Reed Slatkin

Reed Slatkin
Born
Reed Eliot Slatkin

(1949-01-22)January 22, 1949
Detroit, Michigan, US
DiedJune 23, 2015(2015-06-23) (aged 66)
Los Angeles, California, US
OccupationFormer investment manager
MotivePonzi scheme
ConvictionsGuilty plea, 15 counts: mail fraud, wire fraud, money laundering, obstruction of justice
Criminal penalty14 years in U.S. federal prison; was released after 10 years

Reed Eliot Slatkin (January 22, 1949 – June 23, 2015) perpetrated one of the largest Ponzi schemes in the history of the United States. Presented to others as an "investment club", his unregistered investment operation eventually involved $600 million and included 800 victims. Slatkin pleaded guilty and spent 10 years in prison. The majority of investors were Scientologists, and the Church of Scientology agreed to pay back $3.5 million to the bankruptcy estate.

Ponzi scheme

Over a 15 year period, Slatkin operated an unlicensed "investment club". Slatkin was not a registered broker‑dealer with the United States Securities and Exchange Commission (SEC), and his investment club was not a member of the Securities Investor Protection Corporation (SIPC).[1] His earlier financial success investing in the startup Earthlink gave him credibility and enabled him to convince others to invest with him, while his connections within Scientology[a] gave him access to wealthy investors.[2][4][5][6]

From 1986 to 2001, Slatkin raised approximately $593 million from about 800 investors, the majority of whom were Scientologists. Using the funds from later investors, he paid one group of early investors $279M on their original $128M investment, citing investment success without actually making most of the investments he claimed he made. He also paid out millions to associates as "consultants". During this time, he made unwise investments, commingled funds, paid personal expenses, and presented fictitious returns to his investors showing rates of return from 24% to as high as 100%.[2]

The SEC started investigating Slatkin's operation in 1999,[7] but it wasn't until 2001 when the whole scheme unraveled. In early 2001, an investor requested the return of his money, and in April filed suit and writs of attachment to freeze assets. The next month, Slatkin filed for chapter 11 bankruptcy. Immediately afterward, the SEC filed an enforcement action and obtained a temporary restraining order freezing his remaining assets. On the same day, the Federal Bureau of Investigation executed search warrants on his homes, offices, and some locations of his associates.[8][9][2]

The SEC brought the civil case in SEC v. Slatkin, Civil Action No. 01-04823 (C.D. Cal.). The Central District of California brought the criminal case in U.S. v. Reed E. Slatkin, CR 02-313 (C.D. Cal.).[10]

Slatkin pleaded guilty to mail fraud, wire fraud, money laundering, and obstruction of justice.[11] On September 2, 2003, he was sentenced to 14 years in federal prison.[12][13][14] Slatkin served 10 years of his sentence, and in 2013 he was released from a halfway house in Long Beach, California.[15] In 2015 it was reported that Slatkin had died from a heart attack.[16]

Bankruptcy clawback

The bankruptcy estate sought to recover funds paid to early investors who had profited from the scheme, in order to redistribute assets to net-losing victims. The trustee evaluated a list of 75 people who had significantly profited from the scheme,[17] deciding to seek recovery of over $12 million from a dozen individuals who came out ahead on the scam. It settled with several who profited from the scheme, including Scientologists Greta Van Susteren and her husband John Coale who agreed to pay back $700,000 of their 'profits'.[3][18]

In a settlement with the bankruptcy estate, the Church of Scientology agreed to pay back $3.5 million.[19] Many of the investors were Scientologists, who funneled millions of dollars to the Church and its related entities including Narconon, Celebrity Centre, and Church of Scientology Western United States.[8]

Celebrity Scientologists who were members of Slatkin's "investment club" include actors Joe Pantoliano, Anne Archer, Giovanni Ribisi, producers Art Linson and Armyan Bernstein, film composer Mark Isham, and Earthlink founder Sky Dayton.[8]

Aftermath

In addition to Slatkin's conviction, his bookkeeper pleaded guilty to "obstructing an SEC investigation by creating fake documents" and "failing to alert authorities to Slatkin's crimes".[20]

Slatkin's son, who is a musician and promoter, changed his name legally by dropping the last name "Slatkin".[21]

In February 2008, the television show American Greed featured the Slatkin case, titled "Stealing $$$ from Scientologists".[7]

Notes

  1. ^ Slatkin had been an ordained Scientology minister since 1975.[2] In 2003, a Church spokesperson said Slatkin "used his position in the church to suck in Scientologists who were victimized along with other people."[3]

