Gordon Grigg…scheduled for release 9/29/2014.
Gordon Grigg – staying in Prison says Judge Aleta Trauger. Looks like the “Good deeds” don’t outweigh the “Bad!”May 10, 2010
Not long ago a request was submitted to the court to release Gordon Grigg pending his appeal. Grigg’s wife wrote letters to Judge Trauger in attempts to illustrate a clearer picture of her husband’s “character, his life, his ability and his desperate desire to pay restitution.”
In a recent blog providing an update to the Grigg situation, I received a flood of communication (in various forms) expressing outrage at the idea that Gordon Grigg, who, as they put it, “used God to swindle people out of their life’s savings”, would honestly think that he had a chance at ever earning enough money to make restitution. “That’s a pipe dream,” stated one victim, “clear evidence that all he wants is – out of prison!”
Well…it seems that Judge Aleta Trauger agrees. Judge Aleta Trauger recently denied Gordon Grigg’s motion for release pending his appeal, because Trauger wasn’t convinced by Grigg’s claim he is not a flight risk. She also didn’t believe Grigg’s appeal would result in anything less than hard time.
Grigg is currently serving 120 months in prison on multiple counts of mail and wire fraud.
One thing I can say, time passes slowly in prison. I know, (wish I could say different) but I’ve been there. What will be the outcome of this unfortunate event? My guess…Gordon will come to realize that God does work in mysterious ways and, if open, he might find that this experience will open him spiritually to places he has never gone before. Likewise, there will likely be a realization that, choices once made, can’t easily be undone. Restitution is great, but it doesn’t replace the change that those who were victimized have experienced. My guess, the victims will always have an issue with trust.
I respect Gordon’s wife for sticking by him. There will, in my opinion, however, come a time when reality will set in and all involved will recognize that every choice has a consequence and those choices Gordon made will forever mark all concerned…including his family.
My best to all concerned.
Of course, if you have any opinions that you wish to share…YOUR COMMENTS ARE ALWAYS WELCOME!
White Collar Crime Sentence Reduction Requests – What Do You Think? Sholam Weiss, Gordon Grigg and Barry StokesApril 1, 2010
Over the past several years there appear to have been a proliferation of incidences of white collar crime. And, with increasing amount of fraud have come longer and longer sentences. What seemed to be the overwhelming example was the sentence given to Bernie Madoff – 150 years. But, Bernie’s sentence doesn’t come close. Norman Schmidt got 330 years for his role in a huge investment scam. But, convicted life-insurance swindler Sholam Weiss has time on his hands — 845 years, a record for white-collar crime.
But, along with sentences handed out seem to come legal requests for sentence reductions. On March 24th, 2010, Weiss’s attorney appealed for his client to be resentenced in hopes of shaving off a little time — about 800 years worth – and he’s not the only one. Barry Stokes, former CEO of 1Point Solutions, is currently serving a 12 ½-year sentence for siphoning $19 million from the savings accounts of others and claims he must be released from prison to seek proper medical attention.
Likewise, Gordon Grigg’s wife, Mila Grigg stepped up to the plate for her husband, citing a Nashville Post story from September that reported U.S. District Judge Robert Echols gave Stokes a reduced sentence because he cooperated with investigators and had no prior criminal history.
Let’s look at these three in brief. The questions are:
- Are these sentences too harsh?
- Should the sentences be reduced?
According to the Associated Press:
Weiss was sentenced to 845 years in prison in February 2000 by a federal judge in Florida who said he should be removed permanently from society. Of course, Weiss wasn’t in court at the time. He had fled overseas while a jury was deliberating.
Weiss and six others were convicted or pleaded guilty in a plot that caused the 1994 collapse of the National Heritage Life Insurance Co. and cost many of the Orlando company’s 25,000 customers their life savings.
He disappeared after his nine-month trial but before the jury started deliberating. He was found guilty of all 93 counts of pocketing $125 million and given a sentence that the Department of Justice says is likely the longest ever handed down for a white-collar crime.
While on the lam, he settled in Brazil and traveled to Israel, Belgium and the United Kingdom. Investigators tracked him to Austria, where he was captured in October 2000. He was a shadow of the 260-pound man they had sought — he had lost 50 pounds, shaved his beard and had documents that identified him as Charles Dick.
