Posted on 03/27/2002 12:13:05 PM PST by Hank Rearden
EarthLink co-founder admits bilking millions from investors
He will plead guilty in a Ponzi scheme
By Matt Krasnowski
COPLEY NEWS SERVICE
March 27, 2002
LOS ANGELES – The co-founder of EarthLink, one of the nation's largest Internet providers, agreed yesterday to plead guilty to operating a Ponzi scheme that involved $593 million and 800 investors, including celebrities.
Reed Slatkin acknowledged in court documents that he was responsible for $254 million in losses and agreed to plead guilty to mail fraud, wire fraud, money laundering and obstruction of justice charges.
Prosecutors said there is no agreement about Slatkin's possible prison time, but said they expect he will serve 12 to 15 years. He could also face a maximum $3.75 million fine.
Securities and Exchange Commission investigators began scrutinizing Slatkin, 53, of Santa Barbara, last year after investors started filing complaints.
In the agreement, Slatkin acknowledged he falsely portrayed himself as a successful financial adviser and gave investors phony statements showing they were achieving above-market returns on their investments.
"Mr. Slatkin's agreement with the government is a reflection of his decision to accept the responsibility for his conduct and move forward by continuing his cooperation with both government authorities and his creditors," his lawyer Frederick D. Friedman said.
Slatkin started his investment operations in 1990 and included fellow members of the Church of Scientology, Internet executives and Hollywood celebrities as clients.
Much of the money went into what prosecutors call a Ponzi scheme, in which investors are paid returns that are largely funds raised from other investors. He used the money for personal use and his business ventures, court papers state.
When the SEC started investigating, Slatkin allegedly gave false testimony and phony documents to the agency in an effort to cover up the scam.
Slatkin, who helped make EarthLink one of the nation's largest Internet service providers, resigned from the company's board in April and filed for Chapter 11 personal bankruptcy protection May 1.
Not all of his investors lost money. The U.S. Bankruptcy Court trustee overseeing the Slatkin case has reported that at least 75 people reaped $151 million in profits with Slatkin.
Some of those investors have been asked to pay back the money they received or face a possible lawsuit. Among those who profited included Fox News talk show host Greta Van Susteren, actor Peter Coyote, Hollywood producer Armyan Bernstein, and Susie Coelho, an author and host of a cable show on HGTV.
Many of the investors who profited have said they didn't know they were involved in a fraudulent scheme.
Slatkin will be arraigned on the charges in April and has agreed to surrender to federal custody then, said Thom Mrozek of the U.S. attorney's office.
I think Greta's half-life with FNC is evaporating rapidly.
However, my Schadenfreude levels are skyrocketing as I think about the beloved 'appearance of impropriety'. For years, she has condescendingly lectured her opponents as if she were the higher being. Now Greta is going to find out what happens when the shoe is on the other foot.
A Ponzi scammer gives his early investors a great rate of return. It's all investor money anyway. If you have celebrity investors, you make sure you give them a good return to get the word of mouth going for you.
At some point, of course, because there are no real investments being made with all the investor money coming in, you couldn't straighten up and fly right if you wanted to. All these people out there think they own something now and they don't. So you disappear.
Slatkin forgot to do the last step. (It's probably getting harder to do a good disappearing act these days.)
Anyway, it's very, very unlikely Greta knew anything.
She's terrible. Everynight they have serious discussions on the other shows and she wants to talk about silly nonsense and has enough guests on at one time to make one of those "Brady Bunch" Hollywood squares.
So what year did this really happen, and what does it have to do with Earthlink?
This is what the Scientology is all about. They get big name members who are talked into letting "the church" manage their investments. The celebs get great returns and the peons get very little and do all the work, but give all their money, anyway. The whole religion/cult is a giant ponzi scheme.
Maybe that is why Germany is so opposed to Scientology, the wealthy turnover their money to Scientology, get a tax break and Scientology returns the money in goods and services. (I am thinking outloud or on-line, actually)
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