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Half III of III on this sequence of articles on Ponzi schemes will look at an actual world, ongoing rip-off, the con man behind it and some of the a whole bunch of buyers victimized by his felony enterprise, Millennium III Company.
Historical past: At an early age, Gregg Scott Luce was falsely led to consider that his Maine primarily based blood line was instantly related to the storied Time-Life Henry Luce legacy. It is unclear whether or not this fallacy was instilled inside him by private dementia or a collective familial dementia. Luce fled his extremely dysfunctional household at age nineteen and started trafficking in marijuana. Inside a 5 yr interval, petty trafficking grew to main distribution: cargo planeloads of product, a lot of it introduced in instantly from Jamaica.
Ten years into this enterprise, Luce realized {that a} a lot better revenue margin was to be realized in trafficking cocaine. It was the early 1980’s and cocaine was a preferred and accepted leisure drug amongst the institution. There wasn’t the stigma hooked up to the narcotic that exists at the moment. Luce was pushed to the fast repair by impatience, an entrepreneurial spirit, ruthless and boundless ambition, and an insatiable longing for the popularity, money and cache that had eluded his household for the higher a part of a era because it strived, futilely, to establish itself with the gilded Time-Life Luce lineage.
Sociopathology, single minded focus and indifference to the physique rely in his wake, each actually and figuratively talking, allowed Luce to ascertain a port of entry distribution hub in Seattle, Washington, and quickly dominate the unclaimed US Northwest territory. Coming from a household of business fishermen, Luce was effectively versed in nautical maps. The Pacific Northwest’s unsettled, distant shoreline allowed inconspicuous ingress and egress of transport planes from Colombia. Luce leased a pier and houseboats off Lake Washington, internet hosting cocaine fueled events frequented by outstanding space artists, enterprise leaders, attorneys, politicos and bankers.
Inside a 5 yr time frame, the distribution community prolonged north to Canada and as far Southwest as Aspen, Colorado, the place his cartel’s administrative group oversaw operations. The rising enterprise invested in a Nascar race group. Product was transported to merch drop factors in trailers used to ferry automobiles and pit gear from metropolis to metropolis.
As with most narco-centric companies, Luce’s enterprise operated on borrowed time. When the DEA and Feds broke up the drug ring, all senior personnel, save for one particular person, escaped. The captured operative refused to show state’s proof, allowing his associates to quietly search out different enterprise alternatives. Luce took a two yr hiatus mendacity low and pored over current financial developments. It was the early nineties and the Nasdaq bubble had begun to gestate. Silicon Valley, Boston, Austin and Seattle have been the brand new Wild West. Greed and inexperienced have been within the air. Within the quick paced world of recent media startups, the “cocktail serviette to boardroom” paradigm dominated, as did medication, violence, treachery, and authorized manipulation: in any other case often known as Twenty-First Century company greatest practices. Simple offers have been the forex of success; futures contracts and penny shares have been the brand new blow. The cautious vetting of enterprise plans demurred to the haste of being first to market with a given product . Enterprise capitalists indiscriminately showered IT neophytes and veterans alike with extra seed cash than most might realistically hope to match in earnings. Increase-bust excessive tech gold fever was in full drive. Luce could not have scripted a greater entree into legit enterprise.
Ponzi Scheme: Thus marked Gregg Luce’s emergence from the organized crime of drug trafficking to the organized crime of Wall Road. The founding of Millennium III Corp. (MIII) commemorated Luce’s introduction to Fortune 500 society on the VC cotillion. So as to fly underneath the radar of SEC rules and regulators, the newly minted CEO of MIII, a broadband media streaming firm, restricted his preliminary investor pool to thirty-five non-accredited shareholders. He later violated the SEC Rule 505 exemption provision with inclusion of a further ten buyers. Quite than concern shares to buyers, Luce issued “convertible observe mortgage agreements”: an instrument convertible to both buybacks or shares in MIII at maturation. Luce took his tortured enterprise mannequin a step additional, arguing the company maintained a non-profitable belief that secured investor monies. On this and subsequent cons, Luce argued, with poetic license, that the preliminary company type would in some way morph right into a “financial institution”, thereby guaranteeing the liquidity of MIII’s capital funds and the safety of investor monies.
Consistent with Millennium III’s smoke and mirrors enterprise construction, its CEO was functionally illiterate in New Expertise: the corporate’s core product providing. Luce was capable of efficiently go himself off as an IT avatar by surrounding himself with skilled, real know-how specialists, offering the Ponzi scheme with a patina of legitimacy. He maintained an entourage of tech savvy advance folks, lest his shareholders and clientele understand that the emperor had no garments.