Now what? First, you have to wonder if he has a chance at a sentence reduction. First pass…the answer would be NO!
Found by Austrian authorities his attorneys want the 11th Circuit Court of Appeals to order a new sentencing hearing hoping a judge would use different guidelines that would give him a sentence closer to 35 years or so. But the question is – why would the government do that considering Weiss’s actions prior to sentencing. Talking about not wanting to take responsibility…!
The Nashville Post reports the following:
As guards brought former 1Point Solutions CEO Barry Stokes down the the 8th floor corridor of Nashville’s federal courthouse this morning, he noted a scale model of the replacement courthouse that the feds have had on the drawing board for some years now. Stokes wondered aloud when the long-delayed structure would be built.
“You’ll probably be out of prison by the time they break ground,” one of his escorts sarcastically remarked.
To which Stokes replied, in apparent sincerity: “I’ll be out by midnight.”
U.S. District Judge Robert Echols this evening proved Stokes prescient, if not entirely accurate. Turning aside prosecution pleas for a sentence of nearly 22 years, Echols sentenced the admitted fraud artist to 12 and a half years in a federal penitentiary for engaging in a five-year scheme that drained some $19 million from the retirement savings accounts of thousands of people.
In his handwritten court filing labeled “motion to receive documents for appeal,” Stokes said doctors have discontinued his medication and he has concluded the only way he can receive the proper treatment “is to file appeal and get out [of prison].” Stokes then requested necessary documents to file for an appeal. The basis for his claim is that he was transferred in prison and they discontinued his medications prescribed to him by Nashville doctors, causing him to pass out and require five days in the hospital. He states further that he was told by Nashville physicians that he required care by specialists, “none of which practice in Southern Illinois.” (where he is now located). Stokes said doctors found cancerous tumors on his thyroid and liver, and removed his thyroid but “they refused to operate on his liver as it was beyond their skill set.”
This is not the first time that Stokes has sought a sentence reduction due to health concerns.
Candidly, I don’t doubt the last comment as medical care is prison is minimal at best. There is not attempt at heroic life saving attempts.
Then there is Gordon Grigg who I have written about both pre and post sentence.
The Nashville Post stated the following:
Judge Aleta Trauger handed down the sentence this afternoon following the convicted schemer’s guilty plea this spring.
Sentencing guidelines had called for between 78 and 97 months in jail and two years of suspended release. In her sentencing, Judge Trauger noted Grigg’s pattern of preying on vulnerable people and said his use of religion was an aggregating factor.
“It is not a violent offense, but it has done violence in many ways to his victims,” Trauger said from the bench. “This case had a more vicious twist than Madoff.”
During today’s sentencing hearing, Grigg victims from California, Illinois, Arkansas, North Carolina and Tennessee told of their experiences with him, painting a picture of a man who fashioned himself a savior during troubled times.
Rita Jorgensen of Franklin said Grigg “made a mockery of my faith, quoting scripture all the time.” And Steve Weiland, a former pilot now living in Davidson, N.C., said Grigg “came clothed in Jesus Christ, as a brother in God. He said, ‘I’m praying for you and I’ll take care of you.’ Well, he took care of me alright.”
A sentence beyond the “guidelines” – motivated by what the judge cited as a “pattern of preying on vulnerable individuals, people in crisis in difficult spots in their lives.” Likewise, the judge used as a basis for an upward departure Grigg’s “use of religion” to perpetrate his fraudulent scheme.
Grigg claims in his Motion for Release pending appeal the following:
- His sentence is unreasonable since the Court provided no advance notice of their intent to have an upward departure of his sentence and hence his defense had no time to prepare to the variance.
- His sentence is unreasonable since the court relied on his victims (which he claims provided unreliable) testimony.
The Nashville Post reports the following related to Grigg:
Mila Grigg blames her husband’s lawyer for not delivering to the judge “numerous letters” that would have provided Trauger “a clearer idea of his character, his life, his ability and his desperate desire to pay restitution.”
Had Trauger received such letters, Mila Grigg said, the judge would have learned that the Grigg she sentenced to prison “work[ed] with troubled youth in North Carolina” and “coached [soccer] teams where his own children were not playing and never charged a penny … ” — among other claims.
