3/28/02 - Stockwatch - Slatkin Pleads Guilty
tikk
This article contains interesting info on Robert Duggan.. Slatkin's
'mentor'.
Stockwatch
Athena Gold ex-backer Slatkin pleads guilty in massive Ponzi scheme
Shares issued 12,690,238 Mar 28 2002 close $.020
Thursday Mar 28 2002 Street Wire
by Brent Mudry
Controversial EarthLink co-founder Reed Slatkin, a prominent
Scientologist minister and stock promoter, has pled guilty to 15
felony counts, including mail fraud, wire fraud, money laundering and
conspiracy to obstruct justice during an investigation by the United
States Securities and Exchange Commission. Mr. Slatkin, 53, of Santa
Barbara, Calif., is expected to face 12 years to 15 years in jail
under federal sentencing guidelines. Mr. Slatkin's $593-million Ponzi
scheme, an unregistered investment management operation he ran since
1985, collapsed last spring. (All figures are in U.S. dollars.)
In a plea agreement filed Wednesday in U.S. District Court for the
Central District of California, Mr. Slatkin agreed to surrender into
federal custody at his arraignment next month. In what U.S. officials
call one of the largest Ponzi schemes in history, Mr. Slatkin preyed
on the rich and famous, luring and conning numerous Hollywood stars
and producers, dot-com executives and high-society types.
(Mr. Slatkin got his start in disastrous investing on Howe Street, the
centre of dealings on the former Vancouver Stock Exchange. He was a
private-placement investor in Athena Gold Corp. in 1991, when the VSE
company was being actively boosted by fellow Scientologists Michael
Baybak and Kenneth Gerbino. Athena was subsequently acquired by
Vancouver promoter Wally Berukoff's Miramar Mining Corp. in 1995.)
(U.S. officials make no allegations regarding Mr. Slatkin's dealings
on the VSE; nor is any connection to Mr. Baybak, Mr. Gerbino or Mr.
Berukoff suggested. Mr. Baybak filed a libel suit against Time
magazine over an unflattering May 6, 1991, eight-page cover feature
profiling the Church of Scientology, which included a sidebar story
featuring the Athena Gold promotion of Mr. Baybak and Mr. Gerbino.)
Among Mr. Slatkin's 500-plus victims were actor Giovanni Ribisi, who
starred as a sleazy broker in the film Boiler Room, and Hollywood
producer Armyan Bernstein, who arranged for Arnold Schwarzenegger and
Kevin Costner to star in a video for the master fraudster's 50th
birthday celebration. Others did better. Fox News anchor Greta Van
Susteren, who recently defected from CNN as a longtime anchor and
legal commentator, was paid out $659,000 more than the $2.07-million
she and her husband John Coale invested with Mr. Slatkin. Although Mr.
Slatkin is the only target to date, court filings name several
unindicted co-conspirators, including his long-time bookkeeper Jean
Marie Janu, convicted felon, fellow Scientologist and former Grateful
Dead manager Ronald Rakow, Dan Jacobs and Didier Waroquiers, alias
Michel Axiall. In his agreed statement of facts, Mr. Slatkin confirms
the four helped him deceive initially SEC investigators by papering
over and covering up the massive fraud.
Burned investors have blamed the SEC, which began an informal
investigation of Mr. Slatkin in 1997 and launched a formal
investigation in 1999, for doing too little too late. In 2000, Mr.
Slatkin lied to investigators under oath, telling them, "The process
of liquidating accounts is now in full swing" and "I am not accepting
any new accounts or any new money from existing accounts." In reality,
this was his best year ever. Between Jan. 1, 2000, and May 1, 2001,
the day he filed for bankruptcy, Mr. Slatkin took in $135-million from
investors. Within days of the bankruptcy filing, FBI and Internal
Revenue Service agents raided Mr. Slatkin's homes and businesses, and
his Ponzi scheme ground to a halt.
The SEC belatedly moved in on May 11, 2001, launching a civil
prosecution of Mr. Slatkin and winning a broad freeze on his worldwide
assets. Last June, Mr. Slatkin agreed to refrain from future
securities violations and in a consent settlement finalized on Jan. 2,
he was banned from any association with any investment adviser. The
SEC has not yet reached settlements on fines or disgorgement orders
against Mr. Slatkin.
