Author Topic: Madoff vs. Starr: Who's the Real Ponzi King?  (Read 2223 times)

Offline Reginald Hudlin

  • Landlord
  • Honorary Wakandan
  • *****
  • Posts: 9920
    • View Profile
Madoff vs. Starr: Who's the Real Ponzi King?
« on: May 28, 2010, 11:19:30 pm »

Madoff vs. Starr: Who's the Real Ponzi King?
by Allan Dodds Frank Info

Allan Dodds Frank is a business investigative correspondent who specializes in white collar crime. He also is President of the Overseas Press Club of America, one of the many journalism organizations that protests the arrests of journalists abroad and repression of freedom of speech.

 As alleged con men go, New York money manager Kenneth Starr is no Bernie Madoff. The new guy, as Allan Dodds Frank reports, is a real rookie.

When alleged con man Kenneth Starr tried Thursday to convince a judge not to send him to jail without bail, he would have been better off listening to his lawyer and not talking.

Instead, like an elementary school child, Starr, the 66-year-old money-manager-to-the-stars, waved his right hand at Magistrate Debra Freeman to command attention, if not respect.

Maybe Starr should have realized that in fraud cases, most judges believe 110 percent is 10 percent too much.

Despite the judge’s admonition that he consult his defense lawyer one more time before opening his mouth, Starr persisted in his belief that his words might keep him out of jail on bail.

So what if his lawyer, Joshua Klein, already had failed in a pathetic attempt to argue that Starr is not a flight risk? Klein lamely suggested his client hid from the arresting agents in a closet because he was old, scared, and confused by the noise being made by those “gentlemen” outside the apartment shouting: “Federal agents. Open the door.”

• Peter Lauria: The Pole Dancer & the Ponzi Scheme

• Jacob Bernstein: How Uma Sniffed Out a Ponzi Scheme “I would never flee,” Starr said, before claiming the prosecutor’s assertion that he might have millions stashed overseas was “110 percent untrue.”

Maybe Starr should have realized that in fraud cases, most judges believe 110 percent is 10 percent too much.

Says one prominent defense attorney about Starr’s performance: “I would have had one hand wrapped around his mouth and the other one around his neck.” After the magistrate ordered Starr held without bail, U. S. District Judge John Koetl upheld the ruling and categorized the defendant as "a serious flight risk."

Starr’s two-and-a-half-minute outburst followed a detailed account from the prosecutor about how the accused began the day by instructing his apartment doorman, his wife, and his juvenile stepson upstairs to lie and tell federal agents he was not at home.

Just like in the cartoons, an agent noticed Starr’s shoes protruding below the hangers full of suits and, as he cowered in an upstairs closet, hauled him out by the collar of his black shirt. Starr’s wife—having first lied to the feds—was whispering, “He’s upstairs.”

It was a stark contrast to the arrest of Bernard Madoff, who answered the door at his East Side Manhattan penthouse, told the agents he had “no innocent explanation” and went downtown to be booked, and as it turned out, released initially on $10 million bail. Of course, Bernie had a dozen billionaire clients who each lost more money than all the money Starr has ever had under management from all his stars combined.

Bernie, from the moment he confessed to the biggest Ponzi scheme ever, was intent on steering suspicion away from his wife, sons, brother, niece, and others.

What allowed Bernie to take in more than $20 billion from investors was his mystique—his seeming refusal to give most of his thousands of clients anything more than token service.

By contrast, Starr, with just 200 or so clients and $700 million in assets under management, supposedly did everything for his clients. His Manhattan-based firm of 80 employees got celebrities to buy into the “concierge” concept of service. The clients gave Starr check-signing approval and power of attorney—ostensibly to handle their investments, their checking, their credit-card payments, their mortgages, their agents’ fees, their children’s allowance, and their alimony payments.

While the initial criminal complaint against Starr only alleges $30 million in fraud, Assistant U.S. Attorney William Harrington told the judge that he believes that number could multiply as the investigation continues and some of the other alleged participants are charged.

The other defendant in the case—former New York City Council President Andrew Stein—sat in magistrate’s court with a smile on his tanned face, perhaps fitting for a man who, for two decades, has somehow slipped away from prosecution in several cases and jurisdictions.

Stein was not linked to any of the frauds charged against Starr, yet he mysteriously received hundreds of thousands of dollars from accounts controlled by Starr.

Indeed, in a rare joint press conference, U.S. Attorney Preet Bharara and Manhattan District Attorney Cyrus Vance Jr. disclosed that they had combined forces after discovering they were both investigating Starr. In the case of the feds, they first encountered Starr while investigating Stein.

Stein, the judge decided, was worthy of a “Solomonic decision”—a 50 percent reduction in the prosecutors’ request for $500,000 bail and two co-signers. On the other hand, Stein surrendered to authorities in his lawyer’s office.

