Gordon Grigg – How a massive Ponzi scheme fraud was exposed – Part Two

Having been there, I completely understand the impact that choices have – not only on the individual that makes them – but also on the lives of others who are connected.  Whether a spouse, a child, a mother or father – whether a brother or sister – or whether a defrauded investor – everyone connected with the individual who perpetrated the fraud is a victim and, for most, the pain can run deep.

I was told that my earlier blog about Gordon Grigg was filled with lies…that it was slanderous and/or libelous.  I take those claims seriously.  To be clear, my objective is to open a dialogue regarding how a Ponzi scheme is perpetrated and how victims are lured in.  But for a moment let’s look at the allegation of slander and/or libel.

According to Wikipedia – slander refers to a malicious, false and defamatory spoken statement or report, while libel refers to any other form of communication such as written words or images. Most jurisdictions allow legal actions, civil and/or criminal, to deter various kinds of defamation and retaliate against groundless criticism. Related to defamation is public disclosure of private facts, which arises where one person reveals information that is not of public concern, and the release of which would offend a reasonable person.

Hum…well my words are written and the facts that I reveal are provided either from the public domain or are provided by people who have been directly affected by the crime committed by Gordon Grigg.  Further, as best I can tell, none of the comments made or disclosed are private facts that are not of public concern or should offend a reasonable person.  Rather, it would seem that what is disclosed has great public benefit.  If facts related to the commission of a crime can, upon public exposure, potentially protect otherwise unsuspecting individuals from being victimized – then their disclosure is for the public good.

Does it mean that victim perceptions and comments made at trial are not painful when retold.  NO!  No doubt they are to anyone affected.  And while it is not my intent to cause pain, I also know that complete transparency is one of the only ways that true healing can take place.  To say that Gordon Grigg has received his punishment and now the discussion should cease is more an attempt to quietly sweep under the rug the crime he committed rather than expose the true nature of the actions he took and seek to understand them for what they are.

AUGUST 6, 2009 – SENTENCING

According to the FBI the following took place at sentencing:

United States Attorney Edward M. Yarbrough announced that Gordon B. Grigg (“Grigg”), Franklin, Tennessee financial advisor and owner of ProTrust Management, Inc. (“ProTrust”), was sentenced today in federal court to ten (10) years in prison for perpetrating a Ponzi scheme that resulted in a loss of more than $6 million to more than sixty (60) investor – victims.

United States District Court Judge Aleta Trauger, in sentencing Grigg, stated “This case has a more vicious twist than the Madoff case.” Judge Trauger described Grigg’s crimes as “ . . . preying on vulnerable victims in crisis,” noting that Grigg’s scheme “ . . . destroyed families, relationships, marriages, and wreaked incredible havoc.” Prior to imposing sentence, Judge Trauger heard from seven (7) victims who testified as to the devastation Grigg’s fraud had caused to their lives and the lives of their families.

Notes taken at the sentencing hearing reflected the following:

The judge started by saying there were several factors she took into consideration when sentencing Grigg. They were the nature of the crime and the circumstances. This was not a violent crime, but violence was done in many ways. It was similar to the Madoff case but with a vicious twist. It was done in an aggravating way. Two factors keep arising in the pattern that Mr. Grigg worked. The first was that he preyed on vulnerable people and the second was the way he brought religion into the scheme.

People who commit a fraud (most of you who read my blog regularily know I committed a fraud back in the mid ’80’s – not proud of that fact, but it is a fact), typically have a pattern of behavior – a mode of operation if you will – that becomes successful and natural as they seek out victims and attempt to sell them on their scam.  More than one victim has said that Gordon Grigg used his faith as an effective lure.  Clearly stated, I wasn’t there, but it seems to be born out in testimony at sentencing that this is true.

The FBI new brief goes further to say:

Grigg pleaded guilty on April 29, 2009, to mail fraud and wire fraud. Grigg admitted during the plea hearing that, between 1996 and 2009, he operated an elaborate Ponzi Scheme designed to defraud investors who deposited more than $11,000,000 in funds with his company, ProTrust Management. Grigg promised clients that he would invest their money in pooled-client purchases of fixed-term certificates of deposit, private placements, corporate notes and debentures, with the accounts being titled collectively in the Protrust company name. Grigg further promised to personally manage client funds, and promised investors that he would generate and sustain high rates of annualized returns on investment. However, Grigg admitted that it was never his intention to invest the client funds he solicited. Instead, Grigg stated that he used the money placed with ProTrust for his personal benefit and expenses, to operate ProTrust, and to maintain the Ponzi scheme by disbursing “fictitious” earnings and return of deposits to clients who cashed out or closed their ProTrust investment accounts.