Mr. Slatkin's reputation as an investment guru was largely based on
his only significant win, after EarthLink founder Kevin O'Donnell
convinced him to invest as a major seed shareholder in 1994. Mr.
Slatkin resigned from the board of EarthLink, the second largest
Internet service provider in the U.S., on April 26, 2001, and the
company has dissociated itself from him. The Scientologist's
investment empire was little more than a massive Ponzi scheme. By the
end of 2000, Mr. Slatkin would have required an estimated $130-million
annually to keep his hypothetical investment structure from
collapsing.
"Slatkin appears to have conceived and nurtured a perception or aura
that he was a financial wunderkind who graciously bestowed his
investment wisdom upon an exclusive and dutifully grateful
constituency. In actuality, Slatkin conceived, executed and
perpetrated a massive multiyear fraud on his investors, using funds
from new investors to pay inflated and false returns to other and
older investors, while wasting tens of millions of dollars on
ill-conceived and disastrous investments and paying staggering sums to
certain associates and consultants," states trustee Todd Neilson in a
bankruptcy court filing.
Investigators trace Mr. Slatkin's entree into the investment world to
about 1979, four years after he was ordained a minister of L. Ron
Hubbard's Church of Scientology in 1975.
"In about 1979-1980, Slatkin met Robert F. Duggan, a fellow
Scientologist, who Slatkin describes as 'a successful professional
investor, primarily in the stock market,'" states Mr. Neilson in a
recent trustee's report. Mr. Duggan provided rudimentary investment
training to Mr. Slatkin, who had no prior formal training in either
investments or money management. "During this period, Duggan began to
teach Slatkin about the stock market and the process of analyzing
companies as potential investments."
According to Stockwatch records, Mr. Duggan arrived on Howe Street
around the same time as fellow Scientologist Mr. Baybak, who remains
an active player in the market. Both invested in a private placement
financing of immigrant-investor-fund promoter Steven Funk's First
Generation Resources Ltd. in August, 1985, along with budding penny
stock promoter and former drug peddler Robert Friedland. (Earlier that
year, in March, Mr. Baybak invested in Mr. Friedland's then flagship
Galactic Resources Ltd., which later left U.S. taxpayers paying most
of the tab for the massive cyanide pollution Superfund clean up at its
disastrous Summitville mine in Colorado.)
Mr. Duggan and Mr. Baybak also concurrently invested in two other Howe
Street promotions in 1986: Trian Equities Ltd. that February and
Medallion Books Ltd. that December. Scientologist Mr. Duggan served a
stint on Trian's board.
Mr. Friedland participated in the same Medallion financing, along with
Vancouver businessman Grant Woodward "Woodie" MacLaren, who also
joined the boards of Mr. Funk's First Generation and Medallion. (There
is no suggestion that Mr. Funk, Mr. Friedland or Mr. MacLaren, the
former chief executive of Woodward's Stores Ltd., the now defunct
Western Canadian department store chain, had any dabblings in
Scientology.)
After his introduction and training by Mr. Duggan, Mr. Slatkin soon
became immersed in the market.
In 1984, Mr. Slatkin made the transition from working as a full-time
ordained Scientologist minister to becoming a professional, although
unregistered, self-employed investment manager. According to the
trustee, Scientology had "permeated almost every aspect" of Mr.
Slatkin's life, and his fellow Scientologists provided ripe prey from
day one. Mr. Slatkin testified he made investments for these
"friends," "to help Scientologists who have their attention away from
their money and they're helping the church."
In 1985, in his fledgling year as an investment pro, Mr. Slatkin met
Mr. Rakow and Chris Mancuso, who invested money with him. This was a
fateful year for the pair. Mr. Rakow and Mr. Mancuso were promoters
and key players in Culture Farms, an $80-million yoghurt culture Ponzi
scheme, under criminal investigation. Later that year both Mr. Rakow
and Mr. Mancuso were convicted and sent to jail. According to one
published account from a former Slatkin associate, the Scientologist
minister said he cried all the way when he drove Mr. Rakow to jail.