References

  1. ^ Liz Pulliam Weston. "The Basics: 7 reasons to fire your financial adviser". MSN Money. Microsoft. Archived from the original on May 1, 2006. Retrieved August 5, 2006.
  2. ^ a b c d Neilson, R. Todd (December 17, 2001). "First Interim Report of the Trustee and the Creditors Committee Under 11 U.S.C. §§ 1103, 1106(a)(3)-(4)". In re Reed E. Slatkin, Debtor (Bk. No. ND 01-11549-RR). Retrieved January 17, 2011. In 1975, Slatkin was ordained a minister in the Church of Scientology (the "Church" or "Scientology"). From 1974 through approximately 1984, Slatkin and his wife did volunteer work for the Church on a full time basis. ... It appears that most of Slatkin's early, as well as present, business associations relate to his affiliation with Scientology, and a large number of the present investors came to Slatkin for advice because of their mutual involvement with Scientology.
  3. ^ a b Reckard, E. Scott (March 26, 2003). "Victims of Scam Target Church". Los Angeles times.
  4. ^ Fastman, Brandon (July 11, 2013). "Ponzi Schemer Set Free". Santa Barbara Independent.
  5. ^ Staff (March 27, 2002). "Earthlink co-founder charged with fraud, money laundering". CNN. Time Warner. Archived from the original on August 20, 2008. Retrieved June 12, 2008.
  6. ^ Tkacik, Maureen (March 27, 2002). "EarthLink Co-Founder Slatkin Admits to Fraud in Ponzi Scheme". Wall Street Journal. Retrieved June 11, 2008.
  7. ^ a b
  8. ^ a b c Stiles, Greg (January 27, 2002). "Fixer-uppers and fishy deals". Mail Tribune. Archived from the original on November 21, 2015. Retrieved October 25, 2015.
  9. ^ "Reed E. Slatkin : Litigation Release No. 16998". United States Securities and Exchange Commission. May 11, 2001.
  10. ^ "USAO/CDCA Press Release". www.justice.gov. Archived from the original on December 27, 2005. Retrieved January 15, 2022.
  11. ^ "United States Trustee Program Annual Report of Significant Accomplishments: Fiscal Year 2002" (PDF). United States Department of Justice. pp. 33–34. Archived from the original (PDF) on October 4, 2006. Retrieved March 9, 2009. The Woodland Hills office obtained appointment of a Chapter 11 trustee in the bankruptcy case of Reed Slatkin, co-founder of Internet service provider Earthlink Inc., based on allegations that he operated a Ponzi scheme through which he misappropriated over $230 million, defrauded more than 500 investors, concealed $90 million in accounts, and commingled investor funds with personal funds. Criminal charges were later filed against Slatkin, and he pleaded guilty to 15 counts of mail fraud, wire fraud, money laundering, and conspiracy to obstruct justice in connection with an investigation by the Securities and Exchange Commission.
  12. ^ "Reed E. Slatkin : Litigation Release No. 18323". United States Securities and Exchange Commission. September 4, 2003.
  13. ^ Reckard, E. Scott (September 3, 2003). "Reed Slatkin Given 14-Year Prison Term". Los Angeles Times.
  14. ^ Mrozek, Thom. "Santa Barbara Man Sentenced to 14 Years for Running $600 Million Ponzi Scheme that Preyed on Friends for Over 15 Years". Archived from the original on February 11, 2007. Retrieved December 26, 2006.
  15. ^ Brantingham, Barney (July 8, 2013). "Ponzi King Reed Slatkin Freed". Santa Barbara Independent.
  16. ^ Ortega, Tony (June 23, 2015). "Reed Slatkin dies of heart attack — Scientologist served time as major Ponzi schemer". The Underground Bunker. Retrieved June 25, 2015.
  17. ^ Weston, Liz Pulliam (December 21, 2001). "Slatkin Investors May Have to Repay Gains". Los Angeles Times. Archived from the original on April 5, 2024.
  18. ^ "Scientology groups to return tainted funds". Tampa Bay Times. November 9, 2006.
  19. ^ Reckard, E. Scott (November 8, 2006). "Scientology groups to pay back $3.5 million". Los Angeles Times. p. C1. Archived from the original on September 27, 2007.
  20. ^ Reckard, E. Scott (December 5, 2003). "Slatkin Associate Agrees to Plead Guilty". Los Angeles Times.
  21. ^ Mackie, Drew (September 28, 2006). "The Spawn of Slatkin". Santa Barbara Independent.


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