Mila Grigg went on to claim, “His current sentence victimizes the victims who need restitution, and it is our prayer that you hear his sentencing again. This sentence was not a just sentence based on all I know about my husband and all our attorney told us that he had submitted to you.”
Mine is not to judge. As most of my readers know – I served a federal prison sentence with probation following. I know what these men are going through and hope that those – who will be free someday – can gain from their personal experience and use their future choices to help others. Meanwhile – if you have been connected to either Sholam Weiss, Gordon Grigg or Barry Stokes – as a friend, relative or victim – MAKE YOUR VOICE HEARD. Share your thoughts on whether a sentence reduction is appropriate.
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…
The article stated, “Thanks to taxpayer protector and crusader of bailout transparency, Inspector General Neil Barofsky — under the guide of the ever-noble Obama administration — Tennessee is in the headlines as the home to the first exposed bailout-related criminal case. Franklin’s very own Gordon Grigg was accused by the U.S. Attorney’s Office in Nashville on Wednesday for his creation of a $10.9 million fraudulent investment scheme.” But that’s not the total truth…the real exposure of Gordon Grigg’s fraud started well before Neil Barofsky got involved. Frankly, it started with a little known retired US Airways pilot named Steve Wieland.
I can’t forget the call I received from Steve. I didn’t know what to make of it at first, but quickly I began to realize that he was spewing a tale of an ongoing fraud that in many ways he uncovered. Carefully I listened to his story and understood that not only had he been defrauded, but he became unknowingly entwined in the web of deceit having expanded the trust network that Gordon Grigg so carefully played upon.
But this story is not so much about Gordon Grigg’s fraud – that is clearly known. Rather, this is about how the fraud was exposed and, likewise, how Grigg lured his victims into the web of deceit. For this series of blogs I asked Steve Wieland to share with me answers to many questions I asked. Here I will, with Steve’s help, show how easy it is to become a victim of a talented fraudster. Let the interview begin…
HOW DID I GET SUCKED IN?
I had met Gordon Grigg in the summer of 2005. He fathered my girlfriend’s child. This child was a product of an extramarital affair between the two of them. He had moved away from our town with his family. I had just started to connect with his son where I live. He was divorced and had a new, young fiancée. He was extremely charismatic, funny and generous.
For the next two years he came to visit on multiple occasions. But in that second summer, after I met him, I became sick. I was a professional pilot and my illness caused me to lose my medical license to fly airplanes. I had broken my back and had extreme pain due to nerve damage in my feet. I was on 17 medications a day and under psychiatric care due to depression. Additionally my girlfriend and I had broken up, although we remained friends.
My finances were not going well, my airline had already taken my pension, and I was 57 years old with mandatory retirement at age 60. One day my ex-girlfriend told me I should seek financial advice from the father of her child, and now my friend, Gordon Grigg.
Interesting that many, if not most, fraudsters find victims that are susceptible or vulnerable to a scam based on their expanded need. Steve exposed his need based on the varied circumstances he found himself in at the time. And Gordon, being the astute fraudster saw a weak individual that became easy prey to advance his Ponzi scheme. But back to the story…
Gordon Grigg’s website was exemplary. He touted advising everyone from racecar drivers to foreign rock stars to country music singers and professional athletes.
Since we had been friends for over two years and my girlfriend, the mother of his child, had recommended him, I felt comfortable in having an interview with Gordon to take over my finances.
As a side note, it is quite common that a fraud is expanded to new victims based on a close relationship of trust. Note: Gordon first got close to create the bond of trust, so that when it was time to lure Steve in – closing the sale was easy!
This would be the first time we’d ever talked about money. He came into my home, opened his briefcase, and after four hours we had never talked about finances. Instead he talked to me about religion. He asked me how long I’d been angry at God. He told me about his own depression and how he had to commit himself for 30 days to a psychiatric ward to become normal again.
He held my hand and prayed with me. At the time, he seemed like a godsend. I mean what more could I want? Here was a man who had been a college football star, handsome charismatic, extremely versed on investing and was willing to take on my financial package. When he left my home I asked him about the finances. He just smiled and told me not to worry about it and to get myself better. He said that was the most important thing. He said he would take care of me. And believe you me, take care of me he did!