(This sounds a bit odd, as corrections officials usually prefer to
have men with badges, not friends, drive convicts to jail.)
By Mr. Slatkin's own estimate, he was managing about $7-million or
$8-million by late 1986 for his "friends."
Red flags were soon apparent.
In February, 1988, Mr. Slatkin and Richard Levine, a Prudential-Bache
broker, negotiated to buy a 25-per-cent stake in Statistical Sciences
Inc., an investment advisory firm registered with the SEC. SSI's due
diligence included an independent auditor's attempt to verify Mr.
Slatkin's claims of trading results of 40 to 50 per cent. "The audit
ultimately concluded that Slatkin's statements and trading records
were not correct and Slatkin admitted to falsifying those records,"
states a trustee's report.
Mr. Slatkin also had a business relationship from 1986 to 1990 with
Patrick Gallagher, a commodities broker licensed with the Chicago
Board of Trade. The pair had an ugly falling out and Mr. Gallagher's
attorney had ominous comments in legal correspondence. "We are fearful
that a comprehensive review of certain trading and account activity
may reveal unsavory characteristics of a scabrous nature involving,
among other things, irregularities with regards to the exchange rules
and conduct, which, under closer scrutiny, may subject one to
prosecution by various government agencies."
A year later, in 1991, Mr. Slatkin made his first documented official
foray on Howe Street. (He likely was involved in the Vancouver market
earlier with Mr. Duggan.)
That year, Mr. Slatkin made a private placement investment in Athena
Gold, a Vancouver gold promotion which attracted fellow Scientologists
Mr. Baybak and Mr. Gerbino a few years earlier. (Mr. Baybak became a
director of Athena in 1987 and Mr. Gerbino joined the board in 1988.)
Mr. Slatkin's Athena investment came four months after Time magazine's
unflattering cover feature on the Church of Scientology, which
highlighted the promotion of Athena by Mr. Baybak and Mr. Gerbino.
Mr. Slatkin subsequently rose to prominence in the Scientology
community, boosted by his lucky 1994 investment in EarthLink.
The rest of his portfolio was a disaster.
"The trustee has come to the sad, but inescapable conclusion that tens
of millions of dollars, supposedly wisely invested in seasoned and
liquid assets capable of providing a meaningful return, were in fact
invested in highly speculative and illiquid ventures and that much of
the invested funds have been lost as a result of those imprudent
investments," states a court filing.
In one such example, Mr. Slatkin's unregistered fund lost its entire
$1-million and $333,300 investments in PopMail.Com Inc. and
Millionaire.com, respectively, which he purchased with the help of
past felon Mr. Rakow through Co-Right Investments Inc., a Canadian
holding company Mr. Slatkin formed in 1999.
Mr. Rakow and fellow Culture Farms convict Mr. Mancuso both came out
winners, emerging with more than $2.4-million each more than they
invested in Mr. Slatkin's Ponzi scheme.
The pair of convicts also proved quite helpful throwing off the scent
for the SEC's dogs until the house of cards finally collapsed.
(c) Copyright 2002 Canjex Publishing Ltd.
http://www.canada-stockwatch.com
Feisty
These articles are really getting better, informatively speaking.
I have posted a link about Galactic below regarding the toxic cyanide
situation
in Colorado. What an awful situation that was. There is info on Friedland
there too.
tikk <in...@slatkinfraud.com> wrote in message
news:5e0371c5.02040...@posting.google.com...
This really wreaks of criminal conspiracy
http://www.itl.nist.gov/iaui/894.02/projects/t7i/rich/berkeley/BrkInt/P7_C_
rich.txt.
----Transaction # 20----
08 NOV 93 / US Pollution Scandal: Race to move mo
untain of waste in the Rockies - When spring melts the winter snow, water
ca
rrying toxic heavy metals could bring death to the streams feeding the Rio
Grande </HEADLINE>
(snip)
US law enables the EPA to claw back money for cleaning up a polluted
site
from any person or organisation in any way previously connected with that
site. The agency is investigating whether Vancouver-based Galactic's
bankruptcy means the company and its executives are insulated from these
claw-back provisions.
