SARASOTA — Harvey Altholtz liked to brag about the millions he'd made from promising but penniless companies.
Altholtz, owner of Wealth Strategy Partners, showed off spreadsheets tracking returns of 40 percent or more. He held lunch seminars at the Ritz-Carlton and entertained clients at his tony Sarasota home, often mentioning that tennis legend Monica Seles lived down the road.
The pitch worked. Altholtz, 64, raised more than $21 million from at least 120 people in just two years. Some even took loans to invest in Altholtz's two funds.
"I will utterly enjoy watching your life change from this moment forward," Altholtz wrote one customer in early 2007.
But far from multiplying, the value of Altholtz's funds has plummeted over the past two years. The resulting fallout has sparked a torrent of complaints and legal actions, which help paint a clearer picture of Altholtz and his business practices.
Altholtz, who declined to comment for this story, didn't have a license to sell securities and is facing a federal lawsuit related to unlicensed brokerage activities. Another lawsuit accuses him of insurance fraud.
Colorado regulators said he sold investments "in a fraudulent manner." He also owes $1.4 million to the Internal Revenue Service.
The Securities and Exchange Commission is investigating the funds' former investment adviser, and the Florida's Office of Financial Regulation said the state has an open investigation into Altholtz and his business.
Altholtz, his wife and his son Adam, who is his business partner, have all filed for bankruptcy. Meanwhile, investors' money — for some, their life savings — remains under Altholtz's control and out of reach.
William Hartman, who winters in Port Richey, invested $300,000.
"It's my own stupidity that allowed my money to dissipate," said Hartman, 69. "But I've been a fighter all my life. I'll chase a chipmunk through hell to get that nut he stole from me."
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Though Altholtz trained as a dentist, his ambitions were bigger. In the early 1990s, he owned Dental Clearing House in Simsbury, Conn., which sold a root canal filler containing a toxic substance. After several warnings, the FDA seized and destroyed the material.
While living in New England, Altholtz also dabbled in real estate, which led to his first personal bankruptcy in 1993.
In 1995, he got a securities license, and by 1996, he relocated to Sarasota. By 2003, Altholtz was recruiting investors for Nutmeg Group LLC, a Chicago-area company where he was director of sales and marketing. That's where Altholtz was introduced to the high-risk investment strategy he would make his own.
Randall Goulding, the managing director of Nutmeg, was running 15 funds that financed tiny startups — public companies trading at less than a penny a share — in exchange for promissory notes or discounts on stock. When stocks rose, the investors cashed in. If the stock fell, they were given more shares. By investing in a large number of companies, the fund expected the windfalls from the winners to make up for the losers.
A tireless promoter, Altholtz told one client in early 2007 that his $50,000 investment had increased nearly 4 percent in less than a month.
"HOLY TOLEDO!" Altholtz wrote in an e-mail that is now part of a lawsuit. Your "money is secure and growing like a weed every single day of the year. Congratulations! By the way, there is still time to increase your investment … "
In 2007 Altholtz launched two hedge funds of his own — Black Diamond and Stealth. In filings with the SEC, Altholtz said the minimum investment was $50,000; his goal was to raise $60 million. Altholtz paid Goulding $30,000 a month to choose investments, negotiate deals and create reports.
Hartman, the Port Richey investor, had been chief operating officer for a tiny Pennsylvania tech company that received financing briefly through Nutmeg. Though Hartman said Nutmeg's terms were "almost guaranteed to bankrupt the company," as an investor he thought the concept had potential. So when Altholtz approached him about making a "minimum" investment of $300,000 in the Stealth fund, Hartman wrote a check despite never having seen a prospectus.
"I trusted him," said Hartman, who has degrees in mechanical engineering and industrial management. "This was a guy who used to get up at 3 a.m. and work."
Initially, Hartman said his investment looked great, rising to $369,000 within a year. He had no idea that his paper wealth was already in jeopardy.
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Altholtz's money-raising activities attracted the attention of regulators. In March 2008, just weeks before Hartman invested, Colorado officials ordered Altholtz, Wealth Strategy Partners and Black Diamond to stop selling unregistered securities in that state. Altholtz had raised nearly $1.3 million from 10 Colorado investors.
Undeterred, Altholtz raised another $300,000 from Colorado residents, sidestepping the cease and desist order by putting the money in his second fund.
After the Colorado order, Goulding said he became concerned that Altholtz was pitching the unregistered securities to unqualified individuals in violation of SEC rules.
