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PONZI CHARGE DULLS SHINE

Sarasota socialite Beau Diamond is accused of swindling investors.

For the hip young crowd he ran in, Beau Diamond could not have been more aptly named.

Six feet and buff, he had even features and a dazzling smile. His taste ran to exotic vacations, expensive cars, diamond-encrusted watches.

And he had a sterling pedigree. His parents, nutrition gurus Harvey and Marilyn Diamond, rocketed to international fame in the '80s as their Fit for Life became one of the best-selling diet books ever.

It was that celebrity background, combined with his considerable charm, that helped Beau Diamond attract friends and friends of friends to his investment club. At least 200 investors had sunk$37 million into Diamond Ventures by the time they received this e-mail shortly after Christmas:

"Dear Club members: I regret to inform you that the funds have been lost."

Today, the 31-year-old Diamond sits in the Pinellas County Jail, arrested Sept. 1 on federal charges that he operated a Ponzi scheme under the guise of trading in foreign currencies.

The FBI says he took $6.6 million for his own use, including purchase of a $204,000 Lamborghini.

Several investors have also sued Diamond and his father, convinced Harvey Diamond must have known what was going on with a company that bore his famous name and shared an address with his Siesta Key mansion.

But in a town also reeling from Arthur Nadel's $350 million "mini-Madoff" scandal, some investors put part of the blame on themselves.

"Greed created this," says Craig Siegel, a Sarasota chiropractor who lost several hundred thousand dollars. "People wanted those 50 percent-a-year returns and looked at this through rose-colored glasses."

Groomed for success

When Fit for Life came out in 1985, many critics slammed the Diamonds' fruit, vegetable and grain diet plan as nutritionally lacking. But the book spent 90 weeks on the New York Times bestseller list, and the couple became the darlings of a diet-obsessed nation.

Among their fans was TV host Merv Griffin, who lost 25 pounds and devoted a show to the Diamonds' son Beau, then 8. Breast-fed until he was 3, Beau had never tasted meat or cow's milk.

In 1990, the family left California for Bradenton so Beau could take lessons at Nick Bollettieri's famed tennis academy. A year later, the family moved to Sarasota, where their arrival caused a sensation. But the Diamonds split up, and Harvey seemed to keep a low profile.

"I have never run across him in any charity events," says Rebecca Baxter, who photographs the social scene.

Beau, in comparison, became a familiar figure around town. By his mid 20s, driving a silver BMW, he could often be found at the openings of trendy shops and restaurants.

Among his acquaintances he was also known as a bright sort who had parlayed years of trading in foreign currencies into a book, 5MinuteFOREX.

Currency trading is a risky but potentially lucrative field that involves exchanging one currency - say, the dollar - for another- like the euro - on the 24-hour foreign exchange (FOREX) market. In 2006, Diamond began soliciting friends to invest, claiming he had honed a successful trading strategy.

"My style of trading took me years to develop," he told them. "To be totally honest and straightforward here, the first four years I really had no idea what I was doing."

Rather than view that as a warning, people jumped at what Diamond called a "risk free" investment.

"He just came across as a very genuine person, very believable," says Carol DeLoach, whose daughter was a friend of Diamond's. "I explained that I can't afford to lose this money because I'm going to be getting into retirement. He looked me dead in the eye and said, 'You won't lose any of this money.'"

Like other investors, DeLoach, 65, was also reassured by the fact that Diamond came from such a well-known family. She and her daughter even went to the elder Diamond's home, where he autographed copies of his books.

In May 2007, DeLoach invested $250,000 with Diamond Ventures. The same month, Beau Diamond bought a $1.3 million condo on Siesta Beach.

In July 2007, he told investors he was reducing their monthly return from 5 percent to 4 percent because his trading profits had dropped. But, he assured them, "it is totally normal in the trading world that things go in cycles."

The club continued to gain members. A couple invested $200,000 they had set aside for their special-needs daughter. A massage therapist with tongue cancer invested $50,000. And one of the early members, Siegel, the chiropractor, put in another $1.28 million even though he had begun to wonder about Diamond's spending on clothes, jewelry and the black Lamborghini.

"That should have been my first warning sign," he says. "Now they're starting to get cocky and once you start doing that, it's a house of cards."

Diamond also traveled extensively to Las Vegas, where he spent $429,000 of investors' money last year, the FBI says ... to Newport Beach, Calif., where he rented a $16,000-a-month house and allegedly Tasered a woman who resisted his sexual advances.

No charges were filed, but the woman sued and won a default judgment, the Sarasota Herald-Tribune reported.

Reversal of fortune

For a time, Diamond Ventures seemed to do well. Siegel withdrew $800,000. DeLoach and other early investors received some interest payments. But last December, there were no checks, only e-mails:

Dec. 10: Dear Club Member: I'm having some major problems with the Bank of America. ... They seem to have the most fussy and oversensative (sic) fraud protection department.

Dec. 12: I established new accounts at JP Morgan Chase. ... All checks will go out on Monday.

Dec. 26: Hello: I'm travelling internationally on a little holiday. ... December checks are in the mail.

Jan. 9: I regret to inform you that the funds have been lost.

DeLoach, Siegel and several other investors sued Beau and Harvey Diamond, alleging they ran a "classic pyramid scheme" in which money from new investors was used to pay earlier ones.

Beau Diamond declared bankruptcy in March. Then he dropped out of sight.

In jail, no bail

On Sept. 1, a Pinellas deputy was patrolling Indian Rocks Beach when the license plate recognition system in his squad car zeroed in on a Jeep Grand Cherokee. Its driver was wanted by the FBI.

Beau Diamond was charged with wire fraud and money-laundering. According to the criminal complaint, he had taken in $37.6 million, lost $15.4 million and returned $15.6 million to investors. He used the other $6.6 million for "unauthorized expenditures" including gambling

Faced with a 19-year sentence if convicted, Diamond remains in jail. A federal judge has refused to release him, calling him a flight risk and saying neither parent appears able to guarantee his $500,000 bond despite the huge publishing success.

Harvey Diamond, whose $1.1 million Sarasota home is in foreclosure, did not respond to requests for comment. In a letter to the Herald-Tribune, he said he had "total sympathy" for those who lost money because he, too, was a victim.

Many investors doubt it.

"What's amazing to me is Harvey saying he had no idea what was going on, and I absolutely do not believe that at all," says DeLoach, who fears she may lose her Bradenton home.

"He and his son were extremely close and told each other everything. When there was talk about freezing Harvey's assets, his attorney said, 'Well, how is Harvey going to live?' How are the rest of us going to live?' "

But the investors reserve their greatest ire for Beau Diamond.

"I'm lucky. I'm young and I have something to fall back on," says Siegel, 40, the chiropractor. "The thing that gets me are the people who are old and have no time to get back what they lost.

"They basically have nothing to show for their entire lives because of this obnoxious, punky kid."

Times researcher Carolyn Edds contributed to this report. Susan Taylor Martin can be contacted at susan@sptimes.com.

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