The mark of any good sales person is to first find out what motivates you and then meet those needs. NOW CAREFUL…not all salespeople are bad or use their talents for unscrupulous means. But, Gordon was, well lets call him, an unconscious competent. Perhaps, at some point he became a conscious competent…in other words he was an expert at what he was doing – all be it, what he was doing was WRONG!
Two months went by and Gordon had taken away all of my control of my finances by having me sign a limited power of attorney up to and including my will where he made himself the executor. My health was starting to come back, but nowhere like it should have been. He invested me in legitimate TD Ameritrade accounts and then sold and bought in these accounts without my knowledge until I received the monthly statements. He would visit periodically and I would take HIM to dinner. He would tell me that in 12 months I would kiss the ground he walked on. And then he told me of some special investments that only he could make because he pooled other investor’s money. These investments would be for millions of dollars and I alone could not make these investments without being in his pool.
I often refer to victims of Ponzi schemes as having fallen into the PIT – PROMISE, TRUST and ILLUSION. Based on what Steve shared above, Gordon got in based on trust, created the illusion (so Steve would continue to believe) and then made promises that enticed the victim – giving the illusion that they were special – that what they would receive was unique and only offered to a select few. Actually, in that last part they were telling the truth – only a few select people would become victims!
As it turned out, I have a friend in California who is much like myself being medically retired from the airlines. We talk all the time and visit occasionally. After investing with Grigg, he asked me what I was doing with my dwindling investments. I told him about Grigg and what a fantastic job he was doing for me and suggested he call him. After talking with him on the phone, Grigg suggested that he fly to California and meet with my friend.
Many of the fraudsters find that they grow their fraud based on the referral of those who are fully sucked into the scam.
At the time Grigg had advertised that he had offices all over the United States. But neither one of us did due diligence to investigate any further than what Grigg had published or had promised.
Interesting, but as I interview victims of frauds one of the most common comments is, “we were so caught up in the belief that our financial needs could be met that we forgot or ignored doing due diligence.”
After two or three meetings my friend decided that he was going to invest with Grigg as well. Grigg did the same thing to him. He took over all his finances, reinvested them, and then put hard cash in bogus investments.
We were both very happy to see our investments growing while the rest economy was falling dramatically. What we didn’t understand was that the investments were only growing because Grigg typed the statements up on his laptop and generated them to us via his website.
I told yet another pilot friend, who was and is still active, and suggested he talk to Grigg as well. Grigg made a couple of trips to Phoenix where he met with my friend, driving a lavish rental car, dressed to the nines. This friend, however was skeptical, and did some research. He found out that Grigg had a $560,000 judgment against him by the state of North Dakota. When my friend called to inform me of this I immediately called Grigg. He assured me that it was a bogus complaint made by a widow, who did not know her husband’s investments and that no one could be in the business for 20 years or more and not have a complaint. I relayed this to my friend, and although he was still skeptical, chose to invest $20,000. That is less than 10% that myself or my friend in California invested.
For PART ONE…this sets the stage. The fraud that Gordon Grigg had taken from North Dakota to Tennessee was soon to be completely exposed. But, for now in the time we have this is quite enough.
Let me thank Steve Wieland for his courage to step out and expose (through his experience) how a fraud is perpetrated and how easy it is to be sucked into the PIT. I regret Steve’s loss, but know that others will, perhaps, avoid the same disaster Steve and others faced at Grigg’s hand.
I have been alerted that Steve Wieland’s perceptions of the facts (from his perspective) stated above are inaccurate and untrue. My objective is to uncover and/or discover what motivated folks to “invest” with Gordon Grigg, to review how a Ponzi scheme takes place in reality and identify how it unraveled or was exposed. As such, according to the SEC:
Grigg and ProTrust defrauded at least 27 clients out of approximately $6.5 million by obtaining such funds from them and claiming to have invested them in securities that do not exist. Specifically, the Complaint alleges that the defendants have: (1) obtained control over client funds and falsely claimed to have invested such funds in fictitious securities that were described as “Private Placements;” (2) created false and fraudulent account statements reflecting the clients’ ownership of non-existent securities; (3) falsely claimed that the defendants had the ability to invest client funds in government-guaranteed commercial paper and bank debt as part of the U.S. government’s Troubled Asset Relief Program (“TARP”), and that they did invest client funds in the TARP program; and (4) falsely claimed to have partnerships and other business relationships with several of the nation’s top investment firms.
