You Can't Cheat an Honest Man - James Walsh [27]
Investors believed Martin’s pitch for several reasons. First, he was known in the New Orleans area as a legitimate travel agent who specialized in organizing packaged tours. Second, Louisiana was full of rich gamblers who preferred to travel incognito—like former Governor Edwin Edwards, who was famous for staying in Las Vegas under the name “T. Wong.” Third, Martin’s numbers weren’t outrageous for the travel industry. Fourth, in many cases, friends had invested money with Martin and could vouch for the details of his pitch, the secretive nature of his deals and—most importantly—the reliability of his interest checks.
The scam attracted doctors, lawyers, accountants, bankers, corporate executives and, in one case, a state judge. “No one seems to have made any real thorough investigation of the deal,” said David Loeb, an attorney for several investors. “No one asked the hotel people if they had heard of Lynn Paul Martin, if they had set up this travel deal, if they were reimbursing him for flights between the two cities. It’s just incredible.”
In late 1984, Martin was investigated by the FBI because of suspicious activity between accounts he kept at St. James Bank & Trust Co. and the Bank of LaPlace. The investigation could have broken the LPM Enterprises Ponzi scheme at an early stage. But the FBI agents and the U.S. Attorney’s Office agreed that the check-kiting case—while triable—wasn’t very strong. They decided not to prosecute.
One prosecutor summed up the decision: “Juries are in the habit of finding people not guilty when there’s not a victim.”
Besides, Martin never acted like a criminal mastermind. He came from a family of law-abiding tobacco farmers in rural St. James Parish. After graduating from Southeastern Louisiana University in 1968, he worked for 10 years as a ticket agent at New Orleans International Airport.
In 1975, there was a sign of trouble. Martin’s gambling debts—he played in Las Vegas casinos and bet on horses at tracks in Louisiana— caught up with him. He filed voluntary personal bankruptcy.
In 1981, Martin joined a local travel agency as a sales representative. A few years later, he left full-time employment to become one of the company’s outside contractors. Martin’s colleagues in the travel business considered him little more than an ambitious country bumpkin. “We thought he was a simpleton,” said one former travel agency customer. “It’s hard to understand how he could have masterminded an operation like [a $50 million Ponzi scheme].”
In the first few years of the scheme, Martin had only a handful of investors. But, by the end of 1986, word had started to spread about LPM Enterprises. One of the most active salesmen for the scheme was Johnny St. Pierre. As time went on, some LPM Enterprises investors were not personally acquainted with Martin—but they usually knew St. Pierre. A 25-year veteran in the insurance industry, St. Pierre (who was also Martin’s uncle) had a large network of contacts in the Louisiana business world.
In 1987, checks worth as much as $50,000 began passing through the company checking account every day. (By early 1988, that figure had increased to between $100,000 and $200,000.) In 1987—the scheme’s biggest year—more than $97 million passed through LPM Enterprises’ account at the Bank of LaPlace. Through all this growth, the scheme was always pushing the edge of solvency. “[Martin] had to bring in cashier’s checks every day to cover the overdrafts,” one bank officer remembered.
In fact, the bank had a special policy for LPM Enterprises. Every morning, tellers would begin processing the post-dated checks written to investors on the account. They’d usually find that the company didn’t have enough money to cover the checks. But the bank would cover Martin for a few hours. A teller would call LPM Enterprises with an amount and Martin or one of his associates would drop by