those stories today at Slatkin's sentencing hearing in Los Angeles, hoping to persuade U.S. District Judge Margaret M. Morrow to throw the book at the former Santa Barbara financial advisor.

Slatkin, 54, has admitted he fabricated account statements that showed clients beating the stock market's heady returns of the late 1990s, while using their funds to pay for airplanes, luxury cars, real estate, artwork and gold for himself.

The long-running scam ended in his bankruptcy in 2001, followed by his guilty pleas last year to 15 counts of fraud, conspiracy and money laundering.

From the point of view of some victims, the story is one of double betrayal -- once by the scam artist and again by the federal government. They contend that the Securities and Exchange Commission botched an investigation of Slatkin that could have shut him down more than a year before he declared bankruptcy.

Critics of Leniency

The investors also criticize federal prosecutors for recommending what they regard as an overly lenient prison sentence of 11 years and three months.

"If the sentence is 11 years, you can wrap a fish in it," said John Poitras of Santa Ynez, Calif., a former venture capitalist who lost $15 million with Slatkin. "We're just going to walk away from it, because it stinks."

Poitras said he met Slatkin when they co-sponsored a theatrical production in Santa Barbara but that the investment advisor remained aloof until he learned Poitras had decided to part with his multi-acre Silicon Valley estate to move to the Santa Barbara area.

"When he heard I sold my house, he said he had to visit me and he flew up in his jet," Poitras said. He soon found himself discussing the finer points of plants and landscape architecture with Slatkin, who had a grand spread in Hope Ranch, a wealthy Santa Barbara suburb known for its polo field and private beaches.

Slatkin took millions from Poitras toward the end of his criminal career, at a time when Slatkin was stalling an SEC attempt to investigate him.

At about the same time, the family of cellular telephone entrepreneur Michael Azeez entrusted about $17 million to Slatkin, bringing their total investment with him to nearly $44 million.

"He's some type of psychopath," Azeez said in a telephone interview from his home in New Jersey. "I don't know how you go into people's parties, religious functions, like he did. He even went to my dad's funeral."

In a sentencing memorandum, prosecutors detailed the tremendous financial and emotional wreckage that Slatkin caused. But they also described how he voluntarily pleaded guilty and cooperated with prosecutors soon after his May 1, 2001, bankruptcy filing.

Slatkin, who has been in custody for 16 months, has repeatedly briefed investigators on his fraud and cover-up, helping pave the way to guilty pleas by three co-conspirators, with additional charges expected soon, the memo said.

Assistant U.S. Atty. Steven Olson said Slatkin would be facing a far more severe penalty had his crimes occurred after November 2001, when federal sentencing guidelines for financial fraud were made significantly tougher.

"We had to balance the enormous magnitude of the crime with the fact of his coming in early, accepting responsibility and cooperating," Olson said. "If we don't acknowledge that cooperation, the system collapses."

Slatkin had a number of high-profile clients, including actors Peter Coyote and Joe Pantoliano, model Cheryl Tiegs and legal commentator Greta Van Susteren. Those notables were among the relatively few Slatkin clients who were repaid more than they invested.

Their profits were bogus, however, as Slatkin admitted in his plea agreement: The payouts were part of a long-running Ponzi scheme that plundered some investors to pay others.

His 800 accounts included many people of modest means who, as the prosecutors' sentencing memorandum put it, have experienced such hardships as "having to sell their homes, having to delay or come out of retirement, and an inability to pay for critical medical needs."

The most vocal group of victims is made up of successful businesspeople such as Poitras and Azeez, many of whom encouraged family members and friends also to invest millions with the con artist, who persuaded them he was a family man with a strong work ethic and a flair for sniffing out profits in financial markets.

Indeed, one of Slatkin's marketing pitches was that he was a co-founder of Internet firm EarthLink Inc. In the late 1990s, that was a tantalizing come-on.

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