I welcome any of the 27 client “investor” victims to contact me in an effort to seek the truth about how you became involved with Grigg and ProTrust. There are many victims in a circumstance like this, and if there is a way to expose how what happened – happened, perhaps in the future others will have the benefit of learning from others mistakes. Likewise, if there is anything stated above that is inaccurate, please contact me with details so that corrections can be made.
STAY TUNED FOR PART TWO!
YOUR COMMENTS WELCOME!
“I have an inside track on a great investment. You’ll get better than a 12% per year return. But, there are only a limited number of folks that I can get in on this offering. You interested?
STEP ONE – make a promise that seems ‘special’ or ‘better’ than what anyone else can get on their investment funds!
“Wow…this is great. I just got our statement in the mail and you know that investment I made in that private fund that Joe recommended…well its done better than he projected. The market has been down, but this has returned over 16% thus far. Man…I’m glad we got in on this deal!”
STEP TWO – Create an illusion that the investment is real. This is done with fake statements (Bernie Madoff has had co-workers indicted for their role in creating fake documents). Gordon Grigg is now in jail for his Ponzi scheme when he made a simple mistake on one of his fake statements. He reversed the names and instead of calling them Fannie Mae and Freddy Mac he stated Fannie Mac and Freddy Mae…oops.
“Hey Frank…I know you told me the other day how badly your portfolio has been. Well, I got connected with one of my friends on a private placement investment and, well, I was hesitant at first, but it’s been going great guns. We’re up over 16% this year and I have a guarantee of 12%. I didn’t say anything at first, but I thought that you might want to connect with this guy. He’s really got it together. Who knows, if you put some money with him…you might be able to dig yourself out of the hole a bit quicker. Want me to call him and see if he could take you on?”
STEP THREE – Grow the fraud using trust. First you trusted the person who hooked you into the fraud, and now you’re using that same blind trust to lead others to the slaughter. Ouch…it will be painful both emotionally and financially on the back side.
Charles Ponzi arrive in Boston on November 15, 1903, aboard the S.S. Vancouver. By his own account, Ponzi had $2.50 in his pocket, having gambled away the rest of his life savings during the voyage. “I landed in this country with $2.50 in cash and $1 million in hopes, and those hopes never left me,” he later told The New York Times. He quickly learned English and spent the next few years doing odd jobs along the East Coast, eventually taking a job as a dishwasher in a restaurant, where he slept on the floor. He managed to work his way up to the position of waiter, but was fired for shortchanging the customers and theft.
NOTE: There was a pattern of theft and unethical behavior, but the consequence of his actions were not significant enough for Ponzi to change his ways.
Imprisoned for forgery, Ponzi spent three years in the prison St. Vincent-de-Paul near Montreal. Rather than inform his mother of this development, he posted her a letter stating that he had found a job as a “special assistant” to a prison warden. After his release in 1911 he decided to return to the United States, but got involved in a scheme to smuggle Italian illegal immigrants across the border. He was caught and spent two years in Atlanta Prison, where he met inmate Charles W. Morse, a wealthy Wall Street businessman and speculator, where he learned of greater opportunities than simple petty theft.
Ponzi seized on, what he said was an opportunity, to use postal coupons (I guess today we’d call them stamps), to make money. IRCs (the postal coupons referred to) were priced at the cost of postage in the country of purchase, but could be exchanged for stamps to cover the cost of postage in the country where redeemed; if these values were different, there was a potential profit. Here’s where Ponzi dreamed up his opportunity for fraud.
Ponzi went to several of his friends in Boston and promised that he would double their investment in 90 days. The great returns available from postal reply coupons, he explained to them, made such incredible profits easy. Some people invested and were paid off as promised, receiving $750 interest on initial investments of $1,250.
NOTE: The scheme always involves a promise of something that the average bloke just can’t get. So when someone – especially someone you trust tells you that they have a fail safe investment that offers great returns…be prepared to be scammed.