Starr, one FBI agent not involved in the case tells The Daily Beast, made a classic rookie mistake: “They always hide in the closet.”

Offline Reginald Hudlin

  • Landlord
  • Honorary Wakandan
  • *****
  • Posts: 9920
    • View Profile
Ponzi Schemer Driven to Crime By Shopping-Obsessed Stripper Wife?
« Reply #1 on: May 30, 2010, 06:46:03 am »
from GAWKER:

Was Alleged Hollywood Ponzi Schemer Driven to Crime By Shopping-Obsessed Stripper Wife?

How much can you learn about a person from their Facebook update? A lot, if that person is , Diane Passage, wife of alleged accused Hollywood Ponzi scheme artist Kenneth Starr. She loves to shop!

This week we met ex-stripper and current pole dancing aficionado Diane Passage. We already her idea of charity is to throw a celebrity-studded benefit pole dancing competition. And we know Starr bought her a $70,000 diamond bracelet and a $32,000 wedding band.

Today The Daily Beast details some of her ostentatious spending habits and awesome Facebook updates. She spent so much money at Alexander McQueen, for example "the salesgirls became friends who showed up at pole dancing events she hosted." It's like wherever this woman goes, money gets exchanged for intimacy. Judging from her Facebook updates, Kenneth Starr spent a lot of other people's money on her:

"Just got my pink diamond Detroit D from Johnny Dang!!! Amaaaaazing!!!!"
"is thinking about diamonds. pear-shaped."
"Shopping today! Zanotti, Madison Ave, Yay!"
"White mink, White mink, White mink."

Meanwhile, The New York Daily News details a super fun birthday party featuring the band Everclear. And they quote an insider saying ""The story of Ken Starr is simple... he was one of the world's greatest salesmen whose entire life was turned upside down by his infatuation for a stripper." What a scam.

Offline Reginald Hudlin

  • Landlord
  • Honorary Wakandan
  • *****
  • Posts: 9920
    • View Profile
Re: Madoff vs. Starr: Who's the Real Ponzi King?
« Reply #2 on: June 11, 2010, 12:02:50 am »
Untangling a Ponzi Scheme With a Hollywood Twist
Published: June 6, 2010

Kenneth I. Starr tried his best to seem interested in the display, but what he really wanted was introductions. Oh look, there’s Taylor Dayne, the pop singer. Over there is Ahmad Rashad, the sportscaster and former professional football player. And come meet Michael Imperioli of “The Sopranos.”

Mr. Starr, a Manhattan business manager and investment adviser, was shopping for shining stars, not stones.

He already counted celebrities like Al Pacino, Martin Scorsese and Ron Howard as clients, and whether it was opening night for one of Mr. Scorsese’s movies or a charity event like this one hosted by Denise Rich, the socialite and songwriter, these affairs were fertile ground for Mr. Starr.

This 2006 party was no exception. Mr. Starr made the acquaintance of Jacob Arabov, a Harry Winston for the music world. The two became fast friends, with Mr. Starr eventually persuading Mr. Arabov to invest $14 million with his firm.

That money is now gone — and Mr. Arabov is among the clients Mr. Starr is accused of defrauding in a $30 million Ponzi scheme that has become the talk of celebrities from Hollywood to the Hamptons.

As with many scams, including the much bigger one perpetrated by Bernard L. Madoff, Mr. Starr used a mix of friendship and exclusivity to lure his victims, prosecutors say. Except in this case, the targets were a who’s who of actors, directors, writers and other artists with cachet.

Whether it was entree to hot Manhattan clubs like Butter and Bungalow 8, introductions to the likes of Mr. Scorsese, or access to exclusive deals on Wall Street, Mr. Starr always seemed to know what his famous clients wanted, or at least what they wanted to hear.

He would tell Hollywood figures of his connections on Wall Street, while regaling Wall Streeters with stories of Hollywood. And whether the target was an aging heiress or an A-list actor, the routine often worked, according to interviews with current and former clients.

“He exuded confidence and ease,” said Robert Benton, who wrote the screenplay for “Kramer vs. Kramer,” “Superman” and other films and was a client of Mr. Starr’s.

“There was something so engaging about him.”

Mr. Starr, who is not related to the special prosecutor of the same name who investigated President Bill Clinton, seemed eager to leave behind his more mundane existence paying bills, mailing checks and preparing taxes for celebrity clients, aiming to join the exclusive world he served.

He was a fixture at movie premieres — just weeks ago, he attended the opening night party at the Four Seasons for “You Don’t Know Jack,” the HBO film starring Mr. Pacino. Jonathan Demme, the film director and another client, gave him a cameo in the movie “Philadelphia.” And Mr. Starr was a long-standing member of the board of trustees of New York University Law School.