"We were trying to get Harvey to comply with certain rules and regulations and had a plethora of correspondence and meetings," said Goulding, who ended his relationship with Altholtz in late 2008. "The irony is that we were hit with the SEC lawsuit, not Harvey."
In 2009, the SEC took control of Nutmeg's funds, then valued at $32 million, accusing Goulding and his son, David, of misappropriating assets, making misrepresentations and failing to keep required records. That investigation is ongoing.
The SEC's scrutiny had repercussions for Altholtz. Last year Nutmeg's court-appointed receiver, Leslie Weiss, sued Altholtz, Wealth Strategy Partners and the Altholtz Family Limited Partnership, demanding return of about $126,000 he received for recruiting investors after his securities license expired in 2006.
"Unregistered brokers cannot receive compensation for services involving the sale of securities as a matter of law," the complaint says.
Altholtz's lawyer has challenged Weiss' standing to bring the lawsuit and filed a motion to dismiss. Altholtz recently told an investor he intends to go on the offensive, suing the receiver for mismanagement.
"Our plan is to first go after Leslie Weiss and her law firm since they have very deep pockets and lots of liability insurance so that (sic) are a fat target," Altholtz wrote in an e-mail.
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After Altholtz broke ties with Goulding and Nutmeg, he hired George Q. Stevens to be the adviser to his funds, seeking new deals and trying to maximize returns. Stevens, who had also researched potential investments for Goulding, said Altholtz inherited some "pretty ugly deals" from Nutmeg.
"And the records were so convoluted and so disorganized, it took me six months to figure out what was going on," he said.
Stevens recommended closing the funds and returning the proceeds to investors. When that didn't happen, Stevens left in January 2010.
"I was investment adviser, but I did not have control of the funds — Harvey did," Stevens said. "I was really uncomfortable and got more and more uncomfortable over time."
Investors, who saw the glowing reports end as soon as they asked for their money back, have also become increasingly upset.
Jeannine Bicknell, 75, was a wealthy widow who admits she was "totally ignorant" about investments when she went to a luncheon at the Ritz sponsored by Altholtz. Bicknell thought she was investing $200,000 in Altholtz's fund. It was only later that she and her son discovered Altholtz had taken more than $1 million out of her bank account.
Unable to liquidate her investment with Altholtz, Bicknell lost her Sarasota home last year to foreclosure. She's also unable to support an animal shelter in North Carolina that she has funded for 15 years.
"It's very, very sad," said Bicknell, who now lives in Stuart. "Harvey's a nice gentleman, but he's a fast talker."
Altholtz's bankruptcy filing also means that investors wooed with personal "money-back" guarantees are holding a worthless piece of paper.
Dr. Jeffrey Hyman, an internist in Brooklyn, N.Y., and one of Altholtz's creditors, responded quickly when asked if he would recommend Altholtz as an investment adviser.
"Absolutely not," he said. "And you can underline that in bold."
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The Altholtzes' bankruptcy filing in December suggests the couple's high-rolling lifestyle has diminished considerably. The five-bedroom, four-bath home Altholtz told Hartman was worth $6 million is valued in the documents at just $667,000. The dining room table that seats 12? $50. And the eye-popping gold jewelry? Worth just $1,000, according to the filing.
Altholtz said Wealth Strategy Partners paid him just $12,000 last year, though he also borrowed $135,000 from the company. Gambling losses were $34,500.
In addition to the federal lawsuit against Altholtz, the filing says he, his son Adam and Wealth Strategy Partners were among defendants sued in December in Sarasota Circuit Court by Joanne Bauer. The Sarasota resident alleges that Altholtz and others took out a $1.2 million life insurance policy in her name using "misrepresentation, fraud and forgery." That case is pending.
Altholtz, who has closed his office and now works out of his home, seems unfazed by mounting criticism. Despite the poor performance of his funds, he recruited at least one new investment of about $130,000 last year.
Communicating with investors through occasional e-mails, Altholtz blamed his funds' "morbid" 38 percent drop in the fourth quarter on global economic conditions that no one could have predicted. "Don't beat yourselves up too badly," he wrote this month.
Ever the optimist, Altholtz also hinted at improvement: "Already some of our Portfolio company's (sic) stocks are trading a bit higher."
Times researcher Natalie Watson contributed to this report. Kris Hundley can be reached at firstname.lastname@example.org or (727) 892-2996.