The pattern is so common!  NOTE: If an investment adviser promises sustained high rates of returns (something special that you can’t get anywhere else) – RUN!  There is a better chance than not that a fraud is somehow – somewhere – in the works.  And, more times than not, the illusion created is so great that people close to the fraudster have no clue.  Spouses, children and relatives often experience some of the most severe pain when the find that their trust has been broken – no shattered.

Notes from the trial showed the following:

Investors not only lost money themselves, but they got their friends, families and bosses to also invest with Grigg. He caused financial ruin to these investors. They lost college funds for their children and grandchildren, retirement funds were lost or diminished. He destroyed families and marriages. He wreaked havoc with investors. The investors are not only sad, angry and guilt ridden, but are probably in need of counseling. They have suffered great mental anguish because of the nature of this crime and the circumstances.

From a personal perspective I know I will receive criticism for what I am about to say, but Gordon did not destroy families and marriages.  Rather, the choice to blindly invest money with Gordon and the repercussions that followed from his fraud had that effect.  I have a problem with being a “victim”.  Although I use that term (it’s one that people can understand and connect with) – the reality is – EVERY CHOICE HAS A CONSEQUENCE.  Gordon made choices that had direct and far reaching consequences.  Investors also made choices that had a consequence.  In my earlier article Steve Wieland stated that he did not do his due diligence.  That failure had a consequence.  Every choice does have a consequence!

To conceal and sustain the Ponzi scheme, Grigg admitted that he fabricated documents, including invoices, forged correspondence, and fraudulent account statements purporting to reflect client ownership of non-existent securities. To deceive investors into believing that their investments were safe, Grigg admitted that he falsely claimed to have negotiated partnerships and special business relationships with several of the nation’s most successful investment firms, including Berkshire Hathaway, Inc., Goldman, Sachs & Co., Morgan Stanley & Co., Incorporated, and Kohlberg Kravis Roberts & Co. However, as Grigg admitted to the Court, no such business relationships ever existed, and Grigg used counterfeit corporate letterhead and the forged signatures of national investment firm executives to create fictitious documents and correspondence that appeared to confirm unique pooled investment opportunities between ProTrust and national investment firms.

Grigg further admitted that, between November 4, 2008 and January 28, 2009, he repeatedly solicited funds from investors by falsely representing that he had access to “government-guaranteed commercial paper and bank debt” available as part of the newly-created Troubled Assets Relief Program (“TARP”). Grigg told investors that he had committed more than $5,000,000 in ProTrust pooled client funds towards purchase of TARP guaranteed debt as part of a private placement partnership between ProTrust and the investment firms Berkshire Hathaway, Inc. and Kohlberg Kravis Roberts & Co. However, no such private placement partnership had ever existed between ProTrust, Berkshire Hathaway, Inc., and Kohlberg Kravis Roberts & Co., and no such TARP-guaranteed investment opportunity had ever been offered or made available to individual investors or national investment firms.

The finding of fact reflected in the FBI’s news release is quite interesting.  FOR THE RECORD, rarely does the Federal Government (or an Agency thereof) catch a criminal.  The crime is typically exposed by either an unsuspecting investor or a dramatic change of circumstance that forces what is done in the dark to be brought to the light.

Almost as this was happening (or at least soon thereafter) I received a call from Steve Wieland who shared with me a profound revelation that he uncovered related to his investment with Gordon and the investment of friends he recommended.  His comments follow:

I had advised a third friend, another medically retired airline pilot, of what a good job Gordon had done for us. He was selling his house, moving from Pennsylvania and had some extra money. This was the end of 2008.

The end of 2008 was the beginning of the massive financial meltdown.  I have been asked over and over why the proliferation of Ponzi schemes.  My response was – there are no more than usual.  The Ponzi schemer (and I speak from personal experience) is a bit like a bottom feeder fish.  You can’t see them till there is a major drought.  When the water is low the bottom feeder seems to come to the surface.  So as Steve said –  it was the end of 2008…that makes perfect sense…especially since it takes new money to prop up a Ponzi scheme.

Looking back now I can see how it all fell apart for Grigg. Money was so tight he was scrambling to get new Ponzi victims to placate the ones he already had. He became pushy. My friend in Pennsylvania called me very upset because Gordon wanted the money immediately.  My friend was uncomfortable. That night, December 16, 2008, I called Grigg and ask him to kindly verify my investments with him.  I asked him to provide the phone number for the investments or anything that would make my Pennsylvania friend want to invest with him. I knew that would not be a problem, until Grigg questioned as to why I would want that information. The discussion then started heating up to the point where I knew down in my stomach something was very wrong.