Mr. Starr was also adept at parlaying friendships into business opportunities.

Several clients recalled that he flaunted his relationship with Pete Peterson, a founder of the Blackstone Group, an investment and advisory firm, and a prominent philanthropist, lunching with him at the Four Seasons and frequently dropping his name. Mr. Starr, in turn, invested $90 million in Blackstone funds on behalf of clients like Neil Simon and Wesley Snipes, according to a 2008 lawsuit. Mr. Peterson declined to comment.

Mr. Starr also bragged of being close to Alan C. Greenberg, the former chairman of Bear Stearns, but the two were barely acquainted, according to Mr. Greenberg.

“I had some clients that used him, but I’ve only spoken to him a few times,” Mr. Greenberg said in an interview.

Nevertheless, these wisps of Wall Street credibility were enough to convince Hollywood that Mr. Starr had powerful links to the financial world. “My impression was that he had very substantial contacts on Wall Street, with private equity firms and hedge funds,” said Bertram Fields, an entertainment lawyer who has represented Michael Jackson and the Beatles, and is an acquaintance of Mr. Starr’s.

What connections Mr. Starr does possess have been of little help since his arrest on May 27. He remains behind bars at the Metropolitan Correctional Center in downtown Manhattan, after prosecutors argued that he might flee if released on bail. A public defender appointed to represent him declined to comment.

Meanwhile, many questions about Mr. Starr’s suspected scheme are still unanswered, most notably, just how many clients might he have defrauded?

Without identifying them by name, the criminal complaint cites seven people whose money, prosecutors say, was misappropriated by Mr. Starr. Prosecutors are still trying to determine how extensive the suspected fraud was and say they expect the number of victims to multiply.

Now, the people who placed money with Mr. Starr over the years are frantically trying to determine if their accounts are in order.

“It’s all anybody is talking about in the Hamptons or California,” said Lynn Grossman, who with her husband, the actor and director Robert Balaban, was a client of Mr. Starr’s in the 1990s. “This is a handshake business, and he was the guy you went to when you didn’t want your money stolen. He was considered shrewd, not slimy.”

That began to change after a 2002 lawsuit by Sylvester Stallone accused Mr. Starr of mismanaging a failed investment in Planet Hollywood. Mr. Starr’s private life also became more tumultuous — he left his third wife in 2007 for Diane Passage, a pole dancer and former stripper at Scores, the Manhattan club.

Ms. Passage, who prosecutors say benefited from Mr. Starr’s purported fraud, certainly drew attention. But the marriage alarmed clients. “When your business manager marries a stripper, that’s a tell,” Ms. Grossman said. And although Mr. Starr continued to make appearances at the Grill Room of the Four Seasons and at Oscar parties in Los Angeles, more and more clients started to defect over the last five years.

Lauren Bacall, the actress and widow of Humphrey Bogart, fired Mr. Starr after decades with him, as did Diane Sawyer, the broadcaster, and her husband, the film director Mike Nichols. The pressure increased in April 2008, when Joan A. Stanton, who was the voice of Lois Lane in the “Adventures of Superman” on radio in the 1940s as well as an heiress to a $70 million estate, sued Mr. Starr, accusing him of fraud.

Foreshadowing the accusations he now faces, Ms. Stanton said that Mr. Starr diverted tens of millions of dollars from her fortune into risky assets he controlled, while providing her with bogus statements that masked the withdrawals. In the close-knit world of Hollywood, where clients are won and lost by word of mouth, talk of the suit quickly spread.

In January 2010, the family of Ms. Stanton, who died last year, settled with Mr. Starr, but the end of the suit coincided with an exodus of professionals from Mr. Starr’s company, including longtime associates like Arnold Herrmann and Sanford Miller. They joined a rival firm, Citrin Cooperman & Company, and took numerous clients with them, including Mr. Demme and Mr. Scorsese.

Mr. Starr’s lifestyle did not seem to change — if anything it became more lavish in the weeks leading up to his indictment. In April, he used money from clients like Rachel Mellon, an heiress to the Mellon banking fortune, and Uma Thurman, the actress, to buy a $7.5 million Upper East Side condominium with a 32-foot lap pool, according to the complaint and interviews with people familiar with the case.

Ten days later, prosecutors say, when Ms. Thurman demanded $1 million back from Mr. Starr, he returned it by siphoning it from the account of James Wiatt, a longtime friend and former head of the William Morris talent agency.

It is a testament to Mr. Starr’s charm that even some clients who stuck with him until the end and might yet turn out to be victims acknowledge a trace of sympathy. “I know what he is accused of doing,” Mr. Benton said, “but all I kept thinking is how sad it is that he’s sitting in jail.”

Alain Delaquérière contributed reporting.