Soon afterward, Ponzi started his own company, the “Old Colony Foreign Exchange Company,” to promote the scheme. He set up shop in a building on School Street. Word spread, and investments came in at an ever-increasing rate. Ponzi hired agents and paid them generous commissions for every dollar they brought in. By February 1920, Ponzi’s total take was US$5,000, (approximately US$54,000 in 2008 dollars). By March, he had made $30,000 ($328,000 in 2008 terms). A frenzy was building, and Ponzi began to hire agents to take in money from all over New England and New Jersey. At that time, investors were being paid impressive rates, encouraging yet others to invest. By May 1920, he had made $420,000 ($4.59 million in 2008 terms).
NOTE: The illusion was in full force. Just as soon as folks began to see the promised returns happening (just as promised) they began to believe that what they were seeing was real. Bernie Madoff, Gordon Grigg, and many many more in just 2009 did exactly the same thing. They promised something and delivered…creating the illusion that all was just as portrayed. What investors didn’t know was that the returns they were seeing came from other peoples investments.
By July 1920, Ponzi had made millions. People were mortgaging their homes and investing their life savings. Most did not take their profits, but reinvested.
NOTE: Another psychological part of most Ponzi schemes is that once there is an element of trust, greed sets in and investors (wanting more and more) do not take their profits, but rather leave them for yet bigger and bigger profits. In effect, victims would rather gamble with their funds than protect their assets.
Ponzi was bringing in cash at a fantastic rate, but the simplest financial analysis would have shown that the operation was running at a large loss. As long as money kept flowing in, existing investors could be paid with the new money. In fact, new money was the only way Ponzi had to pay off those investors, as he made no effort to generate legitimate profits.
NOTE: It seems odd, but the obvious somehow becomes clouded in the quest for more money. In the Madoff scam…people now looking back could have seen that what he was doing couldn’t work…yet, Madoff survived three SEC investigations with flying colors. It seems that it is human nature to want to believe that what is not real somehow is real.
Ponzi lived luxuriously: he bought a mansion in Lexington, Massachusetts with air conditioning and a heated swimming pool, and he maintained accounts in several banks across New England besides Hanover Trust. He also brought his mother from Italy in a first-class stateroom on an ocean liner.
NOTE: Most Ponzi schemers use the funds (for the most part) for an illusory lifestyle. That’s part of the illusion that causes people to trust the schemer. Madoff, Grigg, Stanford (although he’s not yet been found guilty) Huffman and others all have become part of the illusion that promotes trust so that more people will invest (oops…become scammed).
Joseph Daniels, a Boston furniture dealer who had given Ponzi furniture which he could not afford to pay for, sued Ponzi to cash in on the gold rush. The lawsuit was unsuccessful, but it did start people asking how Ponzi could have gone from being penniless to being a millionaire in so short a time. There was a run on the Securities Exchange Company, as some investors decided to pull out. Ponzi paid them and the run stopped. On July 24, 1920, the Boston Post printed a favorable article on Ponzi and his scheme that brought in investors faster than ever. At that time, Ponzi was making $250,000 a day. Ponzi’s good fortune was increased by the fact that just below this favorable article, which seemed to imply that Ponzi was indeed returning 50% return on investment after only 45 days, was a bank advertisement that stated that the bank was paying 5% returns annually. The day after this article was published, Ponzi arrived at his office to find thousands of Bostonians waiting to give him their money.
NOTE: At the height of the schemes most fraudsters find that their false promise supported by an illusion and reinforced with trust (many times of well known and influential individuals) drives ever more folks to be sucked into the PIT. (PROMISE, ILLUSION AND TRUST). Likewise, at its height that is generally when the pendulum is preparing to swing in – well lets say – a more truthful direction. In other words the house of cards is soon to collapse.
On July 26, the Post started a series of articles that asked hard questions about the operation of Ponzi’s money machine. The Post contacted Clarence Barron, the financial analyst who published the Barron’s financial paper, to examine Ponzi’s scheme. Barron observed that though Ponzi was offering fantastic returns on investments, Ponzi himself was not investing with his own company. Barron then noted that to cover the investments made with the Securities Exchange Company, 160 million postal reply coupons would have to be in circulation. However, only about 27,000 actually were. The United States Post Office stated that postal reply coupons were not being bought in quantity at home or abroad.
