If we must choose one Florida icon among the recent scam artists — oh, my, how intense is that competition? — my vote goes to Orlando Ponzi schemer and former boy band creator Lou Pearlman. To sustain a bloated celebrity lifestyle, he stiffed thousands, many of them Tampa Bay area investors. He promised strong returns and low risk by investing in, among other things, his Trans Continental Airlines.
When the FBI finally started closing in, Pearlman fled the country only to be recognized by a fellow tourist as he ate breakfast at a resort in Bali. In 2007, he was hauled back to Orlando, tried and convicted. He's now serving 25 years in prison.
But Pearlman could hardly defraud so many investors without his network of minions — the salesmen who pitched Pearlman's bogus investment products. And as the years passed, it seemed that many of them were slipping through the fingers of an overwhelmed law enforcement system, moving on to the next financial deception.
So let's pause in the here-today-gone-tomorrow world of daily newspaper coverage and online postings to savor the fresh indictment of serial scamster Steven B. Rodd of Tampa.
Regulators say he has flimflammed plenty of folks, especially the elderly, in various schemes promising better investment returns. A former state-licensed insurance agent, Rodd peddled Pearlman products through Churchill Financial Services in Clearwater and another firm called Oxford Financial. He now faces fraud charges that could put him behind bars for 25 years and owing $936,500, the amount of commissions he earned selling nearly $30 million in fraudulent investments.
Why devote a Sunday column to these shysters?
Because interest rates are now rock bottom. Because people are desperate for better returns on their investments. Because this is precisely the time to urge investor caution. If an investment
pitch sounds too good to be true, it usually is. At the least, get a second informed opinion. And stick with investments you really understand.
For Rodd, this is not his first go-round with breaking the rules. Before Pearlman, he was an agent for at least six fraudulent schemes. That includes two pay phone frauds: LinkTel Communications and ETS Payphones; two insurance frauds: Mutual Benefits Corp. and American Benefits Services; and two promissory note schemes: FLIC and GFI. One result: his being barred from the securities industry.
I can understand his getting a second chance. But this track record is absurd.
In many ways Rodd, now 45, was a Tampa Bay front man — one of the main sales guys pitching Trans Continental Airlines — and a major fundraiser for Ponzi king Pearlman. The Orlando creator of music groups *NSync (with Justin Timberlake) and the Backstreet Boys built a house-of-cards empire through blimp crashes and insurance claims, sleazy stock transactions, forged documents and crafty contracts with his boy bands.
Pearlman propped it all up, Ponzi style. New investor money paid off old investors. False investment statements made everything look rosy.
For a while.
Pearlman pleaded guilty in 2008 to stealing $300 million, though the sum is probably closer to $500 million, from well over 1,000 investors.
Many of those defrauded here got scammed by Rodd and a fellow salesman named Walter Kress, who worked under the banner of Churchill Financial, according to a now-unsealed federal indictment. More than 250 investors lived in Pasco, Pinellas and Hillsborough counties in 2005 and 2006.
At a month-to-month rented office on U.S. 19, Rodd and Kress lured in rate-hungry investors by advertising high-yielding CDs on radio and in newspapers, including this one. Customers who came in looking for a CD typically got a sales pitch for an annuity followed by one for the "Employee Investment Savings Account" offered by Pearlman's Trans Continental Airlines.
With promised yields topping 7 percent in 2006, Pearlman's Trans Continental account stood out over the low rates banks were offering. Worse, the paperwork falsely claimed the investments was FDIC insured. That especially appealed to conservative retirees. Many handed over their life savings.
As for Kress, Rodd's sales partner, he pleaded guilty to fraud charges last August and is awaiting sentencing.
Another Pearlman salesman, Samuel Troncalli, pleaded guilty in Orlando last July to one count of mail fraud and was also ordered to pay more than $2 million in restitution. He began serving a one-year prison sentence in October. He sold Pearlman investments to 35 people.
In addition, in January, Robert Fischetti was sentenced in federal court in Orlando to three years in federal prison for conspiracy and failure to file an income tax return. He was a key player, managing an investor database for Trans Continental Airlines' "Employee Investment Savings Account" program. Fischetti's job was to send investors statements falsely claiming their money was earning interest, according to his plea agreement.
About time some of these sorry sales minions started paying their Pearlman dues.
Robert Trigaux can be reached at firstname.lastname@example.org.