Seven years after the founding of MIII, I used to be retained to overview mental property points. Roughly twelve months into my work, unique observe holders started contacting me, expressing concern that that they had acquired no annual statements from MIII — for that matter, no communication in any respect from the board of administrators or company officers for a number of years. Extra troubling, to a person, each investor had demanded buyback upon maturation of their convertible observe mortgage agreements. Luce refused to honor the promissory notes. The paper path confirmed Luce used cash from the non-accredited investor pool to line his personal pockets, and cash from new buyers to pay contracted workers that held inventory choices; thereby, perpetuating the ruse. A textbook definition of the traditional Ponzi scheme with a slight twist: utilizing cash from new buyers to pay dividends to unique buyers.
I approached the CEO with my issues. He was non-responsive, as was the board. The newly enacted Sarbanes-Oxley Act offered new treatments for attorneys caught on this dilemma, permitting them the flexibility to whistleblow with out worry of reprisal for breach of attorney-client privilege. The brand new regulation permitted me to alert the shareholders and regulation enforcement to Luce’s misuse of company funds. Legal professional-client privilege was a lesser concern, as Luce had lengthy since waived any privilege loved when he actively solicited me, demanded really, that I launder company receipts for his conversion to non-public use. As I dug deeper into the CEO’s historical past, unearthing a deep checklist of accounting corporations, regulation corporations and contractors owed cash, I got here to study that this was considered one of Luce’s tips: secreting cash in his attorneys’ consumer belief accounts, realizing that the lawyer could be obliged to launch the funds to Luce as consumer, no matter whether or not the cash was soiled. Along with confronting shareholders with Luce’s malfeasance, I reported his actions to lawyer normal places of work in two states. Formal investigations into Millennium III and its CEO have been underway.
With warmth turned up by regulation enforcement and shareholders, Luce did a cash seize, embezzling from his personal company, and fled the state to arrange store in Arizona. Luce did not see operating off with buyers’ cash as theft. His mindset was such that he was constitutionally incapable of distinguishing between company property and private property. As he noticed it, MIII’s property have been his property; therefore, there was no theft on this distorted world view. This could be a recurring theme in his subsequent Ponzi schemes. His flight left dozens of buyers in Washington State, Nevada and Idaho holding the bag — out all their cash. To today they haven’t recouped a penny, regardless of two eighteen month lengthy concurrent investigations by AG places of work in each Washington and Arizona.
A very good con man seldom stays static in product or presentation. That is significantly true after a Ponzi scheme has been uncovered. After Luce was chased out of Washington State and began anew in Arizona, he modified his complete enterprise mannequin to cater to the New Age Sedona crowd. Con males gravitate in the direction of services and products the place efficiency can’t be measured empirically. New Age meditations, administrations and potions proved a market ripe for exploitation, because it was largely religion primarily based and never ruled by the FDA or AMA. Underneath the banner of a MIII Corp. international company registered in Arizona, Luce started to solicit buyers for ventures starting from the mundane — self-improvement programs — to the fantastical — house tourism. He held out his companion’s Flagstaff actual property as his personal, utilizing it to collateralize investments. His shotgun method to providing a multiplicity of companies failed. After 5 years with out seeing a return and struggling a loss in extra of $500,000 USD, Luce’s companion gave him the boot, forcibly evicting him from the property. To today, Luce holds out the property as his personal, regardless of the actual fact his identify is just not on the title and a court docket order was awarded for illegal detainer.
Luce then ventured additional south to Santa Fe, New Mexico, this time altering his bodily look to a startling diploma: Luce retired the Brooks Brothers fits and button-down conservatism for ‘growing old rock star’ couture and a metaphysical slant in pitching his “marks”, utterly altering his look and product. The person appeared like Rod Stewart. On a nasty day. The place he was reserved and presentable whereas working and residing in Seattle, Luce now got here throughout as a raving lunatic with out somebody educated, articulate and balanced fronting him on the bargaining desk. These handlers have been defecting in lockstep with their CEO’s deteriorating psyche; Luce’s entourage of competent advance males was quickly thinning; the patina of legitimacy showing extra trompe l’oeil. To see simply how “loopy” loopy is, peruse the nonsensical manifesto that seems on his MySpace web page: myspace.com/duraingo. Video clips and images of Luce executing his numerous cons are linked to his homepage. Courtesy of his formidable ego, this can be a uncommon alternative to see a con man in motion.