The stories caused a panic run on the Securities Exchange Company. Ponzi paid out $2 million in three days to a wild crowd outside his office. He canvassed the crowd, passed out coffee and donuts, and cheerfully told them they had nothing to worry about. Many changed their minds and left their money with him. However, this attracted the attention of Daniel Gallagher (no relation by the way – although that would be quite a coincidence), the United States Attorney for the District of Massachusetts. Gallagher commissioned Edwin Pride to audit the Securities Exchange Company’s books—an effort made difficult by the fact his bookkeeping system consisted merely of index cards with investors’ names.
The denouement for Ponzi began in late July, when McMasters found several highly incriminating documents that indicated Ponzi was merely robbing Peter to pay Paul. He went to his former employer, the Post, with this information. The paper offered him $5,000 for his story. On August 2, 1920, McMasters wrote an article for the Post declaring Ponzi hopelessly insolvent. The article claimed that while Ponzi claimed $7 million in liquid funds, he was actually at least $2 million in debt. With interest factored in, McMasters wrote, Ponzi was as much as $4.5 million in the red. The story touched off a massive run, and Ponzi paid off in one day. He then sped up plans to build a massive conglomerate that would engage in banking and import-export operations.
On August 11, it all came crashing down for Ponzi. First, the Post came out with a front-page story about his activities in Montreal 13 years earlier—including his forgery conviction and his role at Zarossi’s scandal-ridden bank. That afternoon, Bank Commissioner Allen seized Hanover Trust after finding numerous irregularities in its books. Although the commissioner did not know it, this move foiled Ponzi’s last-ditch plan to “borrow” funds from the bank vaults after all other efforts to obtain funds failed.
With reports that he was due to be arrested any day, Ponzi surrendered to federal authorities on August 12 and was charged with mail fraud for sending letters to his marks telling them their notes had matured. He was originally released on $25,000 bail, but after the Post released the results of the audit, the bail bondsman withdrew the bail due to concerns he might be a flight risk.
The news brought down five other banks in addition to Hanover Trust. His investors were practically wiped out, receiving less than 30 cents on the dollar. The Post won a Pulitzer Prize in 1921 for its exposure of Ponzi’s fraud.
WHERE ARE WE TODAY?
Same place we were when old Charles created what we now call the “Ponzi scheme.” Robbing Peter to Pay Paul is the name of this game and unfortunately it existed before Charles Ponzi (he just got the notoriety for it) and continues to this day…and unfortunately will continue.
People get victimized, in a sense, by their own greed – although many don’t wish to admit that. But, reality is – the investor (victim) wants a better return than he/she can get elsewhere (they fall victim to a false promise). The illusion that the fraudster creates lures the investor victim into believing that what seemingly can’t be real – in fact is. And, most fraudsters prey first on those closest to them – their friends, family and close acquaintances people that trust them.
The fraudster typically uses need, opportunity and rationalization to effect their crime while the victim falls into the PIT – or stated this way, they fall victim to a PROMISE supported by an ILLUSION which has a foundation in TRUST.
Robert Allen Stanford – Stanford International Bank and Stanford Capital Management – Fraud In the News! What Motivates Fraud?February 22, 2009
It seems that the flood gates are open with no hope of shutting – at least any time soon – with investigations and indictments of fraud! Madoff, Dryer, Grigg and now Stanford. Every where you turn there is another fraud or investment scam being reported. I’ve seen a lot over the years as a business ethics and fraud prevention speaker, but this is a profound season for fraud discovery. So the question – what motivates fraud?
To address a question like that you need to look at the scope and magitude of the frauds being reported. And, make no mistake in this economic climate this is the tip of the iceberg. As I write this, no doubt, there are frauds taking place that will be discovered in years to come. Not a great comfort. And, in this environment, the time is ripe for people to be scammed or victimized.
Before, however, look at the motivation, let’s examine what Stanford is being accused of. According to the Dallas Business Journal:
A Houston-based broker-dealer and investment advisory firm with an office in Dallas has been charged in an $8 billion investment scheme that centers around a CD program and involves false promises to investors.