Among the EPA's prime targets is Robert Friedland, aged 42, the
Chicago-born
son of a German architect. For the first six years of the mine's short life
Mr Friedland was chairman of Galactic. For much of that time he was also
president and chief executive. To develop the Summitville mine Mr Friedland
raised more than CDollars 300m (Pounds 147.7m) for Galactic, much of it
from
European institutional investors, particularly in Switzerland and the UK.
Today Mr Friedland's main corporate investment vehicle is a Vancouver
investment company, Ivanhoe Capital. He has been promoting Vengold, a
company exploring for gold in Venezuela. He is also negotiating with RTZ,
the UK-based world's biggest mining company, for a stake in the Lihir gold
project in Papua New Guinea. This is probably the biggest gold deposit in
the world outside South Africa.
Mr Friedland has a considerable personal following among some inves
tors. He helped Vengold raise more than CDollars 50m in North America and
Eu
rope this year, one of the biggest capital-raising exercises by a
Vancouver-
quoted company. He was the executive driving force at Galactic when
Summitville was commissioned.
Local legend has it that gold mining started at Summitville, 12,500 ft
up on the north-east flank of the San Juan mountains, 25 miles south-west
of Del Norte in Rio Grande County, in 1750. The skeletal remains of wooden
buildings from mining activity in the 1870s still cling forlor only to the
mountainside near the huge pit dug by Galactic after mining resumed in
1986.
Galactic used a technique known as cyanide heap leaching to reco
ver gold from the ore it mined. This process usually starts with the
constru
ction of an impermeable lined pad on the ground. Then heaps of crushed ore
are dumped on the pad and sprinkled with a cyanide solution that leaches
the
precious metal from the ore. It is a process that has been used by the
mining
industry for many years. But this was the first time it had been used on
such a
scale in Colorado or at such a height.
Galactic used a technique known as cyanide heap leaching to reco
ver gold from the ore it mined. This process usually starts with the
constru
ction of an impermeable lined pad on the ground. Then heaps of crushed ore
a
re dumped on the pad and sprinkled with a cyanide solution that leaches the
precious metal from the ore.
It is a process that has been used by the mining industry for many
years.
But this was the first time it had been used on such a scale in Colorado or
at such a height. Cyanide started leaking from the Summitville ore heap
almost immediately.
Yet rather than call a halt and order the pad to be repaired, regulators
from Colorado's state Mine Land Reclamation Board allowed Summitville to
collect the contaminated water and pump it back up to the top of the heap.
Thus over-ambitious management, botched construction, reckless mining and
weak state government regulation combined to create one of the biggest
scandals in recent mining history.
(snip other facts)
>
> Mr. Duggan and Mr. Baybak also concurrently invested in two other Howe
> Street promotions in 1986: Trian Equities Ltd. that February and
> Medallion Books Ltd. that December. Scientologist Mr. Duggan served a
> stint on Trian's board.
>
> Mr. Friedland participated in the same Medallion financing, along with
> Vancouver businessman Grant Woodward "Woodie" MacLaren, who also
> joined the boards of Mr. Funk's First Generation and Medallion. (There
> is no suggestion that Mr. Funk, Mr. Friedland or Mr. MacLaren, the
> former chief executive of Woodward's Stores Ltd., the now defunct
> Western Canadian department store chain, had any dabblings in
> Scientology.)
>
> After his introduction and training by Mr. Duggan, Mr. Slatkin soon
> became immersed in the market.
>
> In 1984, Mr. Slatkin made the transition from working as a full-time
> ordained Scientologist minister to becoming a professional, although
> unregistered, self-employed investment manager. According to the
> trustee, Scientology had "permeated almost every aspect" of Mr.
> Slatkin's life, and his fellow Scientologists provided ripe prey from
> day one. Mr. Slatkin testified he made investments for these
> "friends," "to help Scientologists who have their attention away from
> their money and they're helping the church."
Yes, he was sure ministering to the people Ron Hubbard style, trained by
someone else who knew the ropes. There have to be many more connections
to this, I agree. I am glad for such a thorough investigation. It is
definitely necessary.
Feisty