Reed Slatkin gets 14 years in prison for huge investment scam
LOS ANGELES – Investment manager Reed Slatkin was sentenced Tuesday to 14 years in federal prison for running a nearly $600 million Ponzi scheme that bilked hundreds of investors.
Slatkin, who was a co-founder of EarthLink, also was ordered to pay victims $240 million in restitution, the amount for which he admitted personal responsibility.
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“The future for myself is only one of isolation and devastation,” Slatkin said in court.
Federal prosecutors believe the scam operated for 15 years, soliciting money from 800 investors. Slatkin, 54, pleaded guilty last year to five counts of mail fraud, three counts of wire fraud, six counts of money laundering and one count of conspiracy to obstruct justice.
The investment scam did not involve EarthLink.
“The havoc that the defendant wreaked was enormous,” said U.S. District Judge Margaret N. Morrow, who added that the harm to the victims “was immense.”
Several victims told the judge how Slatkin betrayed them after trusting him with their money.
Slatkin admitted that he portrayed himself as a successful financial adviser who provided investors with statements that showed hefty returns. But prosecutors said Slatkin did not buy securities on behalf of his clients.
Slatkin paid some investors returns that were largely made up of funds raised from other investors, prosecutors said.
His clientele included actor Joe Pantoliano, model Cheryl Tiegs and legal commentator Greta Van Susteren, but many of his accounts included people of modest means. His more notable clients were among the few who were repaid more than they invested.
Slatkin’s attorneys claimed he was influenced by the Church of Scientology, from which he has been ousted. His attorneys said investors who did receive returns donated between $25 million and $50 million to the church, an arrangement Slatkin was afraid to end.
David Schindler, an attorney for the Church of Scientology, was present for the sentencing. He said later the comments were outrageous.
The judge noted that during most of the time Slatkin was allegedly in fear, he lived a lavish lifestyle.
Slatkin worked with others to obstruct an investigation by the Securities and Exchange Commission in 1999 by giving the agency false testimony and documents about his investment program, which in fact, was a large Ponzi scheme.
Three Slatkin associates were charged in relation to the investigation. Daniel Jacobs, 61, pleaded guilty to conspiring to obstruct the SEC investigation and will be sentenced Nov. 10. Richard McMullin, 39, pleaded guilty to three counts and is scheduled to be sentenced Nov. 24. Didier Waroquiers, 57, a fugitive, was indicted on a count of conspiracy to obstruct justice.