The Securities and Exchange Commission out of its Fort Worth Regional office alleges in a lawsuit filed in Dallas that Robert Allen Stanford through three of his companies — Antiguan-based Stanford International Bank, Houston-based Stanford Group Co. and Stanford Capital Management — were involved in orchestrating a fraudulent investor scenario where the parties made false promises to investors and fabricated return data on investments, the SEC stated.
“As we allege in our complaint, Stanford and the close circle of family and friends with whom he runs his businesses perpetrated a massive fraud based on false promises and fabricated historical return data to prey on investors,” said Linda Chatman Thomsen, director of the SEC’s Division of Enforcement. “We are moving quickly and decisively in this enforcement action to stop this fraudulent conduct and preserve assets for investors.”
Rose Romero, regional director of the SEC’s Fort Worth office, called the scheme “a fraud of shocking magnitude that has spread its tentacles throughout the world.”
This was originally reported on February 17, 2009. Since that time there has been a massive ripple effect related to Stanford’s SEC investigation. Investors have found that their assets have been frozen as Stanford’s assets were frozen to protect investors. This fraud expands far beyond the boundaries of the US.
The Jamaica Observer states: His is a household name in the tiny Eastern Caribbean island of Antigua & Barbuda.
Likewise, the New York Times reports: Having seized control of Robert Allen Stanford’s two banks in recent days, Antiguan government officials are now pledging to work closely with American regulators to investigate their banking system, long suspected by federal officials of being a center for laundering money from around the region.
Now…as the Stanford saga unfolds so does the mystery. Keep in mind, fraud – to be successful – has to be based on illusion. And, as we have seen, the grander the illusion the more plausible the fraud – Bernie Madoff – master illusionist. So in Stanford’s case the illusion is mystified by a story of an “undisclosed island.”
Again, the New York Times reported on February 20, 2009 – In an October 2008 article, Mr. Stanford told Forbes that he was planning to build an elite resort on what the magazine described as an “undisclosed island in the Caribbean.” At the time, Mr. Stanford said that he was working with 17 architectural and engineering firms to build 30 mansions for a development to be called the Islands Club.
Scheduled to open in 2011, it would have featured the largest private aviation complex in the world, Forbes said, with enough room to park 100 private jets as well as a jumbo marina with enough dock space for 30 massive yachts. The super-exclusive resort would require members to shell out a $50 million deposit, which would be refunded if they left the development. That was on top of the $15 million annual membership fee.
The foundation of a scam is based on three components: Promises – something that people want and most can’t get; Illusion – the grand scheme that allows people to believe in something unseen as truth; and Trust – the belief that all is right, that somehow the government is overseeing the illusion and that if others do it – well then so should I.
BUT WHAT MOTIVATES A FRAUD IN THE FIRST PLACE?
That’s a good question and one that is not easy to answer. However, one thing is true – a fraud usually has three distinct components: (1) Need; (2) Opportunity; and (3) Rationalization. While I am not qualified to speak at this time as to each of these critical components, I can safely say that his NEED was driven by emotion (likely first) and (direct need perhaps second).
Note the following reported by chron.com: With a net worth north of $2 billion, he owns glitzy homes in and around Miami, the Virgin Islands and Antigua, and in them he has entertained powerful American politicians from both sides of the aisle.
He has an estranged wife, a girlfriend, former girlfriends and at least six children by four women. The monthly tab to support them all runs upward of $200,000, according to court records.
He loves to flash cash and to flaunt the toys that immense wealth can bring, be it yachts, private jets and helicopters, his own professional cricket team or a string of top-shelf pro golfers whom he pays to wear his logo.
An outstanding article appeared in the Wall Street Journal – a link to that article is here.
The flamboyant life style required money to fund the illusion, but more than that the emotional need to be larger than life is likely the key trigger to what and why this whole fraud began.
STANFORD’S JOURNEY CONTINUES:
The story will no doubt unravel. So consider the following:
- If you were an investor who was defrauded, consider making contact with me as I am doing research into how the fraud was carried out. Your comments might help others avoid your plight.
- What do you think should be Stanford’s consequence for the massive fraud he’s accused of?
- If you did invest – did it cross your mind that the returns (far better than what the market provided) might be – well – shady?
AS ALWAYS COMMENTS ARE WELCOME!