Close to Los Alamos, the MIII CEO tapped into a bunch of retired physicists and businessmen engaged on new encryption know-how. Luce managed to persuade them he was an Data Expertise visionary with the flexibility to pair product builders with financiers. Regardless of his new eccentric look, he almost pulled this off, mesmerizing a younger, naive investor from Los Angeles that ponied up $75,000 USD with the pledge of a a lot better, second angel investor test. Earlier than proffering this second test, the investor had the belated good sense to run the attendant paperwork by his lawyer. The lawyer had the joyless activity of informing his consumer that, not solely was his cash gone, there was no foundation for felony or civil go well with as a result of nebulous nature of the “companies contract” he entered into with MIII. The contract didn’t bind the con man to any identifiable, legally binding particular efficiency. As a authorized doc the contract was meaningless. It was convoluted sufficient to persuade the investor to half together with his cash: that is the place its worth ended. Briefly, from a authorized standpoint, the $75,000 was not more than a “present” from one particular person to a different.
Current day: Phrase of Luce’s reemergence in New Mexico reached my regulation places of work this previous month. I used to be put in touch with attorneys representing each buyers and innovators to the deal. Neither lawyer was shocked to search out Luce was a con man, as that they had arrived at that conclusion with out my assist. They have been, nevertheless, shocked that he had such a prolific and recidivist historical past as an skilled confidence man. I offered them with documentation outlining Luce’s Ponzi schemes in Washington and Arizona. A mere week later, Luce surfaced in Santa Monica, California, the place he had settled in as interminable home visitor on the demi-mansion of a profitable, well-intentioned New Age marketer. Briefly order he had tapped into the marketer’s skilled community the place he succeeded in each co-opting and alienating enterprise contacts.
Like a parasite in search of out a number physique, Luce wouldn’t solely insinuate himself into the enterprise lives of his marks however their private lives, as effectively. The important thing to his con — and that of many confidence males — was to applicable the skilled and social networks of his victims with the intention to feed his rip-off. If one investor dries up, one other within the community is primed and might be approached.
As a consequence of his relationship with Luce, the marketer was dropping credibility, standing and relationships throughout the tight knit naturopathic group. Additional fomenting discord was Luce’s volcanic mood. He had a historical past of violent outbursts, lashing out at those who would query him, significantly minorities and ladies. Not precisely in keeping with the New Age humanist perspective. Luce’s true character was revealed when his mood flared. Regardless of the grave legal responsibility he offered his host, the businessman was so taken in by the rip-off artist’s charisma that he was in denial.
The marketer’s good pal, one other outstanding businessman in Los Angeles’s homeopathic group, was not so enamored by Luce or deluded by his charisma. In reality, when launched to the con man at a Hollywood Hills celebration, he discovered his pitch too good to be true and Googled Luce’s identify on his Blackberry: up popped my identify with a warning to potential Millennium III buyers. He known as my workplace the next day, sharing his concern for his pal’s effectively being. It took repeated sit downs and affected person conversations with the marketer, armed with documentation I offered him, to objectively structure Luce’s historical past and machinations. Even with onerous, tangible information in entrance of him, the marketer remained incorrigible. It took a second spherical of paperwork and direct correspondence from my desk to the marketer’s with the intention to shake him free from the con man’s Svengali-like choke maintain on his reasoning capability. The marketer kicked Luce to the curb.
Previously 5 years, Luce has efficiently mounted three separate monetary scams, even being so brazen as to threaten regulation fits in opposition to buyers who severed ties with him after realizing that they had been swindled. In step with all profitable con males, Luce has a eager eye for figuring out a necessity in his mark, then convincing the mark that he’s uniquely positioned to fulfill that want –despite missing the intent, skill or need to ship on his guarantees.
Luce is starting to unravel and develop ineffectual. The con man has turn into entangled in his personal internet of deceit. Unable to maintain his lies straight, he contradicts and exposes himself at each flip. His mood, misogyny and racism have surfaced repeatedly because the intensifying scrutiny of regulation enforcement, bilked buyers, attorneys and accountants attenuates stress by directing klieg lights on his numerous Ponzi schemes.
Con males are sometimes tough to apprehend, as a result of they aren’t pushed by financial acquire, alone. They’re sustained largely by the adrenalin rush skilled transferring in for the kill, gutting then hanging their prey to bleed out. Luce is especially skewed on this respect, typically forfeiting the large rating with the intention to slink away and mount one other rip-off in one other state. Stealing simply sufficient money to proceed the ruse, however not a lot bounty that felony or civil fits are filed as a matter after all.
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Source by Jason Kays