White collar crime might be defined as non-violent and financially based, but with companies losing billions and families losing homes it’s certainly not victimless. Just ask Ponzi scheme expert and attorney Michael Goldberg. For 22 years Goldberg has fought to return money to victims of Ponzi schemes, including those who allegedly fell prey to businessman-turned-fugitive Eric Bartoli.
After starting up an investment business in Latin America, Bartoli got the itch to make money in the U.S. By the mid-1990s, he moved his investment company, Cyprus Funds, to the Midwestern farming community of Doylestown, Ohio. And he moved in with style. Within months, Bartoli bought up the town, including a Victorian mansion on Main Street, three storefront shops and a huge 12-acre farm house for his family. The community was impressed. And every chance he got, Bartoli attributed his conspicuous consumption to the money he’s made from his company.
Cyprus was a success. The company supposedly sold unregistered mutual funds and certificates of deposits with the promise of more-than a 10 percent return. Within three years, Bartoli signed up more than 600 investors in Ohio who saw his promise pay off. But by summer 1999, when investors like Tina Hollinger say they stopped getting checks, the U.S. Securities and Exchange Commission came looking for answers. Bartoli skipped town. He first resettled in the U.S. before eventually fleeing the country. The Federal Bureau of Investigation now believes he’s living in Peru. He remains wanted on a federal arrest warrant for allegedly masterminding a Ponzi scheme.
In all, Cyprus Funds raised $65 million from more than 1000 investors. One of those alleged victims was Tina Hollinger. A widow and mother of two, Hollinger thought her money was safe with Bartoli. So much so that she eventually invested $200,000, including money from the sale of her late husband’s tree cutting business and the payout from his life insurance policy. When Goldberg told her and a room full of investors that they had lost it all, Hollinger was devastated. She recalls the shock, thinking “It can’t be true; they’re just going to tell us that it was all a mistake and the money will come back.”
But the money did not come back. And Hollinger had to declare bankruptcy.
Her story is just one of many. Goldberg says it’s not easy to tell an investor that they lost their life savings, but that “the worst thing the receiver can do is sugarcoat anything, you have to be honest and it’s brutally honest.”
Tracking the Money Trail When the Perp Is on the Run
When the principal runs, you lose the guy who knows most about the crime and “who knows where the bodies are buried,” as Goldberg put it. The civil case against a fugitive continues but it moves much more slowly. Investigators must hire a forensic accountant who analyzes records and documents to reconstruct the crime. The accountant traces the flow of currency and tries to locate any potential assets and stashed money. The process can be tedious, slow and costly. Both the receiver and the forensic accountant are paid from the pool of assets they recover. Goldberg said this is often a source of contention with victims, but he wanted to remind them that “it costs money to bring money into an estate.” So, without hiring a receiver and an accountant, victims might not ever get any of their money back.
Most perpetrators of white collar crime leave behind a paper trail that investigators can examine. But Goldberg says the best chance for recouping losses is if you have the perpetrator of the crime talking with the hopes of receiving a reduced prison sentence.
Finding the Money: Just How Much Can You Get Back?
Just how much money does a victim of a white collar crime usually recoup? Goldberg said that number can’t be quantified and that theoretically it could be anywhere from nothing to everything. In the dozens of cases Goldberg has worked, he said his clients usually recoup on average one-third of their money. But sometimes it’s as low as 3 percent or as high as 90 percent. Goldberg said the type of assets a perpetrator has amassed is a big factor. If he spent most of the money on fancy meals and high-end travel, that money is up in smoke. And if it was cars and boats the con man fancied, those assets depreciate in value, making the money pool much smaller. Goldberg’s favorite asset to liquidate is any property without a mortgage because it’s difficult for the perpetrator to sell quickly, yet the receiver can generally sell it with added value.
There is no golden rule, but the hunt for hidden money becomes much easier — and your odds of finding it much greater, when you have the perpetrator of the crime talking.
“As a receiver you love when somebody’s arrested and facing the hammer of the criminal authorities and the weight of the court system, then they get very cooperative, and you learn a lot. To this day we have not had the benefit of Mr. Bartoli’s cooperation.”
So far, from the $65 million investors put into Cyprus, Goldberg has been able to pay back $9.6 million.
Watch "American Greed: The Fugitives" on CNBC. It premieres August 8 at 8P ET and re-airs at 9P ET/PT and 12A ET