Only a few days before, the California friend and myself had received notice that Grigg could place us in an investment with the company by the name of KK and R. This investment would yield 12.5% guaranteed by the national T. A. R. P. Guaranteed by the federal government paying 12.5% interest. The only catch was that we had to roll over our existing investments for yet another three years. He sent us documents to this effect.

That’s another tell tail sign…if asked to extend your investments you might begin to question – why.  In order to a Ponzi scheme not to collapse you either need new funds or at a minimum keep existing funds longer so as not the erode the ability to maintain the illusion.

The following day I called my friend in California to tell him of my concerns. Like most victims of Ponzi schemes, they don’t want to believe it. So I set about doing the work myself. I contacted KK and R. They had never heard of Grigg or Pro-Trust management. However if I would kindly fax a statement showing that I had previous investments with them, as well as the new potential federally backed investment they would be sure to investigate and get back to me right away. I then contacted Goldman Sachs and told them of the potential investment with KK and R.  Goldman Sachs was supposed to be the administrator of this investment. The gentleman at Goldman Sachs immediately told me it was bogus and to contact an attorney.

It only takes one slip – one request – one inquiry – to cause the house of cards to collapse.  Most of the time the fraudster is the one who slips up stating something or producing something to maintain the illusion – only to find that he/she (in this case “he”) is not the smartest man in the room.  Once the card is pulled – the house of cards is destined to collapse because the foundation of illusion is pierced.

“Mr. Grigg’s crimes were not merely irresponsible manipulations of the financial system without consequences, they were acts of extraordinary destruction to his victims,” United States Attorney Edward M. Yarbrough said. “Grigg defrauded investors by repeatedly and falsely promising them ‘safe’ growth based on ‘unique’ pooled-investment opportunities, including promises of access to TARP guaranteed funds. Instead, the investors lost their ‘nest eggs’ and retirement savings as part of an elaborate Ponzi scheme. The effect of Mr. Grigg’s crimes was devastating to his victims. The United States Attorney’s Office will continue to diligently and aggressively prosecute the perpetrators of such schemes.”

Steve Wieland continued…”Two days later, the federal S.E.C. contacted me about the information I had sent regarding K. K. and R. They wanted to talk to me. I hired an attorney, who told me this was an outright Ponzi scheme. She could sue on my behalf and win every judgment. She also told me there would probably be no money for me. This would be throwing good money after bad. After a week my friend in California knew I was telling the truth.”

Was this the origination of the downfall of Gordon Grigg’s scheme?  I don’t know.  Many media reports share essentially the same story, so I have to believe that (short of being reputed) the call made by Mr. Wieland to the investment firms was the incident that represented the removal of the card from the house of cards that Grigg built.

Once pulled…the consequences began and continue to this day.  Is there more to this story?  Certainly, but for now…perhaps…readers can begin to understand how easy it is to be drawn into the illusion of a fraud and how simple it is to find that one day the card is pulled that begins the collapse.

More to come…but for now…YOUR COMMENTS ARE WELCOME…

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5 Responses to Gordon Grigg – How a massive Ponzi scheme fraud was exposed – Part Two

  1. steve wieland says:

    wonder if the crook will apeall

  2. Pat says:

    In essence, every stock purchase or sale is a ponzi scheme of sorts since one person’s gain is another’s loss. The problem with ponzi schemes is that they are inherently multiplied to be productive, and because of the need to constantly add new money to the mix, end up becoming deceptive and disguised in order to provide the glue that keeps such schemes operating.

    Because the market favors anonymity, and free trade, unidentifiable persons or stocks (a.k.a, fictitious people or holdings) is easy to manufacture, and may be the method of choice for those without easy access to reliable sources who can be trusted not to reveal the frauds when they occur which typically begin as negligence anyway and grow to be the fraud that is too large to fail.

    Not everyone has a U.S. government to bail them out however as the banks did with TARP funds.

    The solution may lie more in altering the “presumption of innocence” that has become the Patriot standard when dealing with economic and terrorist financing because of the market practice of trade schemes that require attorneys, accountants, brokers, and back office staff which may well be now in another country to operate as the innocent instruments relied upon to carry out such frauds, and able to escape accountability because of that immunity standard.

    Large scale frauds may rob one person but they inevitably become pooled today with many others in order to perpetuate such crimes. And that makes it terrorism, not business. In business, there is no need for deception or presumptions of innocence since legitimate business follows ethics practices of regulation as they are set up to provide. Where flaws occur, gaps exist to provide those loopholes through which fraud is able to occur, and most certainly, will occur – along with the implications to state and federal government with respect to taxation, etc., that inevitably become a part of the fraudulent concern, not the legitimate concern.

  3. Mary says:

    Check his wife out as well she should be sitting next to him

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